The weapon America wants to use against Chinese transceivers is made in China

The US government is drafting a ban on imports of new Chinese optical transceivers. But the American companies this ban is meant to help cannot scale production without a raw material China controls. The FCC is weighing a ban on new Chinese-made optical transceivers, the modules that link AI data-center servers, framed as a national-security measure and targeted for this year. In its sights are China's Zhongji Innolight, which holds 27% of the global market, and Eoptolink, whose revenue has more than doubled in a year. Together the two supply most of Nvidia's 800G module demand.

The replacements Washington has in mind

The intended substitutes are Coherent and Lumentum, both American, both already established names in data-center optical links.

The FCC Mulls Banning China-Sourced Optical Transceivers, Threatening Innolight's 27% Market Share As Coherent And Lumentum Prepare To Pounce (WCCFTECH, 2026-08-05)

출처: wccftech.com

But those replacements are stuck on a Chinese raw material too

The catch is that the high-speed lasers Coherent and Lumentum build depend on indium phosphide, a compound semiconductor with no viable substitute above 100 gigabits per lane. China controls roughly 70% of global refined indium, and it placed indium phosphide on its export-control list in February 2025.

FCC Transceiver Ban Would Cut 60% of AI Data Center Supply; Western Replacements Need Chinese Indium (Tech Times, 2026-08-05)

출처: techtimes.com

Since then, China's indium phosphide exports have fallen roughly 72% year over year, and 6-inch wafer prices have jumped from about $1,400 to roughly $5,000 apiece. AXT, the US materials supplier that feeds Coherent, has piled up more than $60 million in backlogged orders. Lumentum's CEO has said the shortage will get worse than the memory-chip crunch.

Even if the ban passes, supply stays short

So the ban's real effect differs from how it looks on paper. Blocking Chinese supply seems to hand volume to American firms, but those firms cannot expand output without the raw material China controls. Current US 800G transceiver capacity runs around 100,000 units a month, a fraction of total demand. If China tightens indium exports further, even Coherent and Lumentum, the companies the ban is meant to protect, could fail to fill the gap. If the US secures domestic indium production or alternate sourcing first, the ban could work as intended. The question is which comes first: securing the material, or enforcing the ban.