US lawmakers aim to keep China's datacenter tech out of sensitive government systems

By Alexandra Alper

WASHINGTON, Sept 25 (Reuters) - A bipartisan group of US lawmakers introduced legislation on Friday to bar the federal government from equipping sensitive government systems with Chinese-made components used to transmit data in AI data centers.

The devices, known as optical transceivers, allow data to travel over fiber-optic cables at the speed of light and are at the heart of the US AI infrastructure rollout, with some data centers requiring millions of them.

The bill adds to growing pressure on Chinese optical transceiver makers, which dominate the market for parts critical to AI data centers.

Supporters of the legislation say the devices could be harnessed by Beijing to disrupt access to US AI tools and the cloud.

The restriction, sponsored by Republicans John Cornyn and Dave McCormick as well as Democrats John Fetterman and Ruben Gallego, would apply to optical transceivers made by China's Eoptolink and Zhongji Innolight 300308.SZ.

“We shouldn’t rely on China for technologies that are essential to our national security,” McCormick said, according to a press release.

“Critical government communication and information systems must be safe, reliable, and free of any foreign interference, but the use of Chinese technology undermines that mission,” said Cornyn.

Innolight, which was added to a Pentagon list of alleged Chinese military-backed companies, Eoptolink, and the Chinese Embassy did not immediately respond to requests for comment.

But the US industry has argued such a move would slow the US AI infrastructure buildout, ceding ground to China, as hyperscalers scramble to find other suppliers.

The Information Technology Industry Council, a tech lobbying group, sent a letter to the FCC on August 13 calling on the telecoms watchdog to "refrain from adding optical transceivers" to a trade blacklist, emphasizing the "potential effects that supply disruptions could have on data center deployment and U.S. AI leadership."

U.S.-based firms Coherent and Lumentum sell competitive technology but lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. They did not immediately respond to requests for comment.

If the legislation were approved, the government would have five years to comply and the Secretaries of Commerce and Defense would have the authority to add additional companies to the list.