Microsoft Urges Trump Administration to Scuttle Planned Ban on Chinese Optical Transceivers

Microsoft has been pressing the Trump administration to halt plans to bar Chinese imports of optical transceivers used in AI data centers, three people familiar with the situation said. The company has 35 data centers under construction in the US and another 134 planned, according to Cleanview, a market intelligence company that tracks data center development. Devdiscourse reported the lobbying effort on November 10, 2026.

Microsoft's Case Against the Transceiver Ban

Microsoft was one of a handful of firms that met with officials from the White House Office of Science and Technology Policy and the National Security Council in September to flag the supply chain challenges a ban would present, two of the sources said. The company is one of a group of companies and trade groups arguing that a ban could damage the US edge over China in the AI race by further slowing the data center rollout.

"It really threatens to arguably grind (the data center rollout) to a halt," said John Miller, general counsel of the Information Technology Industry Council, a tech lobbying group that has publicly urged the administration not to move forward with a ban. Miller said many cloud companies have already purchased the AI chips needed for the buildout. "Those chips, without optical transceivers literally could just sit there waiting around un-utilized until you actually have the transceivers to essentially connect them together," he added.

The Federal Communications Commission is working on the ban. China holds two-thirds of the global market for optical transceivers, according to Counterpoint Research, with Chinese firms such as Eoptolink and Zhongji Innolight dominating global supply. US-based Coherent and Lumentum produce competing technology but lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. Morgan Stanley said in an October client note that the administration was considering barring transceivers capable of handling 3.2 terabits of data per second, whose production is not expected to ramp up until 2028, with widespread installation expected in 2029.

Microsoft's Scale in Cloud and AI

According to akta.pro company records, Microsoft reported quarterly revenue of $82.9 billion in Q2 FY2026, up 18% year-over-year, with full fiscal year revenues exceeding $240 billion. The company's AI business surpassed a $37 billion annual revenue run rate with 123% year-over-year growth, driven by Azure AI services and Microsoft 365 Copilot adoption. Microsoft employs over 220,000 people globally.

Earlier Moves in Microsoft's Regulatory Record

In June 2026, Italy's AGCM launched an investigation into Microsoft over alleged unfair commercial practices related to Microsoft 365 subscription price hikes, claiming the company bundled Copilot and Designer AI services without adequate disclosure and automatically migrated customers to more expensive plans, according to akta.pro company records. That same month, Chevron's Energy Forge One subsidiary signed a 20-year power agreement to develop Project Kilby, co-locating approximately 2.67 gigawatts of generation capacity with a Microsoft datacenter campus in Reeves County, West Texas.

What Comes Next for the FCC Ban

In September, a bipartisan group of US lawmakers introduced legislation to bar the federal government from equipping sensitive government systems with Chinese-made optical transceivers. The FCC has not addressed the optical transceiver issue publicly, but two of the sources said the 3.2 terabit per second threshold is under consideration.