Microsoft sends 'China ban warning' to US government on data centres

Microsoft has sent a ‘warning’ to the White House saying that data centres in the US will come to a halt if the FCC’s proposed import ban on Chinese optical transceivers is passed. According to a Reuters report, the software giant is lobbying against the move alongside the Information Technology Industry Council (ITI). Microsoft, which is building 35 data centers around the country and is planning 134 more, reportedly met the White House Office of Science and Technology Policy and the National Security Council recently. “It really threatens to arguably grind (the data center rollout) to a halt,” ITI Executive Vice President of Policy and General Counsel John Miller said. “Those chips, without optical transceivers, literally could just sit there waiting around unutilized until you actually have the transceivers to essentially connect them together,” he further stated referring to the AI chips that data centers use. What are optical transceivers that FCC wants to ban import from China Optical transceivers are small devices that convert electrical signals into light signals, allowing data to travel through fibre-optic cables. Data centres increasingly use this technology to transfer data between AI chips and server racks. Compared with traditional copper cables, fibre-optic connections are faster, have lower delays, use less power and produce less heat. However, Chinese companies account for 66% of the global optical transceiver market. A ban on these companies supplying US data centres is expected to cut the available supply by more than half, worsening the shortages already affecting the industry. Concerns against China-made optical transceivers As stated in a Tom’s Hardware report, there are concerns that some of the optical transceivers could be compromised by Beijing which in turn can be used to steal data, install malware, or remotely disrupt American data centers. This is the likely reason why FCC is considering the ban. Notably, only two US-based companies – Coherent and Lumentum produce optical transceivers that data centers need. However, the firms don’t have the scale to make up for the shortfall if the FCC bans Chinese imports.