Chinese Optical Module Stocks Fall After Report of Possible U.S. Import Ban

By Sherry Qin

Shares of Chinese optical transceiver makers fell following a report of a potential U.S. ban on imports of new models of Chinese optical components, the latest hit to sentiment on Chinese artificial-intelligence hardware stocks.

Zhongji Innolight dropped 7.1% in Hong Kong and 7.0% in Shenzhen in afternoon trading Wednesday. Eoptolink Technology declined 5.0%.

The Federal Communications Commission, which oversees the U.S. telecom industry, is drafting a proposal to bar imports of new Chinese optical transceivers, Reuters reported Tuesday, citing unnamed sources.

The report weighed on a segment of the AI supply chain that has already seen market sentiment rattled by AI spending concerns. However, some analysts said it is unlikely the U.S. will impose a clear-cut ban, as Chinese vendors dominate the optical transceiver market.

Optical transceivers play an increasingly important role in AI data centers, as they serve as the interface between electrical signals and optical signals, enabling data to travel over fiber-optic cables between servers with minimal latency amid surging computing demand.

Counterpoint Research estimates that Chinese vendors account for nearly two-thirds of global unit supply, with Innolight controlling 27% of the data-center transceiver market. The U.S.'s Coherent holds the second-largest share, at 17%, followed by Eoptolink.

Innolight and Eoptolink didn't immediately respond to requests for comments.

Any blanket ban would hit both Chinese suppliers and the U.S. cloud service providers. Western competitors like Coherent and Lumentum are unable to absorb Innolight's and Eoptolink's volume within two years if the ban is imposed, Counterpoint's Neil Shah said.

Chinese players also hold key advantages in cost and advanced product development while the current AI optics supply chain remains tight, Citi analysts wrote in a note.

Innolight generated more than 60% of its revenue in the first quarter of 2026 from the U.S. and counts Google and Nvidia as clients.

Meanwhile, cloud service providers typically go through a rigorous multistage qualification process for high-end optical modules, making any switch in suppliers a lengthy and costly process.

Vendors such as Innolight and Eoptolink have already aggressively expanded manufacturing footprints outside China in recent years to mitigate potential trade restrictions.

It remains unclear how the FCC will define Chinese-manufactured optical components--or whether the ban will be imposed at all.

"We believe certain exemptions will apply given the market situation, and that overseas capacity expansion remains a key strategy for Chinese suppliers," Citi analysts said.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

August 05, 2026 02:51 ET (06:51 GMT)