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ICC Xunshi: On August 4, Reuters, citing sources familiar with the matter, reported that the US Federal Communications Commission (FCC) is drafting new regulations planned to restrict the import of China's new-generation high-speed datacom optical modules. The restrictions primarily target core AI computing products such as 800G and 1.6T modules, with online rumors suggesting implementation by 2026.
01. Deep Integration of the China-US Optical Communication Supply Chain: Interdependent and Inseparable
ICC Xunshi believes that the optical communication industry needs to view this event rationally. First, the proposal is still in the discussion phase with no official documents released; it is subject to modification or shelving and is not established regulation. Second, the so-called restrictions focus on new iterative products, without retroactively affecting delivered equipment and mature medium-to-low-speed products, thus not impacting existing North American orders and current computing facilities in the short term. Finally, the US restriction based on "data security" lacks industrial basis. The core function of optical modules is the conversion of optical and electrical signals, with no data storage or manipulation capabilities, making the logic of security control highly controversial.
It should be noted that the China-US optical communication supply chain is already deeply integrated. Unilateral restrictions will only cause mutual losses and cannot achieve complete decoupling. On the supply side, Chinese optical communication manufacturers account for over 70% of the global datacom optical module market and lead the world in the mass production of 800G and the iteration of 1.6T. China's optical communication supply chain possesses a complete packaging, testing, and mass production industry chain, with globally leading yield rates and delivery capabilities.
Overseas and US domestic manufacturers face prominent capacity issues. If Chinese optical modules are genuinely banned, they will be unable to meet the massive demand for AI computing power in North America in the short term. The short-term market sentiment surge cannot change the reality of industrial supply. On the demand side, North American AI computing clusters are in a period of rapid expansion and highly depend on the supply of high-speed optical modules from China. A supply cut would directly lead to soaring costs and delayed progress in their computing infrastructure construction.
Meanwhile, domestic high-end optical modules also require high-end laser/detector chips and high-end DSP/TIA/Driver electrical chips from North America for assembly and shipment. The export of assembled modules and the import of core components form a mutually binding pattern; policy rumors cannot overturn the fundamental industrial landscape.
02. Internationalization Strategy to Mitigate Risks, Supply Chain Ecosystem to Widen the Gap
Regarding this US policy rumor, a representative from an overseas optical communication startup told ICC Xunshi: "We have long anticipated that such events would occur, but we cannot grasp the probability and timing of policy implementation. Future new optical systems will also set higher barriers for Chinese manufacturers, so we need to position ourselves as an international company to mitigate policy risks." As global technological and geopolitical games intensify, the normalization of regional trade policy barriers has become a trend, and the risks of a development model that relies solely on a single regional market continue to rise.
Whether they are domestic companies going global or local overseas startups, all are actively adjusting their development positioning, abandoning regional development thinking, and accelerating the establishment of globalized capacity, market, and compliance systems. By diversifying and internationalizing their layouts to hedge against uncertain policy risks, this will also become the core competitiveness for the survival and development of high-speed optical module companies in the future. An expert in automation equipment for the optoelectronics field told ICC Xunshi that optical modules are high-precision optoelectronic integrated products, and their scaled, high-quality mass production highly depends on advanced automated production and testing equipment.
US companies possess technical reserves and channel advantages in high-end automated equipment and precision manufacturing technologies, enabling them to access top-tier advanced equipment resources globally. However, the core gap lies not in the equipment itself, but in the overall manufacturing system and diversified implementation capabilities. The local North American optical module supply chain has single supporting facilities and insufficient mass production experience, with weak comprehensive capabilities in scaled manufacturing, yield control, and iterative delivery. After long-term accumulation, Chinese manufacturers have formed a complete manufacturing system encompassing equipment adaptation, process optimization, mass production, and rapid iteration. Meanwhile, they possess diversified operational capabilities with globalized capacity layout and multi-regional market adaptation. This is a core shortcoming that the local North American manufacturing system cannot make up for in the short term.
03. China's AI Market Is a More Long-term Driver for High-Speed Optical Modules
Even if the US attempts to restrict imports through policies, it is difficult to quickly make up for local mass production and manufacturing capabilities, and it cannot truly replace the global supply position of China's optical module industry. In fact, ICC Xunshi believes that the industry concern triggered by the so-called US FCC new regulation rumors is fundamentally because the North American market, as the world's largest AI computing power demand market, holds greater discourse power.
However, the global AI market is inherently highly concentrated in China and the US. China will also become a consumer market for high-speed optical modules, which has relevant precedents in the 4G/5G wireless network and fiber-optic broadband markets. The intense investment in the North American AI market is concentrated in hardware infrastructure, while the deployment of AI applications in China is expected to achieve breakthroughs first, especially in industrial scenarios. A technical expert from a silicon optical module manufacturer based in the US once told ICC Xunshi that compared to the substantial increase in AI computing investment in North America, China's AI capital expenditure will be more stable and sustainable, and is expected to become the core driving force for the high-speed optical module market by 2030.
According to research by ICC Xunshi, accompanied by the increase in China's AI capital expenditure, the demand for AI computing optical modules in China is upgrading. By 2026, the market share of 400G optical modules in China's AI computing market will reach 70%, and 800G optical modules will reach 20%, while 1.6T is temporarily close to zero. As the capabilities of domestic core optoelectronic chips gradually upgrade, the demand for 1.6T, 3.2T, and even 6.4T will also be realized in the Chinese market. In short, as long as the industry progresses, there is no need to fear temporary lagging behind others.