Days off the Trump-Xi meeting, four Members of Congress are currently pushing a more structural and long-term China-risk-reduction agenda than the Trump administration is pursuing through the bilateral relationship.
The White House extended its “tariff truce” through January 10, 2027, created a process for reducing tariffs on roughly $60 billion in non-sensitive trade, and agreed to continue economic, military and AI discussions. That is a stabilization strategy on behalf of the Executive Branch. But the Legislative Branch can be even more hawkish at times. A new bill, announced Sept. 25 by Senators Dave McCormick (R-PA), Ruben Gallego (D-AZ), John Cornyn (R-TX) and John Fetterman (D-PA), seeks to systematically remove optical transceivers made by Chinese companies from federal communications and data networks.
The bill (S.5548), titled “Securing National Security Systems from Chinese Optical Transceivers Act,” explicitly mentions Chinese companies Zhongji Innolight, and Eoptolink, and their affiliates, as companies that can no longer supply optical equipment for federal communications networks. That would include things like data centers that are attached to sensitive government networks. Text of the new bill has not been published at this time. If passed, it would give companies up to five years to source optical equipment from other sources. The legislation does not have a “rip and replace” requirement. The Congressional Record likewise describes S.5548 as a bill “to prohibit Federal procurement of certain optical transceivers.”
McCormick also said in a statement on the matter that the Act would give “American manufacturers the opportunity to build more of this technology at home and compete.”
Believe it or not, U.S. companies do exist in this space.
Applied Optoelectronics of Sugarland, TX, is currently undertaking a huge Houston-area manufacturing expansion specifically for 800G and 1.6T optical transceivers. They announced in July nearly 400,000 additional square feet being built in Pearland, TX, on top of other Houston-area facilities. AOII says that once its buildout is complete it will have capacity to produce as many as 700,000 800G/1.6T optical transceivers per month as part of the greater AI data center story. The company has a reported orderbook from the big hyperscalers for both 800G and 1.6T products.
Other publicly traded companies, Coherent of Saxonberg, PA, and Lumentum of San Jose, CA, also make optical equipment but lack the scale of their Chinese rivals thanks to decades of outsourcing.
One 2026 industry source on China, called C-Light, puts Chinese suppliers at about 63.2% of the U.S. optical modules market in 2025. This includes all optical transceiver product categories.
For the U.S. manufacturer, the five year period, if the bill was ever enacted into law, would be a signal for those companies to invest in more capacity to make up for China sourcing restrictions for government-related projects. The bill would not impact private operations.
“China is working hard to develop transceivers that do not rely on any American components, either optical or digital,” said CPA chief economist emeritus Jeff Ferry. “My concern is that five years is too long. By then the Chinese industry will be completely self-reliant. Congress and the administration should think about shortening this to three years, and lighting a fire under the industry and the U.S. customers to develop all the parts and the complete devices in the U.S. or allied nations.”
Despite the bill being centered only on government procurement, not everyone likes the idea, of course. The Information Technology Industry Council (ITI) is already warning that removing Chinese optics could disrupt data-center deployment and U.S. AI infrastructure, a typical argument used by importers made to suggest that without China sources, the sky would fall down. ITI has opposed broader restrictions on Chinese optical transceivers at the Federal Communications Commission (FCC) this summer and warned about the supply-chain risks, according to a Reuters article on Sept. 25. The FCC’s recent equipment-authorization action did not impose a blanket transceiver restriction.
For Innolight and Eoptolink, the June Section 1260H list addition of Zhongji InnoLight makes it much easier to ban their equipment on national security grounds alone once that bill is passed. As it is, the 1260H list does not create a government-wide procurement ban so this bipartisan legislation is attempting to create that procurement consequence, at the very least, for Innolight’s optical transceivers.
Both Innolight and Eoptolink are monsters in the optics market. Like many Chinese companies that have a dominant market position, these are the two largest optical-transceiver champions manufacturers in the world. And their revenue is partly from export markets, especially the U.S. AI data centers, especially the hyperscalers, have been a boon to both of these companies.
InnoLight generated about $5.3 billion in 2025 transceiver revenue and was the world’s largest supplier. Eoptolink exploded from roughly $1.2 billion in 2024, to $3.5 billion in 2025, overtaking Coherent to become No. 2 globally, based on data from LightCounting, a Virginia-based market-research firm focused on optical communications.
That both parties are involved in this legislation is important. It continues a trend on Capitol Hill that reveals a willingness to restrict China’s overpowering of U.S. companies in the home market.
The McCormick bill aims to give U.S.-China technology decoupling a little push, moving beyond advanced semiconductors – some of them restricted for export to China – and into the networking components that connect AI computer networks used by the federal government.
Without the bill’s language to review [at the time of this posting], it is unclear if only Innolight and Eoptolink will be the only targets. China will have plenty of companies to come in and pick up the slack, including those with manufacturing partners in Southeast Asia. And again, the bill only focuses on optical equipment going into federal communications systems – if it is plugged into the federal government, Chinese equipment can’t be nestled inside. The question is, which Chinese companies, or all Chinese companies? Playing whac-a-mole with China is a losing game.
Sen. Fetterman also sees the bill as being supportive of domestic manufacturers like AAOI, and others.
“Just like we use American-made steel to build federal highways and bridges, we should also be using American-made equipment in our fiber optic networks wherever possible,” he said.
After Trump-Xi Meeting, Bipartisan Group in Congress Push to Decouple China Tech from Federal Communications and Data Networks
Days off the Trump-Xi meeting, four Members of Congress are currently pushing a more structural and long-term China-risk-reduction agenda than the Trump administration is pursuing through the bilateral relationship.
The White House extended its “tariff truce” through January 10, 2027, created a process for reducing tariffs on roughly $60 billion in non-sensitive trade, and agreed to continue economic, military and AI discussions. That is a stabilization strategy on behalf of the Executive Branch. But the Legislative Branch can be even more hawkish at times. A new bill, announced Sept. 25 by Senators Dave McCormick (R-PA), Ruben Gallego (D-AZ), John Cornyn (R-TX) and John Fetterman (D-PA), seeks to systematically remove optical transceivers made by Chinese companies from federal communications and data networks.
The bill (S.5548), titled “Securing National Security Systems from Chinese Optical Transceivers Act,” explicitly mentions Chinese companies Zhongji Innolight, and Eoptolink, and their affiliates, as companies that can no longer supply optical equipment for federal communications networks. That would include things like data centers that are attached to sensitive government networks. Text of the new bill has not been published at this time. If passed, it would give companies up to five years to source optical equipment from other sources. The legislation does not have a “rip and replace” requirement. The Congressional Record likewise describes S.5548 as a bill “to prohibit Federal procurement of certain optical transceivers.”
McCormick also said in a statement on the matter that the Act would give “American manufacturers the opportunity to build more of this technology at home and compete.”
Believe it or not, U.S. companies do exist in this space.
Applied Optoelectronics of Sugarland, TX, is currently undertaking a huge Houston-area manufacturing expansion specifically for 800G and 1.6T optical transceivers. They announced in July nearly 400,000 additional square feet being built in Pearland, TX, on top of other Houston-area facilities. AOII says that once its buildout is complete it will have capacity to produce as many as 700,000 800G/1.6T optical transceivers per month as part of the greater AI data center story. The company has a reported orderbook from the big hyperscalers for both 800G and 1.6T products.
Other publicly traded companies, Coherent of Saxonberg, PA, and Lumentum of San Jose, CA, also make optical equipment but lack the scale of their Chinese rivals thanks to decades of outsourcing.
One 2026 industry source on China, called C-Light, puts Chinese suppliers at about 63.2% of the U.S. optical modules market in 2025. This includes all optical transceiver product categories.
For the U.S. manufacturer, the five year period, if the bill was ever enacted into law, would be a signal for those companies to invest in more capacity to make up for China sourcing restrictions for government-related projects. The bill would not impact private operations.
“China is working hard to develop transceivers that do not rely on any American components, either optical or digital,” said CPA chief economist emeritus Jeff Ferry. “My concern is that five years is too long. By then the Chinese industry will be completely self-reliant. Congress and the administration should think about shortening this to three years, and lighting a fire under the industry and the U.S. customers to develop all the parts and the complete devices in the U.S. or allied nations.”
Despite the bill being centered only on government procurement, not everyone likes the idea, of course. The Information Technology Industry Council (ITI) is already warning that removing Chinese optics could disrupt data-center deployment and U.S. AI infrastructure, a typical argument used by importers made to suggest that without China sources, the sky would fall down. ITI has opposed broader restrictions on Chinese optical transceivers at the Federal Communications Commission (FCC) this summer and warned about the supply-chain risks, according to a Reuters article on Sept. 25. The FCC’s recent equipment-authorization action did not impose a blanket transceiver restriction.
For Innolight and Eoptolink, the June Section 1260H list addition of Zhongji InnoLight makes it much easier to ban their equipment on national security grounds alone once that bill is passed. As it is, the 1260H list does not create a government-wide procurement ban so this bipartisan legislation is attempting to create that procurement consequence, at the very least, for Innolight’s optical transceivers.
Both Innolight and Eoptolink are monsters in the optics market. Like many Chinese companies that have a dominant market position, these are the two largest optical-transceiver champions manufacturers in the world. And their revenue is partly from export markets, especially the U.S. AI data centers, especially the hyperscalers, have been a boon to both of these companies.
InnoLight generated about $5.3 billion in 2025 transceiver revenue and was the world’s largest supplier. Eoptolink exploded from roughly $1.2 billion in 2024, to $3.5 billion in 2025, overtaking Coherent to become No. 2 globally, based on data from LightCounting, a Virginia-based market-research firm focused on optical communications.
That both parties are involved in this legislation is important. It continues a trend on Capitol Hill that reveals a willingness to restrict China’s overpowering of U.S. companies in the home market.
The McCormick bill aims to give U.S.-China technology decoupling a little push, moving beyond advanced semiconductors – some of them restricted for export to China – and into the networking components that connect AI computer networks used by the federal government.
Without the bill’s language to review [at the time of this posting], it is unclear if only Innolight and Eoptolink will be the only targets. China will have plenty of companies to come in and pick up the slack, including those with manufacturing partners in Southeast Asia. And again, the bill only focuses on optical equipment going into federal communications systems – if it is plugged into the federal government, Chinese equipment can’t be nestled inside. The question is, which Chinese companies, or all Chinese companies? Playing whac-a-mole with China is a losing game.
Sen. Fetterman also sees the bill as being supportive of domestic manufacturers like AAOI, and others.
“Just like we use American-made steel to build federal highways and bridges, we should also be using American-made equipment in our fiber optic networks wherever possible,” he said.
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