Draft Expansion of Covered List Targets AI Data Center Components in Supply Chain Crackdown
In a significant regulatory move, the U.S. Federal Communications Commission (FCC) is contemplating an expansion of its supply-chain restrictions, which could prohibit the entry of new models of Chinese-manufactured optical transceivers into the American market. This proposal is especially relevant as these optical modules facilitate data transfers between servers within artificial intelligence (AI) data centers, highlighting the critical importance of secure supply chains in modern technological infrastructures.
Reportedly, the FCC is working on a proposal that seeks to include these optical transceivers in its widely scrutinized Covered List. This list consists of various components deemed significant for protecting U.S. national security and critical infrastructure. The draft proposal, which has yet to be officially released, is an expansion of the FCC’s ongoing efforts over the past year to broaden the list to encompass crucial components used in U.S. networks, permeating deeper into critical infrastructure.
As of now, no text of the proposed draft has been unveiled, and the FCC has not initiated a named proceeding, set a comment deadline, or detailed the final product scope. Notably, the current regulations do not categorize optical transceivers as standalone items on the Covered List. The agency has not provided comments regarding these developments.
As it stands in 2026, Chinese optical module manufacturers dominate the global contract manufacturing landscape, boasting the largest share of the market. Many of these suppliers are focused on exports to North America and include well-known companies such as Innolight, Eoptolink, and Cambridge Industries Group, together accounting for nearly 46% of the global optical transceiver manufacturing capacity.
Crucial questions linger concerning the potential definitions and classifications that the FCC might employ in specifying what constitutes a "new model" of optical transceiver and what qualifies a manufacturer as being Chinese. Factors such as company nationality, inclusion on the Covered List, or the physical location of manufacturing facilities may all play a role in these determinations. Further complicating the regulatory landscape is whether importers may receive any transition period to adjust to these new restrictions. Analysts, such as those from TrendForce, have commented that it is premature to view the draft as a sweeping prohibition against Chinese manufactured devices.
The FCC has not yet issued a formal threat assessment regarding optical transceivers. However, agency officials have previously acknowledged gaps in current rules that could be exploited by bad actors, including the potential for vulnerabilities in network security. In October, Chairman Brendan Carr expressed concerns that those gaps could serve as loopholes, posing significant risks to national security.
In July, the FCC released a directive that prohibits the authorization of logic-bearing hardware components from entities listed on the Covered List. This categorization includes pluggable optical modules, which are integral to modern infrastructures, carrying microcontrollers and other critical components that provide diagnostics back to their host switches.
The path for any new models of transceivers is expected to be rigorous. The FCC has been reshaping its authorization pipeline, having enacted rules in May 2025 that bar test laboratories owned or controlled by foreign adversary governments from participating in its equipment authorization program. The agency has also initiated proceedings to revoke recognition from several laboratories linked to the Chinese government.
Notably, nearly three-quarters of the device testing that the FCC recognized was traditionally conducted in China before the implementation of these stringent rules, which means that manufacturers are now facing a significantly narrower and more relocated certification process for new hardware.
In a previous vote, the commission unanimously advanced a proposal that prohibits significant Chinese telecommunications companies — specifically China Mobile, China Telecom, and China Unicom — from operating data centers and similar facilities within the United States. This also includes restrictions on U.S. carriers interconnecting with facilities controlled by entities on the Covered List.
Earlier this year, when foreign-produced consumer-grade routers were added to the Covered List, the FCC pointed to ongoing concerns regarding security threats from Chinese state-sponsored intrusions into U.S. networks, emphasizing the role of insecure edge devices. However, there are critics who argue that many vulnerabilities arise not from the location of manufacturing but from inadequate patch management and the operation of outdated equipment.
The dialogue surrounding these issues has gained further traction following an August report from the House Select Committee on the Chinese Communist Party. The report raised alarms about the retention of equipment and data center space in the U.S. by Chinese telecom corporations, even after the FCC had denied or revoked their authorizations.
As the FCC deliberates over these crucial regulatory measures, the implications for technological security, international relations, and market dynamics are profound, potentially reshaping the landscape of supply chain management in the United States and beyond.