Chinese optical stocks sink on reported US import ban

Shares of Chinese optical module makers fell sharply on Wednesday after Reuters reported that the Trump administration is drafting a ban on U.S. imports of new models of Chinese data center components, triggering a broad selloff across the sector.

The CSI300 Telecommunication Services Index dropped as much as 9% in early trade, led by heavy losses in export-oriented optical module manufacturers. Zhongji Innolight, the 10th-largest China-listed company by market capitalization, fell roughly 8-10% in both its Shanghai and Hong Kong-listed shares. Eoptolink Technology dropped more than 7%, while Suzhou TFC Optical Communication declined about 3.5-6%.economictimes+3

The Proposed Ban

According to Reuters, the Federal Communications Commission is working on rules to bar imports of new Chinese optical transceivers — components that move data through fiber-optic cables inside data centers. Officials aim to publish the measure this year, although it could still be modified or shelved. The proposed restrictions are intended to reduce security risks tied to AI infrastructure, including potential data theft, malware, and service disruptions.investing+1

Market Vulnerability

The selloff highlights the exposure of Chinese optical makers to the U.S. market. Zhongji Innolight generated 62% of its first-quarter revenue from the United States and had earlier warned that escalating trade tensions could hurt its financial performance. Eoptolink derives 96% of its revenue from overseas markets.reuters+1

The negative sentiment was largely confined to optical module makers, while shares of domestic Chinese chipmakers advanced, highlighting a divergence within the broader AI hardware segment.economictimes

Analyst Response

Jefferies said in a research note that the risk of the proposed ban being enforced remained low, describing the move as a potential negotiating tactic ahead of an expected meeting between President Trump and Chinese President Xi Jinping in September. The brokerage also pointed to China's restrictions on rare earth exports, which have affected the U.S. optics industry.economictimes

Analysts said Chinese companies may increasingly need to diversify their customer base and expand into alternative overseas markets to reduce reliance on the United States.economictimes