Citi: FCC framework does not currently restrict Chinese optical modules; near-term ban unlikely
A Citi report analyzing FCC Regulation 26-50 says that although reports have suggested the United States could impose a ban on Chinese optical components, the likelihood of that developing into actual enforcement in the near term is low.
A Citi report analyzing FCC Regulation 26-50 says that although reports have suggested the United States could impose a ban on Chinese optical components, the likelihood of that developing into actual enforcement in the near term is low. The main reason, Citi says, is that Chinese suppliers provide 60%-70% of U.S. cloud-service-provider demand for high-speed optical modules, while alternative sources are limited in the short term.
FCC 26-50 established two types of listing mechanisms: one based on manufacturers and another based on production locations. Optical modules are not included as a restricted product category in any FCC rule currently in effect. Reuters reported on Aug. 4 that the measure remained at the draft or proposal stage.
Eoptolink, also known as Zhongji Innolight, has 88.4% of its overseas production capacity in Thailand, giving it relatively strong protection in a scenario involving restrictions on Chinese production locations alone. DSBJ, or Dongshan Precision, has only 30.3% overseas production capacity and the highest exposure. TFC, or TFC Optical Communication, does not directly manufacture optical transceivers and is the most resilient, according to the report.
Citi's conclusion is that the established FCC regulatory framework, including FCC 26-50, does not currently restrict Chinese optical modules. Given that Chinese suppliers account for 60%-70% of U.S. high-speed optical-module supply and that near-term substitutes are limited, Citi considers the likelihood of a ban being implemented in the near term to be low. Eoptolink and DSBJ would face the greatest potential impact from restrictions, while TFC would be the most resilient.
The report identifies DSBJ and Eoptolink as having relatively high risk exposure and TFC as relatively resilient. If restrictions limited production locations to China only, Eoptolink's 88.4% overseas production capacity would provide a greater buffer than DSBJ's 30.3%.
Potential catalysts cited by Citi include the U.S.-China diplomatic schedule in September 2026 and November 2026, when optical-module restrictions could be raised in bilateral talks; whether the FCC adds optical modules to a restricted product category; and follow-up developments after the Reuters report.
FCC 26-50 established two types of listing mechanisms: one based on manufacturers and another based on production locations. Optical modules are not included as a restricted product category in any FCC rule currently in effect. Reuters reported on Aug. 4 that the measure remained at the draft or proposal stage.
Eoptolink, also known as Zhongji Innolight, has 88.4% of its overseas production capacity in Thailand, giving it relatively strong protection in a scenario involving restrictions on Chinese production locations alone. DSBJ, or Dongshan Precision, has only 30.3% overseas production capacity and the highest exposure. TFC, or TFC Optical Communication, does not directly manufacture optical transceivers and is the most resilient, according to the report.
Citi's conclusion is that the established FCC regulatory framework, including FCC 26-50, does not currently restrict Chinese optical modules. Given that Chinese suppliers account for 60%-70% of U.S. high-speed optical-module supply and that near-term substitutes are limited, Citi considers the likelihood of a ban being implemented in the near term to be low. Eoptolink and DSBJ would face the greatest potential impact from restrictions, while TFC would be the most resilient.
The report identifies DSBJ and Eoptolink as having relatively high risk exposure and TFC as relatively resilient. If restrictions limited production locations to China only, Eoptolink's 88.4% overseas production capacity would provide a greater buffer than DSBJ's 30.3%.
Potential catalysts cited by Citi include the U.S.-China diplomatic schedule in September 2026 and November 2026, when optical-module restrictions could be raised in bilateral talks; whether the FCC adds optical modules to a restricted product category; and follow-up developments after the Reuters report.