Morgan Stanley: Impact of Potential China Ban Reports
> News Overview: Reuters reported that the Trump administration and FCC are preparing restrictions on new Chinese data center components, with optical transceivers specifically targeted and potential rules going into effect this year.> Positive for Non-Chinese Suppliers: The potential ban is viewed as a positive read-through for non-Chinese optical component supply chains, alleviating near-term concerns regarding margin ceilings.> Top Beneficiaries:Coherent Corp (COHR) stands out as the clearest scaled beneficiary due to its vertical integration, given that Chinese suppliers Innolight and Eoptolink represent about 50% of the transceiver market.Lumentum Holdings (LITE) will benefit from longer-lasting tight EML (electro-absorption modulated laser) supply, though this is partly offset by potential Chinese restrictions on Indium Phosphide (InP) substrates.AAOI and FN are also positioned to absorb incremental demand.> Limited Impact Companies: Ciena (CIEN) has limited upside as it does not heavily compete in the data center space, and Corning (GLW) has limited upside since there is already minimal Chinese fiber deployed in US data centers.> Feasibility & Supply Chain Bottlenecks: Executing these restrictions is challenging due to tight existing supply and the reliance on Chinese firms (such as AXTI) for InP substrates, though cloud providers have increasingly qualified alternative suppliers over the past couple of years.$Ciena(CIEN.US) $Lumentum(LITE.US) $Applied Optoelectronics(AAOI.US) $Coherent Corp.(COHR.US) $Fabrinet(FN.US)
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