SHANGHAI/HONG KONG Aug 5 — Shares of Chinese optical module makers such as Zhongji Innolight slumped today, following a Reuters report that the Trump administration was drafting a ban on United States (US) imports of new models of Chinese data centre components.
The CSI300 Telecommunication Services Index tumbled as much as nine per cent in early trading.
Export-dependent optical module makers, including Zhongji Innolight, Eoptolink Technology, and Suzhou TFC Optical Communications, fell sharply.
Reuters reported that Washington is working on a measure, on national security grounds, to bar imports of new Chinese optical transceivers, which enable data to travel over fibre-optic cables at the speed of light within data centres.
The news threatens to hit already-shaky confidence in China’s artificial intelligence hardware stocks after a savage sell-off, but some analysts say the market could be overreacting.
"We see a low risk that this ban will materialise under Trump. We believe the move is a US negotiation tactic ahead of President Xi's visit to the US in September, especially given China's rare earth export controls, which affect the US optics industry," Jefferies said in a note.
The psychological impact was evident today as investors dumped optical module stocks, even as domestic chipmakers' stocks surged.
Shares of Zhongji Innolight — the 10th-biggest China-listed stock by market value — shed roughly 10 per cent in both Shanghai and Hong Kong.
The Chinese optical parts maker generated 62 per cent of its revenue from the US in the first quarter. Earlier this year, it warned that an escalation in Sino-US trade tensions could result in a big slide in performance, or even losses.
Shares of Eoptolink Technology, which generates 96 per cent of its sales from overseas markets, tumbled 10 per cent. TFC Optical, also heavily reliant on foreign markets, slumped roughly six per cent.
"The US move is not surprising, as its policies toward China are driven by two forces: concerns over trade imbalances and efforts to contain China's technological advancement," said Shanghai-based law firm Dacheng's partner Zhan Kai.
He added that the US is increasingly moving from blocking technology transfers to China, toward blocking Chinese investment and Chinese access to its market.
"For Chinese companies, the priority is to proactively diversify their client base and target markets...rather than just to obtain technologies," Zhan said.
