- Chinese firms supply large portions of the parts needed to develop these facilities, including transformers, switchgear, batteries, and optical tech, analysts told CNBC.
- Scrutiny over China's presence in the U.S. data center power stack has risen over the past eight months, shifting from a focus solely on the compute stack, according to Laveena Iyer, senior analyst at The Economist Group.
- The President signed an executive order last week declaring a national emergency around bulk-power system equipment produced abroad, authorizing the Energy Department to restrict certain transactions.
- The Trump administration is drafting a ban on U.S. imports of new Chinese optical transceivers, which allow data to travel at high speed over fiber optic cables between data centers.
- American reliance on China for key components used to power data centers is under increasing scrutiny as Washington and Beijing battle for AI supremacy, raising the prospect of higher costs and worsening supply chain shortages for the AI buildout.
- Key areas of AI infrastructure buildout increasingly dependent on Chinese imports include substation transformers, which hyperscalers typically have on site to step transmission voltage down, according to Ben Boucher, senior analyst at Wood Mackenzie.
- China's share of certain transformer and switchgear categories runs near 30%, and it accounts for over 40% of U.S. battery imports, with deeper exposure upstream in copper, electrical steel, and battery cathode materials, according to Yury Dvorkin, associate professor at Johns Hopkins University.
- Chinese firms collectively account for roughly two-thirds of global data center optical transceiver unit supply, with companies including Zhongji Innolight and Eoptolink leading global revenue, according to research firm Counterpoint.
American reliance on Chinese components for AI data centers is facing heightened scrutiny as geopolitical tensions rise. Key components such as transformers, switchgear, and batteries are primarily sourced from China, raising concerns about supply chain vulnerabilities and potential cost increases.157
President Biden recently signed an executive order aimed at regulating foreign-produced bulk-power system equipment, which includes components critical to data centers. This move reflects a growing awareness of the risks associated with dependence on Chinese imports in the AI infrastructure sector.3
According to Laveena Iyer, a senior analyst at The Economist Group, "Scrutiny over China's presence in the U.S. data centre power stack has only risen over the past eight months or so, this is a shift from the previous focus that centred solely on the compute stack."2
Analysts from Wood Mackenzie highlight that the AI infrastructure buildout increasingly relies on Chinese imports, particularly in areas like substation transformers. Yury Dvorkin, an associate professor at Johns Hopkins University, noted that China's share of certain transformer and switchgear categories runs near 30%, while it accounts for over 40% of U.S. battery imports.6
The Trump administration is also considering a ban on U.S. imports of new Chinese optical transceivers, which are essential for high-speed data transmission between data centers. This regulatory environment underscores the complexities and risks of the current AI data center boom, as companies navigate a landscape increasingly fraught with geopolitical challenges.48
“Chinese firms supply nearly 30% of certain transformer and switchgear categories and over 40% of U.S. battery imports, with deeper exposure in copper and electrical steel. The Trump administration is drafting a ban on new Chinese optical transceivers, which could worsen supply chain shortages.”
CNBC
