Proposed ban on Chinese AI components poses supply-chain risk to Broadcom

A proposed U.S. ban on Chinese artificial intelligence components threatens to disrupt Broadcom's business model through an indirect supply-chain mechanism. According to BNP Paribas research, Chinese manufacturers Innolight and Eoptolink control over 60% of the global data center optical transceiver market, which is critical to AI infrastructure. These transceivers rely on digital signal processors that account for roughly 40% of the transceiver bill of materials, with Broadcom among the major DSP suppliers to Chinese transceiver makers. A ban on Chinese production could cause Broadcom to lose meaningful demand while creating broader AI infrastructure supply bottlenecks, tightening supplies of networking equipment and raising costs for hyperscalers deploying next-generation AI systems.

1. Chinese transceiver makers control more than 60% of the global data center optical transceiver market as of 2026.
2. Digital signal processors account for roughly 40% of an optical transceiver's bill of materials.
3. Broadcom is a major supplier of DSPs to Chinese transceiver manufacturers including Innolight and Eoptolink.
4. U.S. suppliers are unlikely to immediately replace Chinese transceiver production capacity for 800G and 1.6-terabit devices.
5. BNP Paribas projects the data center optical transceiver market will grow 41% year-over-year to roughly 31 billion dollars in 2026.