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Seagate to pay $300 million for supplying Huawei with hard drives

The US Department of Commerce (DOC) fined Seagate $300 million for delivering over $1.1 billion (about $3 per person in the US) worth of hard drives to Huawei, violating export control regulations. Seagate has agreed to pay the fine. Despite a restriction issued in August 2020 restricting sales to the Chinese corporation, the Bureau of Industry and Security (BIS) of the Department of Commerce found that Seagate exported 7.4 million hard drives to Huawei between the month of August 2020 and September 2021 without getting an export license.

The $300 million fine imposed by the BIS is the biggest one ever levied without being related to a criminal prosecution. According to the BIS, Seagate’s profits from selling hard drives have more than doubled.
As a result of worries that the Chinese government could snoop on American networks using Huawei’s communications technology, the company was initially included on the Entity List, a US trade blacklist, in May 2019. When BIS put a license requirement on specific foreign-produced goods created with US technology and supplied to Huawei in August 2020, these restrictions were increased. According to Reuters, Seagate asserted that the limitations did not apply to its hard drives. It continued to do business with Huawei and eventually became its exclusive source for HDDs.

According to Matthew Axelrod, Assistant Secretary for Export Enforcement, “Even after Huawei was placed on the Entity List for behaviour harmful to our national security and its competitors had stopped selling to them because of our foreign direct product rule, Seagate continued sending hard disk drives to Huawei.”

The $300 million punishment will be paid by Seagate in five quarterly instalments of $15 million beginning on October 31, 2023, following the settlement conditions. The business also consented to a multi-year audit and a five-year suspended “denial order,” which may be activated and stop Seagate from exporting goods if it fails to make any payments or fulfil the audit’s criteria.

“We believe that entering into this agreement with BIS and resolving the matter is in the best interests of Seagate, our customers, and our shareholders,” said Seagate CEO Dave Mosley in a statement. “Although we were confident that we complied with all applicable export control laws at the time we made the in question hard disc drive sales,” the company said, “we decided that working with BIS to resolve this issue was the best course of action.”