Seagate has agreed to pay a $300m fine to settle allegations that it violated US export controls by selling hard disk drives to Chinese firm Huawei, in violation of the Bureau of Industry and Security (BIS) rules implemented in 2020. The payment is the largest administrative penalty ever imposed by the BIS.
The company admitted its conduct and violated the rules by exporting, re-exporting, or transferring 7.4 million disk drives to Huawei without BIS approval. The company is alleged to have continued sending hard disk drives to Huawei even after it was placed on the US Entity List. Western Digital and Toshiba ceased shipments to Huawei after the August 2020 rule took effect.
The BIS noted that “the two other companies capable of making HDDs promptly—and publicly—indicated that they had ceased sales to Huawei,” and that “of the three, only Seagate refused to stop sales and transactions involving Huawei.” Seagate supplied 7.4 million hard disk drives worth over $1.1bn to Huawei from August 17, 2020, to September 29, 2021, according to the agency.
In addition to the fine, Seagate will have to adhere to a multi-year audit requirement and a five-year suspended denial order, and its export privileges will be revoked if it fails to comply.
Seagate CEO Dave Mosley said the company chose to settle with the US government due to the risks and costs of prolonged litigation, the size of the potential penalty, and a desire to focus on current and future business challenges.
Mosley added that Seagate believed it had followed all relevant export control laws at the time of the sales but agreed to engage with the BIS and settle the matter. Seagate will pay the fine over five years, with quarterly installments of $15m each.
After recording the $300m settlement penalty in its earnings, Seagate reported a net loss of $433m on $1.86bn in revenue for the quarter ending March 31.
The fine comes amid tensions between the US and China, as the former seeks to limit the latter’s access to sensitive US technology. The US government has placed Huawei on its Entity List, effectively blocking US firms from supplying it with technology without a licence.
As part of the ongoing trade war between the two nations, the US has also targeted Chinese firms such as TikTok and WeChat over national security concerns.
