Seagate fined USD300 million by US govt for selling hard drives to Huawei

Seagate Technology is one of the world’s biggest hard drive manufacturers, but that hasn’t stopped it from getting into trouble with the US government. The US Department of Commerce’s Bureau of Industry and Security has just announced a USD300 million (~RM1.33 billion) civil penalty against Seagate, after it had alleged the hard drive manufacturer of violating US export controls by selling its hard disk drives to Huawei.

According to the Department of Commerce, they had found that Seagate broke the laws on US exports, with its foreign direct product rules and regulations prohibiting the sale and shipping of products with US-origin technology and/or software on it to countries on the US Entity List, which Huawei has been on since 2019. Despite these new export controls, which were put in place in August 2020, Seagate continued to do business with Huawei, becoming its sole hard drive supplier as its competitors—likely Toshiba and Western Digital—pulled out of dealing with Huawei.

Seagate even entered a three-year strategic cooperation deal with Huawei, with Seagate eventually shipping over 7.4 million hard disk drives to Huawei without authorisation from the Bureau of Industry and Security. These hard drives are valued at over USD1.1 billion in total. It seemed that Seagate believed they were in the clear as they manufactured these hard drives outside of the US, with production done in China, Northern Ireland, Malaysia, Singapore and Thailand instead. However, the US government would counter by stating that they used a laser-based surface inspection system manufactured by an American company to detect defects on their hard drives, meaning that it would fall under the list of devices not allowed to be sold to Huawei without authorisation.

“Even after Huawei was placed on the Entity List for conduct inimical to our national security, and its competitors had stopped selling to them due to our foreign direct product rule, Seagate continued sending hard disk drives to Huawei. Today’s action is the consequence: the largest standalone administrative resolution in our agency’s history.

This settlement is a clarion call about the need for companies to comply rigorously with BIS export rules, as our enforcement team works to ensure both our national security and a level playing field,” – Assistant Secretary for Export Enforcement Matthew S. Axelrod

As a result of falling foul with the US Department of Commerce’s regulations, the Bureau of Industry and Security has not only issued an administrative penalty of USD300 million against Seagate, but is also issuing a mandatory multi-year audit requirement and a five-year suspended Denial Order onto Seagate. The data storage manufacturer has since issued a statement, with Seagate CEO Dave Mosley stating that they entered the agreement with the US government in the best interests of the company to resolve the matter, even though they still believe that they had complied with all relevant export control laws at time of the hard drive sales.

For the complete statement from the US Department of Commerce on the Seagate penalty, you can click here to visit the Bureau of Industry and Security’s website.