Seagate has agreed to a record settlement over forbidden exports to Huawei

Seagate Technology agrees to pay $300 million to the federal government after two of its subsidiaries sold hard drives to Huawei, despite US sanctions on the Chinese telecommunications company.

Seagate has agreed to a record settlement over forbidden exports to Huawei

Seagate Technology of Dublin, Ireland is a data storage company that has agreed to pay $300,000,000 to the federal government. This was after two of their subsidiaries sold hard drives for Huawei, in spite US sanctions against the Chinese telecoms company.

Three considerations to make before you take a stand as a company

In a press statement (pdf), the US Department of Commerce announced that the settlement was the largest administrative penalty ever imposed by the Bureau of Industry and Security, which oversees federal export control.

Federal regulators specifically cited Seagate subsidiaries in California and Singapore for violating the Foreign-Produced Direct Product Rule by selling technology developed in America to Huawei.

In 2019, the US government imposed sanctions on Huawei, calling it a national security threat and ordering American firms to avoid doing business with them unless they obtained a government licence. In January 2023, the US stopped considering licenses to conduct business with Huawei.

Seagate's Chief Financial Officer, Gianluca Roma, stated that he did not believe the trade restrictions applied to the US founded company, which was incorporated in Dublin, Ireland in 2010. This is just before Seagate signs a 2020 deal with Huawei.

Romano, the CEO of Romano Technologies, told investors that "we don't see any restriction in our ability to continue shipping to Huawei or other customers in China" even though two of the company's main competitors for hard drive sales have stopped all trade with Huawei.

Seagate then signed a deal for three years with Huawei. The Chinese company received approximately 7,4 million hard disk drives from Seagate without any government licensing. Huawei designated Seagate as their primary supplier in the contract (pdf), and the contact said that the company would receive "priority over other Huawei suppliers."

The result of today's action: the largest administrative resolution in the history of our agency. This settlement is an important reminder that companies must adhere to BIS export regulations, while our enforcement team strives to ensure our national security as well as a level playing ground.

The $300 million figure represents less than one fifth of Seagate’s net income of $1.59 billion in 2022. However, due to a reduced demand for the company's products, its projected net income will be significantly lower in 2023. The penalty includes a multi-year audit as well as a five-year suspension of export privileges.

Seagate's stock fell close to 5% in New York at midday after the announcement. The company is expected to release their earnings report on the following day.

Huawei has reported its largest annual profit decline amid American sanctions against chip technology

Chinese spy accused of trying to undermine Huawei investigation

China sanctions US companies that supply arms to Taiwan