Seagate, a computer storage company, has been slapped with a record-breaking $300 million penalty by the Department of Commerce for continuing to do business with Huawei, a Chinese technology firm, after the latter was blacklisted by the US in 2020. This unauthorized relationship resulted in around $150 million in profits for Seagate, and was facilitated by Seagate's provision of hard drive disks (HDDs), of which the company was Huawei's sole provider.
Between August 2020 and September 2021, Seagate shipped over 7.4 million HDDs to Huawei, which the Chinese firm allegedly acknowledged by saying that "Seagate well seized the opportunity and successfully won the big share". The lines of credit extended by Seagate to Huawei, totaling $1 billion, also allowed the latter to order an "increasing volume" of HDDs that it would not have been able to afford otherwise.
The Commerce Department press release said that Seagate prioritized its relationship with Huawei over at least one US customer, with one executive stating that the company "moved supply to support China" even after export controls had been imposed. A senior Seagate executive reportedly publicly justified the continued relationship with Huawei even after export controls were imposed, saying that "I don't see any particular restriction for us". Meanwhile, Seagate's competitors declined similar exports. Despite all these allegations, Seagate confirmed that it had settled with the Commerce Department, and its CEO, Dave Mosley, stated that "while we believed we complied with all relevant export control laws at the time we made the hard disk drive sales at issue, we determined that engaging with BIS and settling this matter was the best course of action".
The $300 million settlement is the largest ever imposed by the Bureau of Industry and Security, which is responsible for enforcing export controls against blacklisted companies such as Huawei. This latest development adds to Seagate's woes, as its shares slipped by over 7% after reporting disappointing third-quarter results. Huawei has not yet issued a statement regarding the matter.
