Seagate Technology has reached a settlement with US authorities to pay a $300 million penalty for violating US export control laws by shipping over $1.1 billion worth of hard disk drives to China's Huawei. This comes after the US Department of Commerce placed Huawei on the Entity List in 2019, a US trade blacklist, to reduce the sale of US goods to the company over national security and foreign policy concerns. Seagate sold the drives to Huawei between August 2020 and September 2021, despite a rule that restricted sales of certain foreign items made with US technology to the company. Seagate shipped 7.4 million drives to Huawei for about a year after the 2020 rule took effect and became Huawei's sole supplier of hard drives.
The penalty represents the latest in a series of actions by Washington to prevent sophisticated technology from reaching China that may support its military, enable human rights abuses, or otherwise threaten US security. Seagate's competitors, Western Digital and Toshiba, ceased shipments to Huawei after the new rule took effect in 2020. However, Seagate continued to send hard disk drives to Huawei, according to the US Senate Commerce Committee.
Seagate argued that its foreign-made drives were not subject to US export control regulations because they were not the direct product of US equipment. The government disagreed, stating that Seagate wrongly interpreted the foreign product rule to require evaluation of only the last stage of its manufacturing process rather than the entire process. Seagate made drives in China, Northern Ireland, Malaysia, Singapore, Thailand, and the United States, using equipment, including testing equipment, subject to the rule.
Seagate's $300 million penalty is the largest in the history of the agency not tied to a criminal case. The penalty will be due in installments of $15 million per quarter over five years, with the first payment due in October. Seagate has also agreed to three audits of its compliance program and is subject to a five-year suspended order denying its export privileges. Seagate's CEO, Dave Mosley, said that while the company believed it had complied with all relevant export control laws at the time it made the hard disk drive sales, it had determined that settling the matter was the best course of action.