Seagate to pay $300m fine over hard drive exports to Huawei

US authorities have imposed the $300m (£241m) penalty on Seagate, for the shipping of 7.4 million hard drives to China-based Huawei, worth $1.1bn (£883m), the Department of Commerce has confirmed. 

The hard drives were sold between August 2020 and September 2021, immediately after the Trump administration imposed a ban on the sale of foreign items made with US technology to Huawei.

Even after “its competitors had stopped selling to them … Seagate continued sending hard disk drives to Huawei”, said Matthew Axelrod, assistant secretary for export enforcement at the Commerce Department’s Bureau of Industry and Security. “Today’s action is the consequence.”

Axelrod said the administrative penalty was the largest in the history of the agency not tied to a criminal case.

The move is the latest chapter of the trade dispute between Washington and Beijing, which began in 2019, when the US first restricted China’s access to semiconductor technology, banning Huawei from buying vital US technology, citing national security concerns. 

Since then, the country has continued to impose strict export controls on the Chinese electronic maker. Both Huawei and the Chinese government have continued to deny any spying accusations. 

Despite the ban, Seagate was found to have shipped 7.4 million drives to Huawei for about a year after the 2020 rule took effect. After the company's other two primary suppliers of hard drives ceased shipments, Seagate became Huawei's sole supplier of hard drives, the Commerce Department said.

Although they were not identified, Western Digital and Toshiba Corp were the other two, the US Senate commerce committee said in a 2021 report on Seagate.

“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 … settling this matter was the best course of action,” Seagate’s chief executive, Dave Mosley, said in a statement.

The company had defended itself by stating that foreign-made drives were not subject to US export control regulations. However, in an order issued on Wednesday, the government said Seagate wrongly interpreted the foreign product rule to require evaluation of only the last stage of its manufacturing process rather than the entire process.

"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," Axelrod stated.

Seagate made drives in China, Northern Ireland, Malaysia, Singapore, Thailand, and the United States, the order said, and used equipment, including testing equipment, that is subject to the rule.

The company has revealed it will pay the penalty in $15m (£12m) instalments every three months over the next five years.