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Seagate Technology Holdings PLC has agreed to pay a $300 million fine as part of a settlement with US authorities for shipping more than $1.1 billion worth of hard drives to China's Huawei in violation of data protection laws. US data export controls, the Commerce Department said on Wednesday. Seagate sold the units to Huawei between August 2020 and September 2021 despite an August 2020 rule that restricted sales of certain foreign items made with American technology to the company. Huawei was placed on the Entity List, a US trade blacklist, in 2019 to reduce the sale of US products to the company amid national security and foreign policy issues. The sanction represents the latest in a series of actions by Washington aimed at preventing China from using sophisticated technologies that could support its military, enable human rights abuses or threaten US security.
Seagate shipped 7.4 million drives to Huawei over about a year after the 2020 rule went into effect and became Huawei's sole supplier of hard drives, the Commerce Department said.
The other two major hard drive vendors stopped shipments to Huawei after the new rule went into effect in 2020, the department said. Although they were not identified, Western Digital Corp and Toshiba Corp were the other two, the US Senate Commerce Committee said in a 2021 report on Seagate.
The companies did not respond to requests for comment.
Even after "competitors stopped selling them...Seagate continued to ship hard drives to Huawei," Matthew Axelrod, assistant secretary for export compliance at the Commerce Department's Office of Industry and Security, said in a statement. "Today's action is the consequence of that."
Axelrod said the administrative penalty was the largest in agency history unrelated to a criminal case.
Seagate's position was that its foreign-manufactured drives were not subject to US export control regulations, primarily because they were not the direct product of US equipment.
"While we believed that we had complied with all relevant export control laws at the time we made the subject hard drive sales, we have determined that ... resolution of this matter is the best course of action," he said. Seagate CEO. Dave Mosley, in a statement. .
In an order issued Wednesday, the government said Seagate misinterpreted the foreign products rule to require testing only the final step in its manufacturing process rather than the entire process.
Seagate manufactured drives in China, Northern Ireland, Malaysia, Singapore, Thailand, and the United States, based on the order, and used equipment, including test equipment, subject to the standard.
In August, the US Department of Commerce sent the company a "proposed billing letter," warning that it may have violated export control laws. The letter launched some eight months of negotiations.
Reuters broke the indictment in October.
Seagate's $300 million penalty must be paid in installments of $15 million per quarter over five years, with the first payment due in October. It has also agreed to three audits of its compliance program and is subject to a five-year stay order denying it its export privileges.
The company said that, in light of the agreement, it will publish its financial results for the third quarter of fiscal 2023 before the market opens on Thursday, instead of a previous plan after the market closes.
