Seagate Fined $300M for Shipping Drives to Huawei

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Facts

  • The US Commerce Department on Wednesday announced that Seagate Technology Holdings PLC has agreed to pay a $300M fine for shipping more than $1.1B worth of hard disk drives to Chinese tech company Huawei, in violation of US export control laws.1
  • Seagate reportedly sold 7.4M hard drives in 2021 to Huawei, which the US placed on its Entity List in 2019, prohibiting firms from doing business with it without a government license. The sales also violated an August 2020 foreign direct-product rule.2
  • Regulators allege Seagate, which profited roughly $150M from the deal, also prioritized its relationship with Huawei over at least one US customer and extended lines of credit totaling $1B to Huawei, allowing it to order an "increasing volume" of hard drives.3
  • The Dublin-based company publicly announced in 2020 its plans to continue doing business with Huawei and later entered a three-year cooperation agreement with the Chinese company. CFO Gianluca Romano said in September of that year, "I don’t see any particular restriction for us."4
  • The penalty, to be paid in $15M quarterly installments beginning in October, will reportedly be roughly equivalent to one-quarter of Seagate's net income over the last few years. Its net income for 2023, however, is projected to be $400M.2
  • This penalty comes as two other primary hard drive suppliers to China – Western Digital Corp and Toshiba Corp – ceased shipments to Huawei after the new rule took effect in 2020, according to a 2021 US Senate Commerce Committee report.1

Sources: 1Reuters, 2BNN, 3CNBC, and 4Wall Street Journal.

Narratives

  • Pro-China narrative, as provided by Global Times. Plainly, the US is bullying domestic and foreign companies from doing business with China. America should follow the lead of its counterparts in the EU and around the world in seeking favorable economic ties with Beijing rather than using its status as an economic power to gain an edge.
  • Anti-China narrative, as provided by Foreign Policy. If the fact that China controls every domestic company wasn't reason enough, Huawei's founder was a Chinese military engineer before building the company, and it is, inarguably, a risk to US national security and the security of Western private companies. US sanctions are for the benefit of the whole free world and its economy, so it's important that companies abide by trade regulations such as these.