Seagate pays $ 300 million fine for shipping Huawei 7 million hard disks

April 19 (Reuters) – Seagate Technology Holdings PLC (STX.O) has agreed to pay a $300 million fine in a settlement with US authorities for shipping more than $1.1 billion in hard drives to China’s Huawei in violation of US export control laws. . the Commerce Department said on Wednesday.

Seagate sold the drives to Huawei between August 2020 and September 2021 despite an August 2020 rule restricting the sale of certain foreign items made using US technology to the company. Huawei was placed on the Entity List, a US trade blacklist, in 2019 to reduce the sale of US goods to the company amid national security and foreign policy concerns.

The sanction marks the latest in a series of actions by Washington to keep cutting-edge technology out of China that might support its military, enable human rights abuses or threaten US security.

The Commerce Department said Seagate shipped 7.4 million drives to Huawei about a year after the 2020 rule went into effect and became Huawei’s sole supplier of hard drives.

The administration said other major suppliers of hard drives halted shipments to Huawei after the new rule went into effect in 2020. Although they were not identified, Western Digital Corp. said in a 2021 report by Seagate. (WDC.O) and Toshiba Corp (6502.T) are the others.

Even after its “competitors stopped selling to them… Seagate continued to send hard drives to Huawei,” Matthew Axelrod, Assistant Secretary of Commerce for Export Enforcement, said in a statement. “Today’s work is the result.”

Seagate’s position was that foreign-made drives were not subject to US export control regulations, mainly because they were not the direct producer of US hardware.

“While we believed we complied with all relevant export control laws at the time we made sales of the disputed hard drives, we determined that… settling this matter was the best course of action,” Seagate CEO Dave Moseley said in a statement. “. After the news spread.

In an order issued Wednesday, the government said Seagate wrongly interpreted the foreign product rule as requiring evaluation of only the last stage of its manufacturing process rather than the entire process.

The order said Seagate manufactured drives in China, Northern Ireland, Malaysia, Singapore, Thailand and the United States, and used equipment, including testing equipment, in accordance with the rule.

In August, the US Department of Commerce sent the company a “Proposed Charge Letter,” warning the company that it may have violated export control laws. The letter started about eight months of negotiations.

Reuters reported on the indictment letter in October.

Seagate’s $300 million fine is due in installments of $15 million per quarter over five years, with the first payment due in October. It has also approved three audits of its compliance program, and is subject to a five-year suspended order denying it export privileges.

In light of the settlement, the company said it will report its financial results for the third quarter of 2023 before the market opens on Thursday, rather than an earlier plan for after trading closes.

(Reporting by Karen Freifield) Editing by Chris Sanders and Grant McCall

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