Seagate (NASDAQ:STX) will pay a $300-million penalty for allegedly continuing an unauthorized $1.1 billion relationship with Chinese technology firm Huawei after the company was added to a U.S. trade blacklist in 2020.
The $300 million settlement, announced by the Department of Commerce on Wednesday, is the largest ever imposed by Commerce’s Bureau of Industry and Security, which enforces export controls against blacklisted companies like Huawei.
Federal regulators said Seagate was Huawei’s sole provider of hard drive disks, or HDDs, resulting in around $150 million in profit for the hard drive maker.
Seagate shipped over 7.4 million HDDs to Huawei from Aug. 2020 to Sept. 2021, federal regulators said. Neither Huawei nor Seagate made an apparent effort to hide their relationship, according to federal charging documents. “Seagate well seized the opportunity and successfully won the big share,” Huawei allegedly said.
Seagate also allegedly extended lines of credit totaling $1 billion to the Chinese company. Those lines of credit allowed Huawei to order an “increasing volume” of HDDs, federal regulators said, that Huawei wouldn’t have been able to pay for otherwise.
“All the while, Seagate’s competitors declined similar exports,” a Commerce Department press release said.
Even after export controls were imposed, a senior Seagate executive publicly justified the continued relationship with Huawei, regulators alleged. “I don’t see any particular restriction for us,” the executive reportedly said.
Seagate prioritized its relationship with Huawei over at least one U.S. customer, federal regulators alleged, with one executive writing that the company “moved supply to support China,” even after export controls had been imposed.
STX shares sank $2.52, or 4.4%, Friday to $54.55.
