U.S. government imposes record fine on Seagate for violating sanctions against Seagate:
Seagate has been hit with a massive $300 million fine by the U.S. Department of Commerce [PDF] for violating export control restrictions imposed on Huawei in 2020. The report shows that the U.S. Department of Commerce states that Seagate shipped millions of hard drives to Huawei in 2020 – 2021 and become the sole supplier of HDDs to the company while its rivals Toshiba and Western Digital refrained to work with the conglomerate.
Seagate shipped 7.4 million hard drives to Huawei on 429 occasions between August 2020 and September 2021 without obtaining an export license from the U.S. Department of Commerce's Bureau of Industry and Security. Those drives were worth around $1.104 billion back then, a significant sum for Seagate, which revenue totaled $10.681 billion in 2021.
To settle the matter, Seagate has agreed to pay the $300 million fine in quarterly instalments of $15 million over five years starting in October 2023. The civil penalty of $300 million is more than double the estimated net profits that Seagate made from the alleged illegal exports to or involving Huawei, according to BIS. In fact, $300 million is a record fine for BIS.
"Today's action is the consequence: the largest standalone administrative resolution in our agency's history," said Matthew S. Axelrod, Assistant Secretary for Export Enforcement. "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."
As of mid-August 2020, the U.S. Department of Commerce's Bureau of Industry and Security mandated that any company planning to sell semiconductor hardware, software, equipment, or any other asset using American intellectual property to Huawei and its entities must obtain a special export license. The export controls on Huawei mostly pertain to semiconductors. However, Seagate's hard drives also fall under the export-controlled items category because they use controllers and memory designed with electronic design automation tools developed by American companies and produced using U.S.-made equipment.
These export licenses were subject to a presumption of denial policy, meaning they were difficult to obtain. However, multiple companies were granted appropriate licenses between 2020 and 2022, which allowed Huawei to acquire various products that were developed or manufactured in the United States.
Seagate did not apply for an appropriate license and said in September, 2020, that its drives could be shipped to Huawei without a license, an opinion that was not shared by its rival Western Digital. Since Huawei was not supposed to get HDDs at all, republican senator Roger Wicker wondered in mid-2021 how exactly the sanctioned company obtained such storage devices and whether three global makers of hard drives complied with the export rules.
As it turned out, although Toshiba and Western Digital ceased to sell HDDs to Huawei, Seagate continued to do so. In fact, the company became Huawei's exclusive hard drive supplier and even signed a three-year Strategic Cooperation Agreement and then a Long-Term Agreement to purchase over five million HDDs with the Chinese conglomerate in 2021.
(Score: 2) by Freeman on Friday April 21, @01:52PM (1 child)
Okay, perhaps my experiences don't match their current product line, but I've never liked Seagate. I've specifically not bought Seagate products in decades. At least not personally. Random drive in laptops purchased for work don't count. Even Seagate drives probably outlive the usefulness of Laptops anyway.
Joshua 1:9 "Be strong and of a good courage; be not afraid, neither be thou dismayed: for the Lord thy God is with thee"
(Score: 5, Funny) by DannyB on Friday April 21, @03:06PM
So maybe Seagate was helping to punish Huawei?
Perhaps they should be rewarded.
How often should I have my memory checked? I used to know but...
(Score: 4, Interesting) by Anonymous Coward on Friday April 21, @01:55PM
No single drive was exported from the US as the US does not make them.
(Score: 3, Interesting) by PiMuNu on Friday April 21, @02:23PM (6 children)
> shipped 7.4 million hard drives to Huawei
7.4e6 HDDs at $100 each, makes $74e7 worth of revenue. Fine of $30e7. If this is stock that would have otherwise been sold to someone else, assume 10% profit that means Seagate made a loss ($7.4e7 profit compared to $30e7 fine). But if this is stock that would otherwise have been written off then Seagate made a profit despite the fine ($74e7 profit compared to $30e7 fine). If you are not doing well in business, better to ignore the trade barrier thing.
(Score: 2) by PiMuNu on Friday April 21, @02:26PM (4 children)
Ah the numbers are even in TFS.
Suffice to say that this fine is not enough to dissuade bad actors.
(Score: 1, Insightful) by Anonymous Coward on Friday April 21, @04:59PM (2 children)
This is just the US Gov taking a share of the profits.
Real deterrence is when you arrest the CxOs and seriously try to send them to prison.
It's not like the US Gov doesn't know what would really deter the CxOs (even the sociopathic ones) - they've done it before: https://en.wikipedia.org/wiki/Extradition_case_of_Meng_Wanzhou [wikipedia.org]
(Score: 3, Insightful) by quietus on Friday April 21, @05:09PM (1 child)
Seagate stopped shipping hard drives to China in September 2021; or, put differently: the deterrence worked.
(Score: 0) by Anonymous Coward on Sunday April 23, @08:05AM
In contrast when CxOs start going to prison, the replacement CxOs are going to be a lot less enthusiastic about breaking laws. Those multi million dollar golden parachutes are a lot less comforting when serving years in a prison cell.
(Score: 3, Touché) by NateMich on Friday April 21, @06:51PM
This won't be dissuading the US government one bit.
(Score: 2) by quietus on Sunday April 23, @10:38AM
You should add a big fat minus 1 billion dollar to your calculation: Seagate gave a credit line of nearly the complete value of the goods being sold to Huawei. To top it off, they publicly declared they weren't going to follow those silly trade restrictions either. Whatever Seagate's management were snorting, it clearly interfered with their planning ahead capabilities.
(Score: 2) by DannyB on Friday April 21, @03:08PM
What would the fine be if the drives were proven to frequently catch fire and some exotic metals in the drive had a similar effect to thermite?
How often should I have my memory checked? I used to know but...
(Score: 2) by Mojibake Tengu on Friday April 21, @03:31PM (4 children)
Seagate has a drive assembly factory in Wuxi, China.
You know, that means no firmware backdoors and such stuff in Huawei Mission Critical Servers.
The edge of 太玄 cannot be defined, for it is beyond every aspect of design
(Score: 2) by quietus on Friday April 21, @05:04PM (3 children)
That is the interesting thing, isn't: (a) how come Huawei ain't using a Chinese brand, and (b) what exactly do they need millions of hard drives for. The answer to (b) is probably their rack unit servers, and their cloud offering. However, that further deepens mystery (a) -- it's just business sense to exert as much control as possible over your supply chain.
(Score: 2) by RS3 on Friday April 21, @05:08PM
At the risk of overstating the obvious, Huawei needs that many drives to store all the data they're harvesting from the USA.
(Score: 2) by ikanreed on Friday April 21, @05:14PM (1 child)
What does China's largest cloud computing provider need with hard drives?
(Score: -1, Offtopic) by Anonymous Coward on Sunday April 23, @01:44AM
To store your mom's nudes? She's so fat, you see...