Seagate, a California-based company specializing in data storage solutions, has been fined a staggering $300 million by the Bureau of Industry and Security (BIS) of the US Commerce Department for violating export controls against Huawei, a Chinese technology company. The BIS found that Seagate continued to sell hard disk drives to Huawei, even after the US expanded its export restrictions against the company in 2020. The US government had accused Huawei of attempting to acquire advanced technologies to undermine US national security.
Despite this, Seagate went ahead with a billion-dollar deal with Huawei, making the Chinese firm its sole source provider of HDDs. The US Commerce Department has deemed Seagate’s actions to be in violation of its export controls against Huawei, resulting in the largest standalone administrative penalty from the BIS to date.
Seagate had sold an incredible 7,420,496 HDD drives to Huawei between August 17, 2020, and September 29, 2021, after the export controls had been put in place. The US estimates the total value of the sold HDD drives at $1.1 billion. However, the $300 million penalty is more than twice what BIS estimates to be the company’s net profits for the alleged illegal exports to or involving Huawei. As a result, Seagate has incurred a net loss of at least $151 million on the venture.
In addition to the hefty fine, Seagate also faces audits and a “denial order” that could prevent the company from exporting products until it pays the $300 million fine over a five-year period. Despite these measures, Seagate has stated that it believes it complied with all relevant export control laws at the time it made the hard disk drive sales in question. However, it has decided to pay the settlement, taking into account the risks and costs of protracted litigation involving the US government, as well as the size of the potential penalty.
Seagate’s actions have raised questions about the ethics of doing business with companies that have been blacklisted by the US government. Critics argue that companies should put ethical considerations before profits and avoid engaging in business activities that could be detrimental to national security. However, others argue that companies have a responsibility to their shareholders to maximize profits and that it is not their job to enforce national security policies.
Regardless of one’s perspective, it is clear that Seagate’s decision to continue doing business with Huawei has resulted in significant financial and reputational damage. It remains to be seen whether other companies will take heed of Seagate’s example and refrain from doing business with blacklisted firms, or whether profit motives will continue to prevail over ethical considerations.
