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Seagate violated sanctions by selling hard drives to Huawei, says Senate committee

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August 2020 rules tightened trade restrictions

Seagate Photo by Smith Collection/Gado/Getty Images

A US Senate committee says manufacturer Seagate likely violated government sanctions by shipping hard drives to Chinese manufacturer Huawei.

The Republican minority staff of the Senate Committee on Commerce, Science, and Transportation released a report alleging Seagate ignored August 2020 restrictions on shipping semiconductor components to Huawei — a category the report alleges “likely includes hard disk drives.” The report orders Seagate to stop shipments to Huawei and urges the US Commerce Department to “prioritize” enforcement of the sanctions, which the Trump administration implemented after claiming Huawei posed a national security threat.

Huawei has used Seagate, Western Digital, and Toshiba hard drives for its growing external storage business. The report says Western Digital and Toshiba ceased shipments after the sanctions, which banned companies that operate in the US from selling some products to Huawei without a license. But Seagate said in 2020 that it didn’t believe it needed such a license for its hard drives.

Congressional Republicans publicly grilled hard drive companies about Huawei earlier this year. The report says that Seagate officials confirmed in October 2021 that it hadn’t applied for a license to sell to Huawei, and while the officials said they had stopped shipping hard drives to Huawei, they didn’t say exactly when the shipments had stopped. Citing documents and industry reports, the report concludes it was “common knowledge within the storage industry” that Seagate continued them well after the August rules took effect.

The report claims Seagate reaped a windfall by ignoring the sanctions on Huawei. “Seagate’s stock has increased nearly 86 percent since the rule went into effect,” the report notes. “The initial incline began around October 2020, soon after the effective date, as Seagate purportedly continued shipments to Huawei as its sole American supplier of hard disk drives.” It also concedes that the chip shortage may have raised stock prices across the board, however.

A Seagate spokesperson told The Wall Street Journal that the company “complies with all laws applicable to its business and operations, including export control regulations.” It declined to comment specifically on its relationship with Huawei.

In a statement to The Verge, the Commerce Department’s Bureau of Industry and Security (BIS) said it was “committed to fully investigating” any allegations of violations, including ones related to Huawei and China. “Enforcement actions can generally be made public at the end of the investigation,” a spokesperson said of the agency’s next steps. “BIS is committed to briefing Congressional offices at the conclusion of such an investigation and looks forward to continued dialogue with Congress on our national security and economic interests.”

Update 1:30PM ET: Added statement from the Commerce Department.