Senators Allege Seagate Breached US Embargo On Huawei: WSJ

A group of Senate Republicans alleged Seagate Technology Holdings PLC STX of violating U.S. export rules by selling hard-disk drives to Huawei Technologies Co despite the U.S. embargo, the Wall Street Journal reported.

What Happened: Seagate allegedly supplied a substantial share of the Chinese company’s estimated $800 million worth of annual purchases of hard-disk drives after the embargo in September 2020, as per the report.

The report cited market research by banks, disclosures by the company, and committee staffer interviews with Seagate officials.

“By shipping these prohibited products to Huawei, it appears Seagate benefitted from an uneven playing field to the detriment of national security and at the expense of its competitors who abide by the rule designed to combat threats posed by companies with known connections to the Chinese government,” the report said.

Why It Matters: The report urged a halt to unlicensed shipments of technology to Huawei and called on the Commerce Department to better enforce restrictions on Huawei and “penalize past shipments in violation of this regulation.” Seagate has denied the allegations.

In 2020, Seagate told investors it didn’t believe it needed a license to continue selling to the Chinese firm. Seagate disclosed that Huawei accounted for less than 10% of its revenue.

Seagate declined to provide the date from which it halted shipments to Huawei with no comment on whether it had suspended its Huawei sales. Seagate reported FY21 revenue of $10.7 billion, up 1.6% year-on-year.

In 2020, the Commerce Department imposed export restrictions on Huawei, effectively barring any supplier from shipping products made using U.S. technology without a license, citing a national security threat.

Price Action: STX shares closed lower by 1.22% at $88.07 on Tuesday.

Photo by Gijs Bolmeijer via Wikimedia