Seagate has agreed to pay the U.S. Department of Commerce a total of $300 million over the next five years for selling hard disk drives to Huawei.

The U.S. government's Bureau of Industry and Security (BIS) alleged that Seagate broke rules regarding exports to the China-based company when it sold certain hard disk drives to the company over a 13-month period from August 2020 to September 2021.

According to a BIS press release [PDF] (opens in new tab), some of the hard drives were "over 7.4 million units" worth approximately $11,047,320,205. The agency claims that Seagate was the sole supplier of HDDs to Huawei during this period.

Chronologically, these sales occurred after the U.S. government updated its rules for companies doing business with Huawei to include new sanctions regarding what the company can and cannot sell. This change was made in May 2020, prior to which the BIS had already added Huawei to the List of Companies (open in new tab) and restricted its access to U.S.-made technology.

These measures, as stated in the BIS FAQs on sanctions (open in new tab), are in response to the fact that Huawei "engages in activities that are contrary to U.S. national security or foreign policy interests and pose a significant risk that its non-U.S. affiliates will engage in activities contrary to U.S. national security." This began as a response to what the U.S. believes to be a Huawei has previously denied this claim (open in new tab).

Huawei has intensified its internal R&D efforts to counter the sanctions and has recently reported significant profit losses (open in new tab) for the years 2022-2023. Meanwhile, U.S. companies that may have previously supplied products to Huawei are seeing their business dry up.

Seagate, however, argues that selling large quantities of hard drives to Huawei does not constitute a breach of sanctions.

"While we believed we were in compliance with all relevant export control laws at the time we sold the hard drives in question, we decided it was in our best interest to engage with BIS and resolve this issue," Seagate CEO Dave Mosley says.

Rather than contest the lawsuit, Seagate said it did not want to deal with "the risks and costs of long-term litigation involving the U.S. government, the magnitude of potential penalties, and our desire to focus on our current business challenges and long-term business strategy," and instead chose to pay We have elected to do so.

Essentially, Seagate felt it could have been worse.

Nevertheless, $300 million is an amount that will likely hurt Seagate financially for the next five years. How much it will hurt depends on whether the slump in technology sales continues. Seagate recently announced that its sales (open in new tab) for the last few months of 2022 were 39% lower than in 2021.