Seagate Technology Holdings has reached a tentative settlement to resolve investor claims that it concealed illegal HDD sales to Huawei, related export-control violations, and the company’s reliance on that business. On August 17, 2020, the U.S. expanded export restrictions targeting Huawei. On September 14, 2020, Seagate said it did not see a restriction preventing shipments, even as investors say it was moving to capture that business. By December 7, 2020 and January 27, 2021, Seagate had strengthened its Huawei ties and received a supplier warning that its technology required a license. After negative disclosures on March 8, 2022, July 21, 2022, October 26, 2022, and April 19, 2023, the case moved to a tentative settlement.
August 17, 2020: The U.S. Department of Commerce issued the final version of the Foreign Direct Product Rule aimed at Huawei.
September 14, 2020: Seagate said it did not see any particular restriction preventing shipments to Huawei.
December 7, 2020: Seagate signed a three-year Strategic Cooperation Agreement naming itself Huawei’s strategic supplier.
January 27, 2021: A supplier sent Seagate an FDP rule notification letter warning that its technology triggered FDPR licensing requirements.
October 26, 2021: A Senate Commerce Committee report said Seagate appeared to have knowingly violated the Foreign Direct Product Rule for more than a year.
March 8, 2022: Seagate lowered expectations and said disruption in the Chinese market would put results at the lower end of guidance.
July 21, 2022: Seagate reported a major revenue miss and cut forward guidance as HDD demand in Asia weakened.
October 26, 2022: Seagate disclosed that BIS had sent a proposed charging letter alleging export-control violations.
April 19, 2023: Seagate admitted it sold more than $1.1 billion in HDDs to Huawei in violation of U.S. export restrictions and disclosed a $300 million BIS penalty.
Seagate is a major data storage company whose business depended heavily on hard disk drives. By 2020, HDDs made up the core of its revenue, and investors were closely watching whether Seagate could keep that business stable through the economic pressure and supply disruptions caused by the pandemic.
In August 2020, the U.S. government tightened export restrictions aimed at Huawei. Investors say that mattered directly to Seagate because the company used restricted U.S.-origin technology in key stages of its HDD manufacturing process, which meant shipments to Huawei required a license.
Instead of stepping back, Seagate allegedly expanded the relationship. According to the source, the company became Huawei’s only HDD supplier after competitors stopped shipping, signed strategic agreements making Huawei a priority customer, and extended huge lines of credit to support large orders.
Investors say Seagate still told the market that it complied with all applicable rules and that Huawei was not a material driver of results. At the same time, the complaint says those Huawei sales helped Seagate meet or beat revenue expectations and boosted the company’s financial performance while the broader business was under pressure.
The truth came out in stages. In 2022, Seagate disclosed weaker results tied to China and later revealed a proposed BIS charging letter, and on April 19, 2023, the company admitted that it had sold more than $1.1 billion in HDDs to Huawei in violation of U.S. export restrictions and accepted a $300 million penalty. The matter has now moved to a tentative settlement.
What Can Investors Expect Now?
Seagate Technology Holdings has reached a tentative settlement to resolve investor claims that it concealed illegal HDD sales to Huawei, related export-control violations, and the company’s reliance on that business.
If you were damaged due to this situation, you can file for a payout and get your share of the settlement. You can check if you are eligible and other details in the FAQ section.