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Western Digital, Seagate Differ on Selling Hard Drives to Huawei

(Image credit: Seagate)

Being one of the leading high-tech companies in the world, Huawei has to buy hardware from thousands of producers. As a result, the restrictions imposed by the US government on Huawei and its affiliates have affected hundreds of companies in the US. Seagate and Western Digital are the world’s only companies that sell both hard drives and solid-state drives. While neither SSDs nor HDDs are made in the US, they use technologies developed in the country. As a result, the companies may need to obtain a license to sell these products to Huawei. Surprisingly, the two firms seem to have different opinions about such a license. To make the matters even more complicated for the Chinese giant, Micron cannot ship SSDs to Huawei. 

Strict Rules

Under the latest rules imposed by the US Department of Commerce on August 17, any company that sells a product subject to US DoC export control that was developed or made using US IP, software, technology or equipment to Huawei or any of its affiliates must obtain a license. The new amendment restricts Huawei and its associates from obtaining “foreign made chips developed or produced from US software or technology to the same degree as comparable U.S. chips.” Technically, the restrictions only concern semiconductors, but since all high-tech devices use chips and most chips nowadays are designed using software developed in the US and then made using equipment partly made in the US, it gets extremely complicated (if not impossible) to sell any product to Huawei. 

Storage devices like HDDs and SSDs use chips developed in the US and/or using software designed in the US, so companies like Seagate and Western Digital need to get a license from the US DoC to sell their products to Huawei. The Chinese giant is not a major customer of either Seagate or Western Digital (its share in their revenue is less than 10%), but it certainly is important for both. 

Different Views

Surprisingly, when presenting at Deutsche Bank 2020 Virtual Technology Conference, executives from the two storage companies had different opinions about licensing. 

“We have already applied for a license to ship both our flash products and our hard drive products to Huawei,” said Bob Eulau, CEO of Western Digital. “We do not know exactly what the process or the timeline looks like, but we have got our applications in and we will obviously do whatever we can to get clarification as quickly as possible.” 

Western Digital has supplied both HDDs and SSDs to Huawei. But right now, the company does not ship anything to Huawei. Western Digital is currently conducting a thorough analysis of how it makes hard drives to find out whether it indeed needs a license for them. 

“We are in the process of doing a very detailed analysis on everything we use in our [HDDs] to understand whether we do have to fully comply with the regulation,” said Eulau. “In the interim, we have decided to pause and we are not shipping hard drives to Huawei.” 

As it turns out, Seagate has a slightly different view on the issue. The company is also investigating to find out whether it needs a license for hard drives, but at this point it believes that it does not. 

“We are still going through the final assessment, but from what I have seen until now, I do not see any particular restriction for us in term of being able to continue to keep the Huawei or any other customers in China,” said Gianluca Romano, CFO of Seagate. “So, we do not think we know we need to have a specific license.” 

Since Seagate is a US-based company, it will have to comply with the regulations, but what was unclear is whether Seagate was shipping HDDs to Huawei after September 14, 2020. We asked the company and here is the response we received: 

“As a global technology company with a broad network of suppliers and customers worldwide, Seagate continuously monitors and complies with policies and regulations across the world,” a spokesman for Seagate said. “We are aware of the actions by the U.S. Department of Commerce to add multiple Chinese entities to the Entity List and we continue to review this situation and will fully comply with these rules and regulations.”

No DRAM or SSDs from Micron Either

Huawei uses loads of HDDs and SSDs not only for the PCs and servers it sells, but also for its cloud data centers. Even SSDs developed and made in China are designed using software from the US and their components are made using tools at least partly produced in the US, so Chinese companies like YMTC need to get a license from the US DoC. But given that the US government cannot really control supply chains in China, it could be possible for Huawei to get solid-state drives on its domestic market. Yet, without hard drives, it will be extremely complicated to run cloud datacenters or sell servers. 

“As you know, we are continuing to work to understand the details of the latest US orders regarding Huawei, but it is clear that our prior licenses that we had under which we were shipping to Huawei have been impacted by this new ruling,” said Sumit Sadana, chief business officer at Micron. “It seems that most of the semiconductor shipments to Huawei will have to stop after September 14, 2020.” 

Huawei uses loads of HDDs and SSDs not only for the PCs and servers it sells, but also for its cloud datacenters. Even SSDs developed and made in China are designed using software from the US and their components are made using tools at least partly produced in the US, so Chinese companies like YMTC need to get a license from the US DoC. But given that the US government cannot really control supply chains in China, it could be possible for Huawei to get solid-state drives on its domestic market. Yet, without hard drives, it will be extremely complicated to run cloud datacenters or sell servers. 

Huawei has been stockpiling all kinds of components in the recent months, so it probably has enough HDDs and SSDs to keep its businesses running for a while. But what remains to be seen is what happens when the stock depletes and HDD makers still do not have a license to sell their products to Huawei? 

Sources: SeekingAlpha (123), Seagate

  • gg83
    “So, we do not think we know we need to have a specific license.” from Seagate. Thats pure "lawyer speak" if I've ever heard it. Lol
    Reply
  • nofanneeded
    This is what happens when you allow Seagate and WesternDigital to buy every HDD makers in the market.

    Samsung , Hitachi , and whatever else .. now USA controls you all ...

    This is a wake up call to everyone not to sell their business to any US company ... it will be used in politics.

    sadly ARM was sold to a US company as well (nvidia) .. and who ever allowed this to pass outside USA is short sighted .
    Reply
  • gdmaclew
    Don't tell me someone is actually sad that Huawei can't get the high-tech they want!
    They are a bunch of thieves stealing all the IP they can get their hands on.
    Reply
  • nofanneeded
    gdmaclew said:
    Don't tell me someone is actually sad that Huawei can't get the high-tech they want!
    They are a bunch of thieves stealing all the IP they can get their hands on.

    funny they are thiefs now after they became a serious threat to Apple in the Mobile market.

    we all know this is just propaganda and politics.
    Reply
  • gg83
    nofanneeded said:
    funny they are thiefs now after they became a serious threat to Apple in the Mobile market.

    we all know this is just propaganda and politics.
    They became a serious threat because they kept stealing IP
    Reply
  • nofanneeded
    gg83 said:
    They became a serious threat because they kept stealing IP

    Prove it !
    Reply
  • gg83
    nofanneeded said:
    Prove it !
    https://www.wired.com/story/us-hits-huawei-new-charges-trade-secret-theft/
    I cant count this as proof. It does mention what they are charged with at least. Im sure the charges are inflated drastically, but there is some truth in there. How can someone defend these companies after knowing about all the human rights violations that come out of the country? I compare it to buying cocaine, that money eventually makes it to the cartel.
    Reply
  • nofanneeded
    gg83 said:
    https://www.wired.com/story/us-hits-huawei-new-charges-trade-secret-theft/
    I cant count this as proof. It does mention what they are charged with at least. Im sure the charges are inflated drastically, but there is some truth in there. How can someone defend these companies after knowing about all the human rights violations that come out of the country? I compare it to buying cocaine, that money eventually makes it to the cartel.


    Make up your mind , stealing technology is different from Human rights ... and last time I checked even Apple had Human Rights violations in China ...

    https://www.business-humanrights.org/en/latest-news/china-apple-accused-of-violating-labour-laws-as-employees-at-iphone-factory-found-working-100-hours-of-overtime-being-punished-for-not-meeting-targets-incl-co-comments/
    Reply