WD And Seagate Stop Selling to Dahua

Western Digital and Seagate are no longer selling to Dahua due to US semiconductor export controls imposed last month, IPVM has confirmed with WD directly and from sources for Seagate.

Just 2 months ago, the US government charged Seagate with violating sanctions adding increased scrutiny to these companies actions.

Inside this note, we examine what happened and the impact of Dahua being blocked out from obtaining hard drives from the 2 mega-storage manufacturers for its kits, recorders, and servers.

Related: Favorite Video Surveillance Hard Drive Manufacturers.

Prior to the semiconductor sanctions, Dahua was able to obtain gear from the surveillance hard drive giants as long as it was produced outside the US. However, Dahua's latest sanctions are even stricter, targeting foreign-produced tech as well.

Hikvision was not named in the semiconductor sanctions. This means that currently, Dahua is subject to even more US sanctions restrictions than Hikvision, which is notable given prior sanctions affected both companies evenly.

Semiconductor Sanctions Backgroud: Targets Foreign-Produced US Tech

As covered by IPVM, the latest US semiconductor sanctions, announced on October 7, are specifically tailored to stop PRC companies from obtaining "foreign-produced items" that were not previously subject to the Export Administration Regulations (EAR).

This is to ensure the 28 entities, including Dahua but not Hikvision, do not obtain technology that has been produced outside the US but was made using US parts and software, because "many supercomputer parts and components based on U.S. technology and software are not produced in the United States", per BIS.

US Goods Made In Thailand

Seagate and WD both produce hard drives outside of the US, e.g., in Thailand, but the sanctions expand the scope, as the US government explained:

Expands the scope of the Export Administration Regulations (EAR) over certain foreign-produced advanced computing items and foreign produced items

WD "Stopped Shipping All Products To Dahua"

WD told IPVM that it "stopped shipping all products to Dahua effective October 21, 2022, in compliance with the latest restrictions":

Western Digital stopped shipping products controlled by the U.S. Export Regulations to Dahua when they were placed on the Entity List in October 2019. After the October 7, 2022 rules that imposed further restrictions on Dahua, Western Digital stopped shipping all products to Dahua effective October 21, 2022 in compliance with the latest restrictions.

Seagate No Longer Sells Dahua

Seagate told IPVM that "it complies with all relevant export control laws and regulations. We do not comment on specific customers", declining to elaborate. A source close to the company said that Seagate too has stopped shipping drives to Dahua.

Seagate Charges

Seagate, in particular, is under strong scrutiny as the company disclosed 2 weeks ago that the US government has charged it with violating sanctions, which Seagate argues was not prohibited:

received a proposed charging letter (“PCL”) from the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”), alleging violations of the U.S. Export Administration Regulations (“EAR”). The PCL alleges Seagate acted in violation of the EAR by providing Seagate hard disk drives (“HDDs”) to a customer and its affiliates listed on the BIS Entity List between August 2020 and September 2021. Seagate has responded to the PCL, setting forth Seagate’s position that it did not engage in prohibited conduct as alleged by BIS, because, among other reasons, Seagate’s HDDs are not subject to the EAR.

News reports say that Huawei is the customer Seagate sold to violating sanctions though Seagate itself did not disclose the customer's name.

Toshiba Status

While Seagate and Western Digital combine to sell the overwhelming majority of hard drives, Toshiba is a distant third and could possibly sell to Dahua. However, Toshiba may be impacted as well (i.e., if it too uses some US technology) but we could not verify.

Hikvision Unaffected

It remains legal to ship some foreign-produced goods to Hikvision, since it was not part of the semiconductor sanctions. WD confirmed IPVM they still ship "certain foreign made products" to Hikvision:

Western Digital stopped shipping products controlled by the U.S. Export Regulations to Hikvision when they were placed on the Entity List in October 2019. Currently we only ship certain foreign made products that are not subject to the U.S. Export Regulations.

According to the source, Seagate also continues to supply Hikvision.

Impact: Dahua More Sanctioned Than Hikvision

This gives Dahua the dubious distinction of being subject to even more restrictions than Hikvision.

Note this may change if Hikvision, but not Dahua, is subject to Magnitsky sanctions, which are stronger sanctions that a May 2022 report says the US is considering for Hikvision.

Impact on Dahua / Lorex

While Dahua has an inventory of hard drives from before the ban was put into place, if this ban continues, it may make it hard for the company to supply kits commonly used by SMB and consumers, where pre-installed hard drives are the norm.

Those kits and recorders are still widely sold e.g., by Dahua through ADI and by Dahua subsidiary Lorex. Buyers could still purchase hard drives separately and install them themselves but, for that marketplace, the additional cost and complexity would be a material negative.

Dahua No Response

Dahua did not respond to IPVM's request for comment.

Other Components Impacted?

IPVM is still working on verifying what other components that have US technology may now be blocked to Dahua (e.g., SoCs inside cameras and recorders).

This is part of a larger projected impact on covered PRC companies that many are arguing will have a major impact on the PRC, e.g. The Financial Times: How the US chip export controls have turned the screws on China and Foreign Policy: Biden Is Now All-In on Taking Out China.