IBM is cutting more than 1,000 jobs in China due to geopolitical tension between Beijing and Washington, prompting global companies to reassess their future in the country. The United States and China have had strained relations over technologies like artificial intelligence and green technology, leading some firms to quietly lay off or relocate staff. IBM is reported to be closing its research operations in China entirely, including the China Development Lab that opened in 1999. The company declined to comment on the number of job losses or whether it would retain any research staff in China.
The job cuts at IBM were reportedly announced by Jack Hergenrother, an enterprise systems development executive, and affected staff in Beijing, Shanghai, and Dalian. The company’s infrastructure business in China was said to be in decline, leading to the transfer of research work to other labs, potentially in India. IBM has a long history in China, dating back to supplying machines to a major hospital in 1934 and re-entering the market in 1984. However, market access for Western firms in China has become increasingly challenging due to national security concerns and the tech war between the US and China.
IBM stated that Chinese companies, particularly in hybrid cloud and AI technologies, are becoming a focus, and the company’s strategy is to cater to those opportunities. China, once seen as a promising market for industries, is no longer as attractive. IBM reported a 19.6% revenue decline in the country last year. This news comes after Microsoft confirmed offering to relocate some of its employees in China, following challenges in the business outlook for American companies working in AI and cloud computing research in the country.
Microsoft has also faced obstacles in China, despite entering the market in 1992 and building goodwill through its research lab, Microsoft Research Lab Asia. Many US firms were enticed to move research to China in the past by incentives and bureaucratic urging, but political and intellectual property risks are now reversing that trend. US companies are finding it increasingly difficult to operate in China, particularly in areas like enterprise IT, due to the dominance of large state-owned and state-connected firms in the market.
The shifting landscape for American companies in China reflects the broader tensions between the two countries and their competition in critical technologies. IBM and Microsoft, among other global firms, are navigating the challenges of doing business in China while balancing the demands of the US government and protecting their intellectual property. As geopolitical tensions continue, the future of American companies in China remains uncertain, requiring careful strategic decisions and adaptations to changing market conditions.
