IBM is closing its research and development operations in China, resulting in the loss of 1,000 jobs. Jack Hergenrother, IBM’s VP of global enterprise systems development, confirmed the shutdown in a meeting with employees on Monday. He cited increased competition from Chinese companies and the underperformance of IBM’s infrastructure business as critical reasons for the closure.
IBM’s revenue from China fell nearly 20% last year amid ongoing tech industry tensions between the US and China. The company plans to hire R&D staff in other locations, such as India, to fill the gap left by the closure. The planned shutdown will impact staff in cities like Shanghai and Beijing.
IBM’s research division primarily focuses on artificial intelligence development, semiconductor research, and cloud computing technology. Geopolitical tensions between the US and China have increased recently, especially since the US banned the export of advanced AI chips to China in 2022.
IBM ends China R&D operations
The US continues to restrict the export of Nvidia’s most powerful chips to China. Still, investigations have revealed that Chinese researchers may circumvent the ban by using loopholes, such as acquiring server hardware or importing chips from other countries like Singapore. IBM has a long history in China, first supplying machines to a major hospital in Beijing in 1934. After re-entering the market in 1984 following China’s opening to the world, the country was seen as a priority with massive potential.
However, in recent years, that enthusiasm has waned. “It’s a reality that market access for Western firms is constricting, if not closing, in some sectors in China due to national security concerns,” David Hoffman, senior advisor of the Conference Board Asia, said. He added that enterprise IT, which refers to complex systems used by large organizations to manage operations, was one of those areas, mainly because large state-owned and state-connected firms form the bulk of the market.
The closure of IBM’s two China research labs has sent shock waves across the local tech community. For years, the tech giant had been considered one of the most desired employers for the nation’s top computing graduates. However, US companies have been losing their luster in recent years as China intensifies its self-reliance campaign and strives to reduce dependence on foreign technologies amid growing geopolitical tensions.
