IBM is shutting down its research and development operations in China, resulting in the elimination of 1,000 jobs. Jack Hergenrother, who serves as IBM’s VP for global enterprise systems development, confirmed the termination during a meeting with staff on Monday. He pointed to heightened competition from local Chinese companies and the lackluster performance of IBM’s infrastructure sector as key factors behind the decision.
Last year, IBM’s earnings from China dropped by nearly 20% amid escalating tensions in the tech industry between the United States and China. The firm is planning to recruit R&D personnel in alternative locations, like India, to mitigate the impact of this closure. The impending closure is expected to affect employees in cities such as Shanghai and Beijing.
The core focus of IBM’s research division includes artificial intelligence advancements, semiconductor research, and cloud computing technologies. Recently, geopolitical tensions between the US and China have escalated, particularly after the US imposed a ban on the export of advanced AI chips to China in 2022.
IBM terminates R&D initiatives in China
The United States continues to limit the export of Nvidia’s most advanced chips to China. Nevertheless, investigations suggest that Chinese researchers are finding ways around the ban, such as obtaining server hardware or sourcing chips from other nations like Singapore. IBM has maintained a long-standing presence in China, initially providing equipment to a major hospital in Beijing back in 1934. After re-establishing its foothold in 1984, following China’s economic opening, the nation was viewed as a key area with significant growth potential.
However, that optimism has declined in recent years. “Market access for Western companies is becoming more restricted, if not entirely closed, in certain sectors in China due to national security issues,” stated David Hoffman, a senior adviser at the Conference Board Asia. He further noted that enterprise IT—which encompasses intricate systems utilized by large organizations for operational management—has become one of these sectors, primarily because large state-owned and state-affiliated enterprises dominate the market.
The shutdown of IBM’s two research centers in China has resulted in significant concern within the local tech community. For many years, the tech giant has been regarded as one of the most sought-after employers for the country’s leading technology graduates. However, in recent times, US companies have seen a decline in their appeal as China accelerates its self-reliance initiatives and aims to diminish dependency on foreign technologies amid mounting geopolitical strife.
