International Business Machines Corp. (IBM) has announced the closure of its hardware research and development (R&D) team in China, a move affecting fewer than 1,000 employees. This decision is the latest in a series of strategic withdrawals by U.S. tech companies from China, driven by escalating geopolitical tensions, increased local competition, and a shifting economic landscape.
The affected team in China was primarily focused on the development of hardware, including servers and storage. According to a source familiar with the matter, the job functions will be relocated to other countries, with a significant portion expected to move to India. This reallocation is part of IBM's broader strategy to adapt its operations to better serve its global clients while navigating the complex regulatory and economic environment in China.
"IBM adapts its operations as needed to best serve our clients, and these changes will not impact our ability to support clients across the Greater China region," an IBM spokesperson stated, underscoring the company's commitment to maintaining its service capabilities in the region despite the restructuring.
IBM's decision reflects a growing trend among American companies to scale back their operations in China as the country's government pushes for greater self-reliance in critical technology sectors. This drive is part of Beijing's broader strategy to reduce dependence on foreign technology, particularly from the U.S., amid ongoing trade and technology disputes between the two superpowers.
The move by IBM also highlights the diminishing importance of the Chinese market for U.S. technology firms as local companies increasingly opt for homegrown providers. "This decision underscores the company's focus on expanding profit margins while responding to the diminishing importance of the region for U.S. tech firms," wrote Anurag Rana, an analyst at Bloomberg Intelligence.
China's efforts to foster the growth of its own technology champions, such as Huawei Technologies Co., are seen as a response to the restrictions imposed by the U.S. on key technologies, including semiconductors and artificial intelligence. These restrictions have raised concerns in Beijing about the long-term impact on China's technological and geopolitical standing.
IBM's retreat from China comes at a time when other U.S. tech giants are also re-evaluating their presence in the country. Earlier this year, Microsoft reportedly asked hundreds of its employees in China to consider relocating to other countries as the company sought to reduce its cloud-computing and AI-research operations in the region. The move was seen as a response to increasing competition from local firms and the Chinese government's push to reduce reliance on foreign technology.
IBM's annual report for 2023 revealed a 19.6% decline in revenue from China, reflecting the growing challenges U.S. companies face in the Chinese market. The report highlights the increasing pressure on foreign firms as they navigate an environment where local companies are encouraged to dominate the market.
