IBM Shuts Key Research Division in China

International Business Machines Corp. (IBM) is closing a major research division in China, impacting more than 1,000 employees, according to local media reports. The move marks the latest retreat by a major US company from the world’s second-largest economy amid growing economic challenges and geopolitical tensions.

The American tech giant is set to shutter two business lines focused on research and development (R&D) and testing, as reported by Yicai, a prominent Chinese financial news outlet. Instead of continuing these operations, IBM will shift its focus towards serving private enterprises and select multinational companies that are still operating in China.

This decision aligns IBM with a broader trend of Western companies scaling back their operations in China. The economic environment in the country has been increasingly challenging, with a downturn in growth, intensified regulatory scrutiny, and a push from Beijing to promote local businesses over foreign competitors. The Chinese government’s efforts to reduce reliance on foreign technology and foster domestic champions, such as Huawei Technologies Co., have also contributed to the dampened business sentiment among international firms.

The technology sector has become particularly sensitive in the ongoing US-China conflict, which spans critical areas like semiconductors and artificial intelligence. Beijing’s strategy to nurture homegrown tech giants reflects concerns that US-imposed restrictions could hinder China’s long-term technological and geopolitical ambitions.

According to a report by The Wall Street Journal, IBM intends to relocate its Chinese R&D operations to other international offices. During a recent employee briefing led by Jack Hergenrother, a vice president at IBM, it was revealed that the company plans to expand its engineering and research teams in locations such as Bangalore, India. These changes are part of IBM’s broader strategy to reallocate resources and maintain its competitive edge in an increasingly complex global market.

IBM’s retreat from China comes as other major players like Morgan Stanley have also scaled back their Chinese operations, with some moving activities abroad. The reduction in foreign investment has been partially attributed to concerns that Beijing is increasingly favouring domestic companies over international firms.

As IBM navigates these shifts, the company has not yet issued a public statement on the matter, and representatives have declined to comment outside of normal working hours. The closure of the Chinese R&D division underscores the ongoing challenges faced by multinational corporations in China, as they adapt to a rapidly evolving economic and political landscape.