IBM, one of the leading technology corporations in the USA, is withdrawing from large parts of its research and development activities in China. More than 1,000 employees, spread across various locations in the country, will lose their jobs as a result. This measure affects the two research-oriented units, the China Development Lab (CDL) and the China Systems Lab (CSL), and marks another step in the gradual reduction of the presence of US companies in China.

IBM's Withdrawal from China is Part of a Broader Trend where American Companies are Reducing Their Activities in the World's Second Largest Market Due to Increasing Geopolitical Tensions and Growing Competition from Domestic Providers. Back in May, Microsoft had Announced Plans to Relocate Hundreds of Employees from its Cloud and Artificial Intelligence Sectors After the USA Further Restricted China's Access to Sensitive Technologies.

Jack Hergenrother, a senior IBM manager, informed the affected employees about the decision in a virtual meeting. He pointed to the intense competition and the shrinking infrastructure business in China, which prompted IBM to relocate research and development activities closer to customers outside of China. At the same time, Chinese competitors benefit from government directives that prefer the use of domestic technology products in government and state enterprises.

A former employee commented on the withdrawal with the words: "In recent years, IBM has continuously reduced its presence – part of the decoupling process between the USA and China." The revenue of IBM's Chinese division fell by nearly 20 percent in 2023 compared to the previous year, while the entire Asia-Pacific region contributed 11.7 percent to the total revenue of 62 billion US dollars.

The affected employees in China were offered the opportunity to move to other countries, while others were offered severance packages based on their length of employment. Back in 2021, IBM had already closed another large R&D center, the Beijing-based China Research Lab.

The decision to close the Chinese development and system labs is also seen as part of IBM's efforts to improve profitability by reducing costs. Another former employee stated: "Just like the sale of the ThinkPad business to Lenovo, IBM now has to close CDL and CSL. The businesses were not profitable.

IBM has more than 7,500 employees in China, with a large office in the northeastern city of Dalian. The company stated that the adjustments in China will not affect its ability to support customers in the Greater China region. However, it remains unclear how the corporation will fare in the future given the intense competition from local providers and geopolitical challenges.