IBM Pulls R&D Units Out of China in Latest Withdrawal by U.S. Firm

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IBM is closing its China Development Lab and China Systems Lab which employ nearly 1,700 workers. Photo: VCG

IBM Corp. is shutting down two major research and development (R&D) units in China, amid declining business in the country and mirroring a broader trend of U.S. tech firms scaling back their presence in China.

The units affected by the pullback are IBM’s China Development Lab (CDL) and China Systems Lab (CSL), both established in 1999. CDL, which focused on application software development, has more than 1,000 employees, while CSL, which focused on system development such as mainframe database, has a team of 695, one IBM worker told Caixin.

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IBM is closing its China Development Lab and China Systems Lab amid declining business and increased competition, affecting over 1,600 employees.
IBM’s business strategy in China will shift towards providing technology and consulting services, focusing on hybrid cloud and AI for local companies.
The closures reflect a broader trend of U.S. tech firms, such as Amazon and Microsoft, reducing their presence in China due to market dynamics and geopolitical pressures.

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Who’s Who

IBM Corp.: IBM Corp. is shutting down its China Development Lab and China Systems Lab amid declining business and market competition. Established in 1999, the labs focused on application software and system development. IBM's revenue in China dropped by 16% in 2023. Despite the closures, IBM will continue to serve the Greater China region by leveraging its technology and consulting experience, particularly in hybrid cloud and AI solutions for Chinese customers.

Oracle Corp.: The article mentions Oracle Corp. in the context of China's "De-IOE" campaign, which began in 2013. During this campaign, Chinese sectors such as internet and finance moved to replace servers and databases from American suppliers like IBM, Oracle Corp., and EMC Corp. with domestically produced alternatives. This reflects a broader push to substitute foreign IT products to support China's technology independence.

EMC Corp.: The article mentions EMC Corp. as one of the American suppliers replaced by China's "De-IOE" campaign, which aimed to substitute foreign IT products with homegrown alternatives. This initiative targeted servers and databases, including those from IBM and Oracle Corp., in various corporate sectors such as banking and telecommunications.

Amazon.com Inc.: Amazon.com Inc.'s Kindle e-bookstore completed the final phase of its exit from the Chinese market last month. This move is part of a broader trend of U.S. tech companies scaling back their presence in China.

Microsoft Corp.: Microsoft Corporation has closed all its retail stores on the Chinese mainland by the end of June. The company is consolidating its channels in the mainland market, though consumers can still purchase products and services through its website and selected retail partners. Additionally, Microsoft-owned LinkedIn shut down its professional social networking platform on the mainland in August 2021.

LinkedIn: Microsoft-owned LinkedIn shut down its professional social networking platform on the Chinese mainland in August 2022. This move is part of a broader trend of U.S. tech firms scaling back their operations in China.

Airbnb Inc.: San Francisco-based Airbnb Inc. announced in May 2022 that it would cease operations in China due to harsh COVID-19 restrictions impacting its business.

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What Happened When

1999：: IBM's China Development Lab (CDL) and China Systems Lab (CSL) were established.

2021：: IBM closed its China Research Laboratory after 26 years of operation.

2023：: IBM’s revenue in China declined by 16% year-on-year.

August 2023：: Microsoft-owned LinkedIn shut down its professional social networking platform on the mainland.

End of June 2024：: Microsoft Corp. closed all of its retail stores on the Chinese mainland.

July 2024：: Amazon.com's Kindle e-bookstore completed the last phase of its exit from the Chinese market.

Friday, August 23, 2024：: Some China-based IBM colleagues found themselves locked out of the company’s intranet VPN and shared cloud drive, and received verbal layoff notices.