IBM to close key research division in China

In one of the latest moves by U.S. companies pulling out of the Chinese market, International Business Machines Corp. (IBM) announced the closure of its key research division in China. The move will affect more than 1,000 employees.

Change of focus

IBM $IBM has decided to close two business lines focused on research and development and testing. Instead, the company plans to focus on providing services to private enterprises and select multinational companies operating in China. The move comes at a time when an increasing number of US companies are deciding to cut back their activities in the world's second-largest economy.

Reasons for withdrawing from China

IBM's decision comes in the context of a broader economic slowdown in China, increased regulatory scrutiny and growing pressure to replace foreign technology with domestic alternatives. This trend can also be seen in other major players such as Morgan Stanley, which has moved some of its operations abroad, or in the decline in foreign investment, partly due to concerns that the Chinese government is favouring local firms.

Technology tensions between the US and China

The technology sector is a particularly sensitive spot given the ongoing conflict between the US and China in areas such as semiconductors and artificial intelligence. The Chinese government has struggled to support the growth of domestic champions such as Huawei Technologies Co. out of concern that restricting access to U.S. technology could jeopardize the country's long-term prospects and limit its geopolitical influence.

Shifting research and development

According to the Wall Street Journal, IBM plans to move its Chinese research and development functions to other offices, with one possible location being Bangalore, India. This information comes from a briefing for employees led by Jack Hergenrother, the company's vice president.

IBM is thus following a growing trend of U.S. technology firms rethinking their strategy in the Chinese market, reflecting the changing global geopolitical and economic situation.

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