IBM Corp. is winding down its research and development group in China, multiple publications reported today.
A source told Bloomberg that the move is set to affect fewer than 1,000 employees. The Wall Street Journal put the number at more than 1,000. It’s believed the R&D group focused on developing servers, storage equipment and enterprise software.
Affected employees were reportedly notified of the move earlier today by Jack Hergenrother, the vice president of IBM’s Global Enterprise Systems Development division. The division is responsible for, among others, developing technologies that underpin the company’s Power and System Z product lines.
The Power product line comprises servers based on IBM’s internally developed processor series of the same name. The newest chip in the processor family, the POWER10, features circuits optimized to speed up data encryption tasks. It also includes modules built specifically to run artificial intelligence models.
The System Z product line, in turn, comprises IBM’s iconic mainframes. Those machines are likewise powered by internally developed silicon. The company’s newest mainframe chip, the AI-optimized IBM Telum II Processor, made its debut this morning.
Bloomberg reported that the job functions affected by the shutdown of the R&D group will be moved to other countries, particularly India. According to Journal, IBM told some employees that it’s adding engineers and researchers in Bengaluru, one of India’s largest tech hubs. The city is already home to multiple IBM offices.
The decision to shut down the R&D group was reportedly driven partly by geopolitical tensions between the U.S. and China. Go-to-market considerations may have also factored into the decision. IBM’s revenue in China reportedly declined by 19.6% last year.
“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,” a company spokesperson told Bloomberg.
At least one other major tech firm is also believed to be reshuffling its R&D operations in China. Earlier this year, Microsoft Corp. reportedly asked between 700 and 800 of its technical staffers in China to consider relocation. The employees in question reportedly work on AI and cloud products.
For IBM, the shutdown of its China-based R&D group represents the latest in a series of workforce adjustments made over the past few years. In 2021, the company reportedly shuttered another China-based engineering group that “focused on research into cutting-edge areas.” More recently, IBM laid off about 1.5% of its workforce last January in a bid to cut costs.