IBM Layoffs in China: Strategic Shift

Man, talk about a speed run. 1,000 people axed in just three minutes. Fastest layoff in history, no joke. So check this out. This morning, IBM China called an all-hands meeting in the pouring rain. Whole thing lasted a whopping three minutes. They dropped the bomb that IBM's shutting down all their R&D departments in China. We're talking the entire development center, system center, the works, all that research stuff. Shipped overseas. Now, these 1,000 folks getting the boot? Mostly the brainiacs doing R&D and testing. We're talking Beijing, Shanghai, Dalian, you name it. It's a done deal, but now everyone's fighting for that sweet 2N severance package and a 6-month grace period. Word on the street is, these laid-off peeps might get shipped off to Bangalore, India. Makes sense, because if you look at IBM's job postings, they're beefing up their Indian workforce big time. cutting costs, boosting efficiency. You know the drill. So here's a million-dollar question. If you were working for IBM, would you pack your bags and move to India? On August 26, Chinese media outlet Yicai confirmed with IBM China that IBM will completely shut down its R&D departments in China, affecting over 1,000 employees. In a statement, IBM China said, IBM will adjust operations as needed to provide the best service to our clients. These changes will not affect our ability to support customers in greater China. The statement mentioned that Chinese companies, especially private enterprises, are increasingly focused on seizing opportunities brought by hybrid cloud and AI technologies. IBM's local strategy in China is to leverage its rich experience in technology and consulting to build teams with relevant skills. helping Chinese clients co-create solutions that meet their needs. IBM emphasized that in the future, they will shift towards serving private enterprises in China and some multinational companies operating in China. In the past, IBM's most important major clients were large state-owned enterprises in key sectors like finance and energy. The report stated that this R&D department closure involves the operations of IBM China Development Center and IBM China Systems Center, mainly responsible for research, development and testing. China was once IBM's most comprehensively structured market outside the United States. This closure of R&D departments marks a significant turning point in IBM's 40-year history in China. Some netizens lamented, an era has passed. Man, we're watching history unfold right here. IBM just pulled the plug on their entire R&D center in China, wiping out a team of over 1,000 people in one go. Get this, word is, they did it all in a three-minute phone call, all hands meeting, my foot. They dropped the bomb about shutting down the R&D center, and then poof, calls over, everyone's offline. Talk about cold. It's like the end of an era, you know. These past few years, we've seen a ton of foreign companies bail on the Chinese market. R&D centers, factories, you name it. Before we knew it, boom, we're in a whole new ballgame. Real talk though, we gotta give props to where they're due. Companies like IBM, they've been solid. All these years, they've been hooking us up with cutting-edge tech and management know-how. Not to mention, they've trained up a boatload of tech wizards and management gurus. But hey, that's all in the rearview mirror now. From here on out, it's all on us. We gotta step up, run the show, and start dishing out our own innovations. Time to sink or swim, you know what I mean? On the evening of August 23rd, over a thousand employees in R&D and testing positions at IBM China in Beijing, Shanghai, Dalian, and other locations suddenly had their access privileges revoked, sparking speculations about layoffs. On August 24th, According to a report from Jiamian News, several employees at IBM China revealed that the company abruptly revoked access for all employees in research and development and testing positions on the evening of August 23. This affected more than 1,600 employees across China. IBM's decision caught everyone by surprise. Some people believe this could be a sign of a major layoff at IBM China. Others think that due to political factors, IBM might gradually pull out of China, just like Microsoft did. A lab technician said that before the access was revoked, employees were working their normal shifts with no warning or signs. Although some employees had already left for the day, some R&D staff were still working overtime when the access was cut off. The report also mentioned that these employees were removed from their work groups and could no longer log on to the company's intranet. although they could still access their emails. Currently, on the job platform MyMy, someone stated that IBM China is planning a wave of layoffs, mainly targeting R&D positions. Another comment confirmed this, saying, It's been verified. The news is true. The report also noted that IBM China has multiple branches and employs approximately 12,000 people. IBM had several R&D departments in China, including the IBM China Research Lab, CRL, the IBM China Development Labs, CDL, and the System Labs, CSL. However, in January 2021, IBM underwent an organizational restructuring, which led to the closure of IBM China Research Lab. The employees who lost their access this time were mainly from the CDL and CSL, responsible for R&D and testing. The interviewed employees explained that they understood that R&D and testing employees from across the country, including Beijing, Shanghai and Dalian, lost their access. The number of affected people is around 1,000, though some insiders mentioned that the number is actually over 1,600. However, the customer service and consulting departments at IBM China still retain their access rights. Many believe that the employees who lost access will likely face layoffs. Some suggest that this could be another significant move by IBM following the closure of the China Research Lab in 2021. If true, this would mean that after this restructuring, IBM might no longer have any R&D departments in China. IBM's recent actions were indeed very sudden. On August 22, just before this change, IBM held an enterprise-level AI forum in China, aimed at advancing the large-scale application of generative AI. Hans Deckers, IBM's general manager for the Asia-Pacific region, stated that this year marks the 40th anniversary for the company's operations in China, and it hopes to continue to take root in China in the upcoming 40 years and beyond. At that time, IBM China's management also expressed confidence in the Chinese market and continued their investment in local R&D. Chairman and General Manager of IBM Greater China, Chen Xudong, told a reporter from Yicai that the company sees great growth potential for IBM's AI business in China. He also mentioned that IBM's strategies in China and the United States are aligned when it comes to artificial intelligence. Back in March, during a media and analyst briefing, Chen Xudong emphasized that IBM's strategy in Greater China was very clear. The company plans to focus on enterprise-level AI and and make a push in the automotive industry. One of their main goals is to expand their partner ecosystem by leveraging large key customers and breaking into new markets. It's worth mentioning that during that time, Xie Dong, IBM Greater China's chief technology officer, shared the breakthroughs that IBM China's R&D team had achieved over the past 30 years in product development and technical cooperation. He highlighted that, with hybrid cloud and AI as the core strategy today, The Chinese R&D team remains an important part of IBM's global R&D system. Just last August, IBM launched its generative AI and data platform WatsonX, specifically for greater China. From this, it's clear that IBM outwardly showed a strong commitment to the Chinese market. However, now, with this sudden shift in strategy, many are reminded of Microsoft's recent withdrawal of its development teams from China. This has led to speculation that geopolitical factors are pushing IBM to abandon its R&D teams in China. IBM's move has sparked heated discussions among Chinese netizens. One comment noted, the overall strategic direction of U.S.-China relations is decoupling. Once the framework is set, each sector and industry will find its own way to decouple, with different pacing and strategies. We've seen Tesla increasing its investment in China against the trend. while Apple continues to adjust its product chain by moving it out of China. However, no matter how things change, the end result remains the same decoupling. The high-tech sector is leading this process, which has been clearly defined by the U.S. government, particularly with the Biden administration's new regulations for chips and AI. Following this, the focus will shift to the low-end manufacturing supply chain, like those found on platforms such as Timu and Xiyin. Another commenter pointed out that institutions with large R&D centers withdrawing from China would deal a significant blow to the nation because those centers serve as talent pools for the related industries. For example, most winners of China's Future Science Prize, with a $1 million award, had returned from the U.S. The next step for the U.S. government might be to gradually close the paths for cultivating talent within China. IBM and Microsoft are likely to be the first affected. An industry insider remarked, For most people in China, IBM is only known for its laptops. Although IBM is no longer what it once was during its peak, it has long transformed its main business. For instance, in cloud services, globally, everyone knows about Microsoft, Google, and Amazon, which hold 70% of the market. In China, everyone recognizes Alibaba Cloud as the most dominant cloud provider. But what most people don't realize is that IBM and Alibaba Cloud have similar market shares. Another netizen commented, China's major banks have been using IBM servers and software for many years, and they won't be able to replace them anytime soon. A former IBM employee also shared their views on IBM's layoffs in China on Douyin. IBM shut down all its labs in China, and I feel so emotional about it. This essentially marks the end of an era. It's a complete collapse of foreign companies in China. Everyone knew this day would come, but we didn't know when. IBM's move shows us that the day is already here. I'm feeling this way mainly because I was a part of it. I was an old IBM employee. I joined the company back in 2007, so I have deep feelings for it. This former employee also shared his thoughts on IBM. First, he believes IBM is a very decent company. Unlike the current tech companies that are so cutthroat and exploitative, IBM treats its employees very well. He worked there for six or seven years and found that the company's benefits and overall treatment were very humane. Some even say IBM is a good place to work for retirement. But he sees IBM as a great company, where many Nobel Prize winners have worked. It's just that IBM's corporate culture is a bit more relaxed. Also, while most tech companies now offer layoffs with a severance package of N plus one. Some IBM employees received N plus 3 compensation. For someone with 10 or 20 years of experience, that would amount to around 1 million yuan. While layoffs are unfortunate for many, for some, encountering such a generous company with a high-quality compensation plan is something to be grateful for. Second, he feels it's a shame what has happened to IBM. The company started out strong, having developed over 100 years. And it's even invented the world's first PC. Later, companies like Microsoft, Apple and Dell followed in its footsteps. However, it's regrettable that IBM didn't seize the opportunities presented by the Internet and cloud eras. IBM originally focused on servers and the cloud business, renting instead of selling, and essentially disrupted its own business model. So, from that perspective, IBM was reluctant to embrace the cloud. IBM missed out on its first mover advantage. while Amazon seized it. The internet space basically has nothing to do with IBM now, because IBM has always focused on business-to-business, never touching the consumer market. Perhaps that was its destiny, leading to its decline. This insider also discussed IBM's connections with several large Chinese tech companies. The first is Lenovo. IBM sold its global PC business to Lenovo for 2.5 billion US dollars back then. He thinks that before the sale, IBM's ThinkPad was very reliable, but now Lenovo's ThinkPad series has a reputation for declining quality. Still, IBM's PC business did help Lenovo secure the top spot in the global PC market. The second is IBM's relationship with Huawei. Huawei's founder, Reng Zhengfei, has acknowledged that IBM was Huawei's mentor. Huawei spent a lot on consulting fees to have IBM help with its overall business management. The most famous result was the matrix management structure. where the rows represent product lines and the columns represent industry lines, and their intersection determines talent positioning. Thanks to IBM's matrix management system, Huawei's overseas business thrived, and that's an undeniable fact. The third is IBM's connection with Inspur. Due to China's policy of removing foreign technology, which involves removing IBM servers, Oracle databases, and EMC storage, China sought to innovate independently and reduce reliance on foreign companies. Under this backdrop, IBM began to provide its x86 servers to Inspur through branding and OEM methods, which helped Inspur boost its server products capabilities. The fourth company is Digital China, which we call a systems integrator. IBM primarily focuses on platforms like servers, operating systems, and middleware, but it doesn't handle business-level applications. So, who handles that? Companies like Digital China, which provide integration and outsourcing services. With this partnership, Digital China secured a large share of the market, especially with banks and major state-owned enterprises and central enterprises in China. From this man's summary, it's clear that IBM has made significant contributions to the development of China's major tech companies. As mentioned by another commentator, companies with large R&D centers in China are like talent pools for the country's related industries. So, where have IBM's talents gone? According to this man's insights, many of IBM's talents have moved into B2B businesses. Some have gone to Alibaba and Tencent to work on cloud services. Particularly in the financial and government sectors, many of the pre-sales and consulting teams have come from IBM. IBM's R&D talent has split into three directions. Some have gone into entrepreneurship, focusing on cloud and middleware business. Others have joined large internet companies because IBM employees typically have strong educational backgrounds, solid foundational skills, and good foreign language proficiency. The final group has gone overseas, representing the global migration of IBM's talent. This man believes that No matter how great IBM once was, it couldn't escape its historical fate. In China, while helping others succeed, it has lost its own foothold. Now let's take a look at IBM's history in China. Records show that as early as 1934, IBM installed its first commercial processing machine at Peking Union Medical College Hospital. In 1936, IBM established an office in Shanghai, the first of its kind in the Far East at the time. In 1937, IBM facilitated its first trans-oceanic phone call. However, frequent wars cut off IBM's connection with China after that. In 1979, after nearly 30 years of disconnection, IBM returned to China following the country's reform and opening up. That year, it installed the first IBM mid-range computer at Shenyang Blower Works after the founding of the PRC. IBM also installed the first computer in the history of the Bank of China that same year. You could say that IBM was the pioneer of the Internet in China. As China's reform and opening up deepened, IBM's business expanded rapidly. In the mid-to-late 1980s, IBM established offices in Beijing and Shanghai. In 1992, IBM officially announced the establishment of international business machines China Company Limited in Beijing, its first wholly-owned enterprise in China. The following year, IBM China opened branches in Guangzhou and Shanghai. In 1995, IBM founded the China Research Lab, one of IBM's eight global research centers. Currently, IBM has about 10 joint ventures and wholly owned enterprises in China, handling manufacturing, software development, services, and leasing. IBM's offices span 33 cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, with operations extending to over 300 cities. As an innovative giant, IBM has been involved in various fields like environmental power, logistics, healthcare, and financial services, conducting development and research. However, as the former IBM employee pointed out, it was with IBM's support that China's tech companies rapidly advanced. These domestic tech firms, which initially started by copying foreign companies, gradually absorbed their technologies and management experience. Then, with the help of favorable policies and local advantages, they began to push foreign companies out of the Chinese market. As we've seen, IBM, once a titan, has now slowly retreated from the Chinese market over the years. According to Statista, IBM's revenue from 2011 to 2020 generally showed a downward trend, with a sharp decline in 2020, followed by a slight recovery in recent years. Not only does the Asia-Pacific region account for the smallest share of IBM's global revenue, but according to IBM's 2023 annual report, Although overall revenue in the Asia-Pacific region increased by 1.6%, revenue from China dropped from 19.6%. In 2021, IBM quietly shut down its China Research Lab entirely. Known as IBM CRL, the IBM China Research Lab was located in the Zhongguanchun Software Park and was established in September 1995. It was the first research center IBM set up in a developing country. and once was one of the most influential research institutions in China. As one of IBM's 12 global research labs, the China Research Lab made significant contributions, with its most famous achievement being the development of Watson in 2011. Named after IBM's founder, Thomas J. Watson, Watson is a computer system capable of answering questions posed in natural language. In addition to cognitive computing, The IBM China Research Lab also focused on key areas such as big data analytics, the Internet of Things, cloud computing, industry solutions, and computing as a service. Despite producing many research outcomes and solutions, IBM's CRL could not escape its demise. Just three years after the closure, IBM's planned R&D hubs, CDL and CSL, faced the same fate. Some have analyzed that the closure of the IBM China Research Lab was partly due to political turmoil at headquarters. After the departure of its original founder, internal restructuring and resource struggles ensued. Coupled with recent silent layoffs by IBM in the China market, it's clear that while internal politics may have played a role, this is more so a part of the global trend of foreign companies gradually decoupling from China. It's hard not to draw parallels with Microsoft, which just a few months ago implemented a similar strategy. abruptly withdrawing around 700 to 800 employees from its China-based Azure AI team. Although the official reason given was a rotation option for employees, many internal staff and external analysts pointed out that this was also part of Microsoft Research Asia's gradual exit from China. There were already reports in June of last year suggesting that Microsoft was relocating its top AI scientists from China to Vancouver. Microsoft's president previously disclosed that China only accounts for 1.5% of the company's total sales, and that the new Bing AI search engine couldn't be launched in China. At the same time, Microsoft pledged to invest US$2.2 billion in Malaysia and US$1.7 billion in Indonesia in the coming years, and established a data center cluster in Singapore. It seems they are shifting their focus within the Asia-Pacific market to Southeast Asia. As domestic internet giants rise in China, the leadership positions once held by foreign companies are being gradually eroded. Additionally, the effects of the trade war, tech war, US-China decoupling, and COVID-19 have led many foreign companies and investors to say goodbye to China. In March 2015, Yahoo announced its exit from the Chinese market, shutting down its Beijing R&D center. In 2019, Amazon announced its withdrawal from China. That same year, Oracle, which had been hit hard by the rise of cloud computing, officially closed its research center in China, laying off around 900 employees. Now it's IBM's turn. As IBM pulls its R&D operations out of China, what lies ahead for the company? We will have to wait and see.

Man, talk about a speed run. 1,000 people axed in just three minutes. Fastest layoff in history, no joke. So check this out.

This morning, IBM China called an all-hands meeting in the pouring rain. Whole thing lasted a whopping three minutes. They dropped the bomb that IBM's shutting down all their R&D departments in China.

We're talking the entire development center, system center, the works, all that research stuff. Shipped overseas. Now, these 1,000 folks getting the boot? Mostly the brainiacs doing R&D and testing. We're talking Beijing, Shanghai, Dalian, you name it.

It's a done deal, but now everyone's fighting for that sweet 2N severance package and a 6-month grace period. Word on the street is, these laid-off peeps might get shipped off to Bangalore, India. Makes sense, because if you look at IBM's job postings, they're beefing up their Indian workforce big time. cutting costs, boosting efficiency.

You know the drill. So here's a million-dollar question. If you were working for IBM, would you pack your bags and move to India? On August 26, Chinese media outlet Yicai confirmed with IBM China that IBM will completely shut down its R&D departments in China, affecting over 1,000 employees.

In a statement, IBM China said, IBM will adjust operations as needed to provide the best service to our clients. These changes will not affect our ability to support customers in greater China. The statement mentioned that Chinese companies, especially private enterprises, are increasingly focused on seizing opportunities brought by hybrid cloud and AI technologies.

IBM's local strategy in China is to leverage its rich experience in technology and consulting to build teams with relevant skills. helping Chinese clients co-create solutions that meet their needs. IBM emphasized that in the future, they will shift towards serving private enterprises in China and some multinational companies operating in China.

In the past, IBM's most important major clients were large state-owned enterprises in key sectors like finance and energy. The report stated that this R&D department closure involves the operations of IBM China Development Center and IBM China Systems Center, mainly responsible for research, development and testing. China was once IBM's most comprehensively structured market outside the United States. This closure of R&D departments marks a significant turning point in IBM's 40-year history in China. Some netizens lamented, an era has passed.

Man, we're watching history unfold right here. IBM just pulled the plug on their entire R&D center in China, wiping out a team of over 1,000 people in one go. Get this, word is, they did it all in a three-minute phone call, all hands meeting, my foot. They dropped the bomb about shutting down the R&D center, and then poof, calls over, everyone's offline.

Talk about cold. It's like the end of an era, you know. These past few years, we've seen a ton of foreign companies bail on the Chinese market.

R&D centers, factories, you name it. Before we knew it, boom, we're in a whole new ballgame. Real talk though, we gotta give props to where they're due.

Companies like IBM, they've been solid. All these years, they've been hooking us up with cutting-edge tech and management know-how. Not to mention, they've trained up a boatload of tech wizards and management gurus.

But hey, that's all in the rearview mirror now. From here on out, it's all on us. We gotta step up, run the show, and start dishing out our own innovations. Time to sink or swim, you know what I mean?

On the evening of August 23rd, over a thousand employees in R&D and testing positions at IBM China in Beijing, Shanghai, Dalian, and other locations suddenly had their access privileges revoked, sparking speculations about layoffs. On August 24th, According to a report from Jiamian News, several employees at IBM China revealed that the company abruptly revoked access for all employees in research and development and testing positions on the evening of August 23. This affected more than 1,600 employees across China. IBM's decision caught everyone by surprise.

Some people believe this could be a sign of a major layoff at IBM China. Others think that due to political factors, IBM might gradually pull out of China, just like Microsoft did. A lab technician said that before the access was revoked, employees were working their normal shifts with no warning or signs.

Although some employees had already left for the day, some R&D staff were still working overtime when the access was cut off. The report also mentioned that these employees were removed from their work groups and could no longer log on to the company's intranet. although they could still access their emails.

Currently, on the job platform MyMy, someone stated that IBM China is planning a wave of layoffs, mainly targeting R&D positions. Another comment confirmed this, saying, It's been verified. The news is true.

The report also noted that IBM China has multiple branches and employs approximately 12,000 people. IBM had several R&D departments in China, including the IBM China Research Lab, CRL, the IBM China Development Labs, CDL, and the System Labs, CSL. However, in January 2021, IBM underwent an organizational restructuring, which led to the closure of IBM China Research Lab.

The employees who lost their access this time were mainly from the CDL and CSL, responsible for R&D and testing. The interviewed employees explained that they understood that R&D and testing employees from across the country, including Beijing, Shanghai and Dalian, lost their access. The number of affected people is around 1,000, though some insiders mentioned that the number is actually over 1,600. However, the customer service and consulting departments at IBM China still retain their access rights. Many believe that the employees who lost access will likely face layoffs.

Some suggest that this could be another significant move by IBM following the closure of the China Research Lab in 2021. If true, this would mean that after this restructuring, IBM might no longer have any R&D departments in China. IBM's recent actions were indeed very sudden. On August 22, just before this change, IBM held an enterprise-level AI forum in China, aimed at advancing the large-scale application of generative AI. Hans Deckers, IBM's general manager for the Asia-Pacific region, stated that this year marks the 40th anniversary for the company's operations in China, and it hopes to continue to take root in China in the upcoming 40 years and beyond.

At that time, IBM China's management also expressed confidence in the Chinese market and continued their investment in local R&D. Chairman and General Manager of IBM Greater China, Chen Xudong, told a reporter from Yicai that the company sees great growth potential for IBM's AI business in China. He also mentioned that IBM's strategies in China and the United States are aligned when it comes to artificial intelligence. Back in March, during a media and analyst briefing, Chen Xudong emphasized that IBM's strategy in Greater China was very clear. The company plans to focus on enterprise-level AI and and make a push in the automotive industry.

One of their main goals is to expand their partner ecosystem by leveraging large key customers and breaking into new markets. It's worth mentioning that during that time, Xie Dong, IBM Greater China's chief technology officer, shared the breakthroughs that IBM China's R&D team had achieved over the past 30 years in product development and technical cooperation. He highlighted that, with hybrid cloud and AI as the core strategy today, The Chinese R&D team remains an important part of IBM's global R&D system. Just last August, IBM launched its generative AI and data platform WatsonX, specifically for greater China.

From this, it's clear that IBM outwardly showed a strong commitment to the Chinese market. However, now, with this sudden shift in strategy, many are reminded of Microsoft's recent withdrawal of its development teams from China. This has led to speculation that geopolitical factors are pushing IBM to abandon its R&D teams in China.

IBM's move has sparked heated discussions among Chinese netizens. One comment noted, the overall strategic direction of U.S.-China relations is decoupling. Once the framework is set, each sector and industry will find its own way to decouple, with different pacing and strategies.

We've seen Tesla increasing its investment in China against the trend. while Apple continues to adjust its product chain by moving it out of China. However, no matter how things change, the end result remains the same decoupling. The high-tech sector is leading this process, which has been clearly defined by the U.S. government, particularly with the Biden administration's new regulations for chips and AI.

Following this, the focus will shift to the low-end manufacturing supply chain, like those found on platforms such as Timu and Xiyin. Another commenter pointed out that institutions with large R&D centers withdrawing from China would deal a significant blow to the nation because those centers serve as talent pools for the related industries. For example, most winners of China's Future Science Prize, with a $1 million award, had returned from the U.S. The next step for the U.S. government might be to gradually close the paths for cultivating talent within China.

IBM and Microsoft are likely to be the first affected. An industry insider remarked, For most people in China, IBM is only known for its laptops. Although IBM is no longer what it once was during its peak, it has long transformed its main business.

For instance, in cloud services, globally, everyone knows about Microsoft, Google, and Amazon, which hold 70% of the market. In China, everyone recognizes Alibaba Cloud as the most dominant cloud provider. But what most people don't realize is that IBM and Alibaba Cloud have similar market shares. Another netizen commented, China's major banks have been using IBM servers and software for many years, and they won't be able to replace them anytime soon.

A former IBM employee also shared their views on IBM's layoffs in China on Douyin. IBM shut down all its labs in China, and I feel so emotional about it. This essentially marks the end of an era. It's a complete collapse of foreign companies in China. Everyone knew this day would come, but we didn't know when.

IBM's move shows us that the day is already here. I'm feeling this way mainly because I was a part of it. I was an old IBM employee.

I joined the company back in 2007, so I have deep feelings for it. This former employee also shared his thoughts on IBM. First, he believes IBM is a very decent company.

Unlike the current tech companies that are so cutthroat and exploitative, IBM treats its employees very well. He worked there for six or seven years and found that the company's benefits and overall treatment were very humane. Some even say IBM is a good place to work for retirement.

But he sees IBM as a great company, where many Nobel Prize winners have worked. It's just that IBM's corporate culture is a bit more relaxed. Also, while most tech companies now offer layoffs with a severance package of N plus one. Some IBM employees received N plus 3 compensation.

For someone with 10 or 20 years of experience, that would amount to around 1 million yuan. While layoffs are unfortunate for many, for some, encountering such a generous company with a high-quality compensation plan is something to be grateful for. Second, he feels it's a shame what has happened to IBM.

The company started out strong, having developed over 100 years. And it's even invented the world's first PC. Later, companies like Microsoft, Apple and Dell followed in its footsteps.

However, it's regrettable that IBM didn't seize the opportunities presented by the Internet and cloud eras. IBM originally focused on servers and the cloud business, renting instead of selling, and essentially disrupted its own business model. So, from that perspective, IBM was reluctant to embrace the cloud. IBM missed out on its first mover advantage. while Amazon seized it.

The internet space basically has nothing to do with IBM now, because IBM has always focused on business-to-business, never touching the consumer market. Perhaps that was its destiny, leading to its decline. This insider also discussed IBM's connections with several large Chinese tech companies.

The first is Lenovo. IBM sold its global PC business to Lenovo for 2.5 billion US dollars back then. He thinks that before the sale, IBM's ThinkPad was very reliable, but now Lenovo's ThinkPad series has a reputation for declining quality. Still, IBM's PC business did help Lenovo secure the top spot in the global PC market. The second is IBM's relationship with Huawei.

Huawei's founder, Reng Zhengfei, has acknowledged that IBM was Huawei's mentor. Huawei spent a lot on consulting fees to have IBM help with its overall business management. The most famous result was the matrix management structure.

where the rows represent product lines and the columns represent industry lines, and their intersection determines talent positioning. Thanks to IBM's matrix management system, Huawei's overseas business thrived, and that's an undeniable fact. The third is IBM's connection with Inspur.

Due to China's policy of removing foreign technology, which involves removing IBM servers, Oracle databases, and EMC storage, China sought to innovate independently and reduce reliance on foreign companies. Under this backdrop, IBM began to provide its x86 servers to Inspur through branding and OEM methods, which helped Inspur boost its server products capabilities. The fourth company is Digital China, which we call a systems integrator.

IBM primarily focuses on platforms like servers, operating systems, and middleware, but it doesn't handle business-level applications. So, who handles that? Companies like Digital China, which provide integration and outsourcing services.

With this partnership, Digital China secured a large share of the market, especially with banks and major state-owned enterprises and central enterprises in China. From this man's summary, it's clear that IBM has made significant contributions to the development of China's major tech companies. As mentioned by another commentator, companies with large R&D centers in China are like talent pools for the country's related industries.

So, where have IBM's talents gone? According to this man's insights, many of IBM's talents have moved into B2B businesses. Some have gone to Alibaba and Tencent to work on cloud services.

Particularly in the financial and government sectors, many of the pre-sales and consulting teams have come from IBM. IBM's R&D talent has split into three directions. Some have gone into entrepreneurship, focusing on cloud and middleware business. Others have joined large internet companies because IBM employees typically have strong educational backgrounds, solid foundational skills, and good foreign language proficiency.

The final group has gone overseas, representing the global migration of IBM's talent. This man believes that No matter how great IBM once was, it couldn't escape its historical fate. In China, while helping others succeed, it has lost its own foothold. Now let's take a look at IBM's history in China.

Records show that as early as 1934, IBM installed its first commercial processing machine at Peking Union Medical College Hospital. In 1936, IBM established an office in Shanghai, the first of its kind in the Far East at the time. In 1937, IBM facilitated its first trans-oceanic phone call. However, frequent wars cut off IBM's connection with China after that. In 1979, after nearly 30 years of disconnection, IBM returned to China following the country's reform and opening up.

That year, it installed the first IBM mid-range computer at Shenyang Blower Works after the founding of the PRC. IBM also installed the first computer in the history of the Bank of China that same year. You could say that IBM was the pioneer of the Internet in China. As China's reform and opening up deepened, IBM's business expanded rapidly.

In the mid-to-late 1980s, IBM established offices in Beijing and Shanghai. In 1992, IBM officially announced the establishment of international business machines China Company Limited in Beijing, its first wholly-owned enterprise in China. The following year, IBM China opened branches in Guangzhou and Shanghai.

In 1995, IBM founded the China Research Lab, one of IBM's eight global research centers. Currently, IBM has about 10 joint ventures and wholly owned enterprises in China, handling manufacturing, software development, services, and leasing. IBM's offices span 33 cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, with operations extending to over 300 cities. As an innovative giant, IBM has been involved in various fields like environmental power, logistics, healthcare, and financial services, conducting development and research.

However, as the former IBM employee pointed out, it was with IBM's support that China's tech companies rapidly advanced. These domestic tech firms, which initially started by copying foreign companies, gradually absorbed their technologies and management experience. Then, with the help of favorable policies and local advantages, they began to push foreign companies out of the Chinese market.

As we've seen, IBM, once a titan, has now slowly retreated from the Chinese market over the years. According to Statista, IBM's revenue from 2011 to 2020 generally showed a downward trend, with a sharp decline in 2020, followed by a slight recovery in recent years. Not only does the Asia-Pacific region account for the smallest share of IBM's global revenue, but according to IBM's 2023 annual report, Although overall revenue in the Asia-Pacific region increased by 1.6%, revenue from China dropped from 19.6%.

In 2021, IBM quietly shut down its China Research Lab entirely. Known as IBM CRL, the IBM China Research Lab was located in the Zhongguanchun Software Park and was established in September 1995. It was the first research center IBM set up in a developing country. and once was one of the most influential research institutions in China. As one of IBM's 12 global research labs, the China Research Lab made significant contributions, with its most famous achievement being the development of Watson in 2011. Named after IBM's founder, Thomas J. Watson, Watson is a computer system capable of answering questions posed in natural language.

In addition to cognitive computing, The IBM China Research Lab also focused on key areas such as big data analytics, the Internet of Things, cloud computing, industry solutions, and computing as a service. Despite producing many research outcomes and solutions, IBM's CRL could not escape its demise. Just three years after the closure, IBM's planned R&D hubs, CDL and CSL, faced the same fate.

Some have analyzed that the closure of the IBM China Research Lab was partly due to political turmoil at headquarters. After the departure of its original founder, internal restructuring and resource struggles ensued. Coupled with recent silent layoffs by IBM in the China market, it's clear that while internal politics may have played a role, this is more so a part of the global trend of foreign companies gradually decoupling from China. It's hard not to draw parallels with Microsoft, which just a few months ago implemented a similar strategy.

abruptly withdrawing around 700 to 800 employees from its China-based Azure AI team. Although the official reason given was a rotation option for employees, many internal staff and external analysts pointed out that this was also part of Microsoft Research Asia's gradual exit from China. There were already reports in June of last year suggesting that Microsoft was relocating its top AI scientists from China to Vancouver. Microsoft's president previously disclosed that China only accounts for 1.5% of the company's total sales, and that the new Bing AI search engine couldn't be launched in China. At the same time, Microsoft pledged to invest US$2.2 billion in Malaysia and US$1.7 billion in Indonesia in the coming years, and established a data center cluster in Singapore.

It seems they are shifting their focus within the Asia-Pacific market to Southeast Asia. As domestic internet giants rise in China, the leadership positions once held by foreign companies are being gradually eroded. Additionally, the effects of the trade war, tech war, US-China decoupling, and COVID-19 have led many foreign companies and investors to say goodbye to China.

In March 2015, Yahoo announced its exit from the Chinese market, shutting down its Beijing R&D center. In 2019, Amazon announced its withdrawal from China. That same year, Oracle, which had been hit hard by the rise of cloud computing, officially closed its research center in China, laying off around 900 employees. Now it's IBM's turn. As IBM pulls its R&D operations out of China, what lies ahead for the company?

We will have to wait and see.

Transcript for:IBM Layoffs in China: Strategic Shift

Transcript for:
IBM Layoffs in China: Strategic Shift