(CNN) – IBM will cut more than 1,000 jobs in China, according to several state media reports, at a time when geopolitical tension between Beijing and Washington leads many global companies to rethink their future in the world’s second largest economy.
Relations between the United States and China have deteriorated over technologies such as artificial intelligence (AI) and green technology, in part for national security reasons. Some companies have laid off or relocated staff discreetly.
Yicai, a Chinese state financial media, reported on Monday that IBM will completely close its research operations in the country. Among them were the China Development Laboratory, which opened 25 years ago, in 1999, and the China Systems Laboratory.
In a statement to CNN on Tuesday, the company declined to comment on the number of jobs lost or whether it would keep research staff in China.
“IBM adapts its operations as necessary to better serve our customers, and these changes will not affect our ability to support customers throughout the Greater China region,” he said.
Jiemian, another state media outlet, wrote on Monday that the job cuts — which reportedly affected staff in Beijing, Shanghai and Dalian — were announced by Jack Hergenrother, an enterprise systems development executive.
Hergenrother told staff that IBM’s infrastructure business in China was “in decline” and that research work being done in the country would be moved to other laboratories. The Wall Street Journal reported that Some of the work could be done in the company’s laboratories in India.
IBM has a long history in China: in 1934 it first supplied machines to a major hospital in the capital. After its re-entry into the market in 1984 following China’s opening to the world, the country was considered a priority with enormous potential.
But in recent years, that enthusiasm has waned. The technology war between the world’s two major economic powers has intensified, making it increasingly difficult for American companies to do business in China.
“It is a reality that market access for Western companies is being restricted, if not closed, in some sectors in China for national security reasons,” David Hoffman, senior advisor at the Conference Board Asia, told CNN.
He added that enterprise computing, which refers to complex systems used by large organizations to manage operations, was one such area, especially since large state-owned and state-connected companies make up the majority of the market.
In the statement, IBM added that Chinese companies, especially privately held ones, are increasingly focusing on hybrid cloud and AI technologies and that its strategy was to address those opportunities.
After years as a growth market, China is no longer the promising bright spot it once was for a number of industries. IBM said in its most recent annual report that income in the country fell 19.6% last year.
The IBM news comes three months after Microsoft confirmed it offered to relocate some of its employees to China. State media had previously reported that the company made this offer to at least 100 employees.
Like IBM, Microsoft has worked hard to earn a good reputation in China.
It entered the market in 1992 and for decades relied on its influential research lab, Microsoft Research Lab Asia, to help it build influence. Its software is used by the Chinese government and companies, and Bing is the only foreign search engine with any roots in China.
But it has also faced challenges, as geopolitics clouds the business prospects for American companies working on AI research and cloud computing in China.
According to Anne Stevenson-Yang, co-founder and CEO of J Capital Research, “Chinese incentives and bureaucratic insistence” convinced many American companies to move research to the country decades ago.
“For a long time, the Chinese government boasted about it. Now, political risk and intellectual property risk are reversing that trend,” he said.
