Following the footsteps of several U.S. companies, IBM has decided to scale back its research and development operations in China. In a virtual meeting held in late August, the company informed its China-based employees of the decision, which marks a significant shift after decades of engagement in the region. IBM plans to limit its R&D presence in China while expanding its operations in India, although it remains unclear how many employees will be offered relocation opportunities.

IBM originally established its Chinese R&D operations around 25 years ago, viewing the country as a key growth market. The company became a significant player in China’s telecommunications sector, serving major Chinese banks and energy companies. However, declining revenues over the past two years and rising competition from local firms have eroded IBM’s business in China.

Though the company’s leadership framed the move as part of a global consolidation to enhance client service, rising labor costs, growing competition from Chinese firms, and increasing government scrutiny have likely contributed to the decision. Beijing’s push to replace foreign technology with domestic alternatives and the U.S. government’s intensified scrutiny of firms operating in China, especially in strategic sectors like AI, have further complicated the business environment.

IBM now joins a growing list of American corporations, including Apple, Dell, Intel, and Nike, that have either reduced or entirely exited their operations in China, often relocating to other parts of Asia. With global tensions between Washington and Beijing on the rise, companies are facing increasing challenges in maintaining their presence in the Chinese market.