Chinese employees at US computing giant IBM, once considered a cradle of mainland engineers, have expressed dismay over a terse conference call with the company’s American executives on Monday, as the firm known by the nickname Big Blue cuts hundreds of jobs at two local research labs.

The morning town hall, organised for affected workers, had been scheduled to go for half an hour. It ended up lasting only three minutes, according to an internal meeting transcript seen by the South China Morning Post and confirmed by an employee.

During the meeting, US-based executives told staff that IBM had decided to shift some Chinese operations overseas, citing market dynamics and fierce competition in the infrastructure business on the mainland. They did not take any questions.

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IBM did not immediately respond to a request for comment on Tuesday. A company representative said on Monday that the firm adapts its operations as needed to best serve its clients, adding that “these changes will not impact our ability to support clients across the Greater China region”.

Over the weekend, China-based IBM workers found themselves blocked from accessing the company’s intranet system, before they were told that the IBM China Development Lab and China Systems Lab were shutting down. Over 1,000 employees are being laid off across Beijing, Shanghai and the northern port city of Dalian, according to reports by local news outlets.

One employee, who spoke on condition of anonymity, said many IBM staff in Beijing braved heavy rain to gather in the office for the meeting on Monday, only to be disappointed by how brief it was.

On the call were Jack Hergenrother, vice-president of global enterprise systems development, Ross Mauri, general manager of IBM Z mainframe computers, and Danny Mace, vice-president of storage software engineering.

Hergenrother encouraged affected workers to arrange private discussions with their respective managers, while Mauri and Mace thanked staff for their contributions, the transcript showed.

The employee in Beijing said he spoke with his manager, who was also laid off. Staff have been offered severance packages based on tenure, plus three months’ salary if they sign the termination agreement before September 13.

Their last day on the job will be October 31.

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The closure of IBM’s two China research labs has sent shock waves across the local tech community. For years, the tech giant had been considered one of the most desired employers for the nations’ top computing graduates.

A former employee, who goes by the username “Room e” on social media platform Xiaohongshu, said most of his team members at the China Development Lab were graduates from the country’s top 10 universities in the early 2000s.

IBM has been considered a cradle of Chinese engineers. Photo: AFP alt=IBM has been considered a cradle of Chinese engineers. Photo: AFP>

However, US companies have been losing their lustre in recent years, as China intensifies its self-reliance campaign and strives to reduce dependence on foreign technologies amid growing geopolitical tensions.

In 2014, state-owned banking and telecoms enterprises – once major customers of IBM, Oracle and EMC (since merged with Dell) – launched a “de-IOE” campaign to replace US products with domestic alternatives.

IBM is the latest multinational tech giant to shed jobs in China. Sweeping lay-offs this year have affected China-based workers in companies from Ericsson and Tesla to Amazon.com and Intel.

IBM’s sales in China have steadily declined in recent years.

In 2023, IBM’s revenue in the country dropped 19.6 per cent compared to a 1.6 per cent rise in revenue across Asia-Pacific, according to the company’s annual report. Sales in China in the six months ended June 30 this year fell 5 per cent, while revenue in Asia-Pacific increased 4.4 per cent, IBM’s financial statement showed.

Additional reporting by Xinmei Shen.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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