International Business Machines, better known as IBM, is closing one of its research and development divisions in China. The move, according to the news outlet Yicai, will see more than 1,000 employees laid off. The affected workers are from the IBM China Development Lab and IBM China System Lab, and those affected will get compensation.
Commenting on the decision, IBM China said:
"IBM will adjust its operation based on needs. These changes will not impact our ability to support customers in China."
Reuters said in its report that the decision was made because IBM was struggling with the falling demand for its hardware. However, IBM China's Chairman Chen Xudong was optimistic about IBM's AI business in the Chinese market.
The layoffs in China come as many in the United States are being laid off as a result of businesses tightening their belts when it comes to spending. In the US, interest rates have been increased to bring down inflation, so consumers are now spending more on mortgages and rent instead of on other goods and services. As a result, revenues are falling, and businesses have to focus on their profitable endeavors, leading to layoffs.
In China, inflation isn't a problem. In July, it came in at 0.5% year-over-year. However, the country has a strong savings culture, and customers in the US and Europe will likely be spending less due to their domestic situations, affecting businesses in China.
Interestingly, this year is the 40th anniversary of IBM's arrival in China. Hans Dekkers, general manager for IBM Asia Pacific, said he hopes the company will further establish itself in the country over the next 40 years.
According to layoffs.fyi, 412 tech companies have laid off more than 134,000 employees since the start of this year. Dell, Intel, and Cisco are some popular companies that have laid off employees this month alone.
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