Commentary: IBM’s Sudden China Layoffs Tarnish Reputation of ‘Foreign Company Culture’

In the era of globalization, Western tech giants like IBM Corp. capitalized on their early mover advantage to disseminate mature IT products globally, accumulating significant profits and proliferating Western corporate culture in the process [para. 1]. This led to a perception in China that multinational companies prioritized employee welfare more than local firms [para. 2]. However, the growing decoupling between China and the U.S. and supply chain disruptions are prompting these companies to reduce operations in China, reshaping these perceptions [para. 3].

A prominent example is IBM's recent layoffs in its China R&D units. On a Friday, China-based employees unexpectedly found themselves locked out of IBM’s intranet and cloud drives. They thought it was a technical issue until they received verbal layoff notices from their managers [para. 4][para. 5]. On the following Monday, an official online meeting relayed the news, but it concluded abruptly within three minutes, leaving some employees unable to even access the meeting due to being locked out [para. 6]. The layoffs, characterized by a lack of preparedness and respect, shocked many employees [para. 7].

Currently, frontline managers and HR staff are negotiating severance packages without including the affected employees, and no handover arrangements have been made [para. 8]. One employee reported that their American colleagues were unaware of the layoffs in the China team [para. 9]. IBM did not respond to inquiries from Caixin but stated that operational adjustments wouldn’t affect its service in the Greater China region [para. 10].

Most IBM employees expressed pride in working for the company, citing a respectful and balanced work culture [para. 11][para. 12]. IBM provided extensive training, open communication, and a feedback system, making the work environment positive. The company was also flexible with office hours even before the pandemic [para. 13]. Despite lower salaries compared to domestic internet giants, employees felt respected and valued. Historically, IBM provided a transition period of at least four months for project handovers during layoffs [para. 14].

However, previous layoffs involved one-on-one communication and transparency, contrasting with the impersonal approach of the recent cuts [para. 15][para. 16]. The reduction in operations was unexpected for many, who had seen IBM expand its R&D teams in China during the 2010s due to market potential and cost advantages [para. 17][para. 18]. The affected units include the China Development Lab (CDL) and China Systems Lab (CSL), established in 1999 and employing a substantial number of workers [para. 19].

The turning point came in 2018 with changing China-U.S. relations, followed by IBM accelerating its shift of R&D positions to India under CEO Arvind Krishna since 2020 [para. 20][para. 21]. An employee highlighted that the cost of one Chinese employee could equal three to four Indian employees, making the transition economically motivated [para. 22]. IBM has been investing in India, establishing R&D teams and a cybersecurity hub, aligning with India's digital economy ambitions [para. 23][para. 24].

IBM's declining business in China, with a 16% year-on-year revenue drop in 2023, is also driving its withdrawal [para. 25]. Major Chinese state-owned enterprises are moving towards independent IT systems, replacing IBM's equipment. The "De-IOE" campaign in 2013 marked a shift towards homegrown products, which has intensified due to U.S. technology restrictions [para. 26][para. 27]. Despite such downsizing, market competition and evolving geopolitical factors necessitate a rational view of these changes. The key for the Chinese market is to focus on its own strengths amidst these global shifts [para. 28].