IBM Shutters Systems Research And Development Labs In China

September 9, 2024 Timothy Prickett Morgan

What a change four decades makes, and what a bigger change even a decade has made, when it comes to the relationship between the United States and China.

Four decades ago, when Big Blue started to do business for real in China, the only reason to believe that the Middle Kingdom might one day rival the United States economically and militarily was the vastness of its population, the breadth and depth of its natural resources, and the patience and tenacity of its command economy. China was the anchor economy of the so-called BRICS – Brazil, Russia, India, and China – and nearly 30 years after IBM entered China to do business, the BRIC share of gross domestic product at purchasing power parity – meaning adjusted for a market basket of good and services to come up with an equivalency in spending power – had matched that of the G7 countries – that is the United States, Germany, France, Italy, Japan, the United Kingdom, and Canada – and has since taken a progressively larger slice as the G7’s share continues to decline.

So given this, it may be surprising that Big Blue is shutting down two of its main development laboratories in China this year. But this is what happens when China wants indigenous technology, and open sourcing the Power chip ISA and inviting Chinese manufacturers into the OpenPower Consortium in the past decade, as well as moving server manufacturing from the United States and Ireland to China and Singapore was not enough to satisfy the ruling Communist party in China.

And as a consequence, the once booming Power Systems business in China has all but dried up and as a consequence IBM earlier this year started shutting down its China Development Lab and last week shut down its China Systems Lab. According to a report in Nikkei, the layoffs in China by Big Blue affect around 1,600 workers located in Beijing, Shanghai, and Dalian. The CDL creates application software (it was instrumental in the creation of IBM’s WatsonX AI models and frameworks for running them, for instance) and has over 1,000 employees, while the CSL works on compilers and systems software for IBM’s mainframe and Power platforms and has under 700 employees reportedly.

We have always strongly suspected that a lot of development work on the IBM i platform was done in China, but have no proof of that; we also think a lot of work gets done in India. The India Systems Development Lab in Bangalore is apparently “the largest development hub” in IBM’s Infrastructure division, which is the combination of System z and Power Systems platforms.

In the wake of the layoffs at CDL and CSL, there was chatter that IBM would be looking for replacements for Chinese software and hardware engineers in Bangalore to take over the work. It is not clear if Big Blue was offering customers a chance to relocate from China to other labs around the world to continue on their projects.

IBM confirmed the Chinese lab closings to The Four Hundred, but did not elaborate on what its plans were beyond this statement: “To help provide the best service to IBM clients, we have decided to consolidate our IBM Power development mission to other locations. Shifting this work to locations where we have existing operations will allow us to achieve sustainable long-term growth while ensuring continuity and reliability for clients.”

First of all, even though we are American first and the long history of our families is centered on the Western world, we nonetheless have compassion for the fact that somewhere over 1,600 people who had good jobs in China no longer do. But at the same time, if IBM’s China business has been frozen out by the Chinese indigenous IT efforts, then we would hope that some of those jobs – if not all of those jobs – would make their way back to Rochester, Austin, Raleigh, Poughkeepsie, and Toronto in North America and the appropriate places in Europe. (Although it is very hard to hire in Europe because it is very difficult to fire in Europe. This is great for workers, but not so great for employers and understandably causes some hesitation to make a commitment because it may very well be a very long one.) This is where the Power Systems and System z customers are located. IBM’s labs in Japan (Tokyo) and Switzerland (Zurich) could get a boost, as could the Montpelier lab in France and Boeblingen in Germany could, too.

We shall see. Or far more likely, we will not see what actually happens because IBM will not talk much about it at all. And frankly, all that really matters is that the PTF patches and the firmware, operating system, middleware, and development tool releases keep to their regular cadence and have real improvements aimed at solving real problems.

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