Concerns grow that more US-backed tech firms set to retrench across China

Reports that Oracle to cut 200 Beijing staff, while Seagate has confirmed it plans to shutter Suzhou plant with the loss of 2,200 jobs

PUBLISHED : Tuesday, 17 January, 2017, 9:30pm
UPDATED : Tuesday, 17 January, 2017, 10:05pm

Concern is growing within China’s tech industry that the number of US-backed companies downsizing their operations in the mainland is expected to rise, following Beijing’s drive to promote domestic-made-and-developed technology products, and the country’s soaring production costs.

US-backed computer technology giant Oracle Corporation, for example, plans to lay off over 200 employees, most of them research and development staff, at its Beijing branch due to what it called a strategic restructuring, China Daily has reported.

A staff member with the company’s Beijing office, who declined to be named, was quoted as saying the staff concerned received an email from the head of the business unit on Friday, and have been asked to leave before March 31.

Bill Nesheim, vice-president of the unit, Solaris Platform Engineering, wrote: “Oracle is refocusing more R&D effort on cloud computing ... Due to this restructuring, some product teams in some markets will be eliminated ...” Oracle China was unavailable for comment on Tuesday.

Foreign tech giants are likely to face serious challenges to expand in the mainland market in future as the Chinese authorities focus on reducing the market shares of foreign IT companies to build up the capacities of its own Chinese-owned IT companies, according to industry insiders and analysts.

On January 10, the world’s largest hard disk producer Seagate, with operations globally including in Thailand and Malaysia, announced it planned to shut down its manufacturing plant in Suzhou, Jiangsu province, one of its largest production assets in China and lay off about 2,200 employees there.

The action, the company said, reflects the ongoing commitment to reduce its global manufacturing footprint and better align the business with current and expected demand trends.

Suzhou authorities have claimed Seagate is closing the plant due to weak global demand, but point out it still has a plant in the nearby city of Wuxi and has increased investment in China for new products on security surveillance, robotics, the internet of things, and cloud computing.

Last week, a group of Shenzhen congress deputies from IT companies warned the Chinese authorities more traditional manufacturing as well as hi-tech firms were expected to leave the city in search of cheaper labour as economic conditions worsened at home and abroad, adding to growing worries among industry insiders that a flood of overseas-owned enterprises could now would follow Seagate and Oracle in retreating from China.

It’s hard for foreign tech companies to independently develop their China market share in advanced technologies such as big data and cloud computing, and you are likely to see them seeking new business modes to cooperate with domestic tech companies
Liu Liang, analyst, Forrester Research China

“It’s hard for foreign tech companies to independently develop their China market share in advanced technologies such as big data and cloud computing, and you are likely to see them seeking new business modes to cooperate with domestic tech companies,” said Liu Liang, an analyst with Forrester Research China.

According to a new report from the Information Technology and Innovation Foundation (ITIF), a global science and tech policy think tank, as countries around the world compete for market share in high-wage, innovation-intensive industries, China is gaining an unfair advantage by implementing protectionist and discriminatory policies.

Earlier this month, ITIF released its 2016 list of the worst 10 examples of innovative benefits of profitable trading, including two cases from China.

The study said the country introduced a cybersecurity law that imposes extensive requirements for international companies to store data inside China’s borders.

This, it claimed, establishes audits that discriminate against foreign technology products and forces companies to disclose intellectual property and software source code.

It also highlighted that China introduced cloud-computing restrictions that prevent foreign firms from operating in the Chinese market.

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