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US technology group IBM is ceasing most of its research and development activities in China, making it the latest US company to withdraw from the world’s second-largest economy amid rising tensions between Washington and Beijing.

Employees said more than 1,000 employees would lose their jobs. They are spread across several offices in mainland cities and work in two research-focused units – the China Development Lab and the China Systems Lab.

IBM’s move to cut R&D staff comes amid a broader wave of layoffs by American companies in China. In May, Microsoft offered to relocate hundreds of Chinese employees working on cloud and artificial intelligence as the US continued to restrict China’s access to sensitive technologies. Microsoft had previously shut down its social network LinkedIn in China.

Jack Hergenrother, an IBM executive, cited tougher competition when he informed employees of the cuts in a virtual meeting on Monday. He said its infrastructure business in China was weakening and the company was moving its research and development work closer to customers outside the country, according to Chinese media outlet Jiemian, which first reported the news.

IBM’s local business is struggling with Chinese competitors that are benefiting from Beijing’s directives to local governments and state-owned companies to buy more technology products from domestic suppliers.

“IBM has been steadily reducing its presence in recent years – that’s part of the decoupling,” said a former employee.

The Chinese division’s revenue fell nearly 20 percent in 2023 compared to the previous year, while the entire Asia-Pacific region contributed 11.7 percent to IBM’s $62 billion in revenue. The technology giant has also cut staff in other regions to increase profits.

Some of the affected IBM employees in China were given the option to move to other countries, while others were offered severance pay based on their length of service if they agreed to their severance packages within three weeks, two employees said.

The US company closed another major R&D unit in 2021 – the Beijing-based China Research Lab.

Another former employee noted that IBM’s business in China was in trouble. “Just like IBM sold the ThinkPad (laptop) business to Lenovo, it now has to close CDL and CSL. The businesses were not making good profits,” the person said.

Chinese company records show that IBM employs more than 7,500 people in the country and has a large office in the northeastern city of Dalian. A large research team in China could make it more difficult to win contracts from the US government, one of Big Blue’s main customers.

IBM did not immediately respond to requests for comment.