However, in a context marked by geopolitical tension, this investment is beginning to wane. Microsoft has started to dismantle agreements and close facilities as part of a broader reorganization plan in the region.
Microsoft’s joint venture in China comes to an end. According to the South China Morning Post, Wicresoft, Microsoft’s first joint venture in the country, will cease operations. Despite the increasingly challenging environment for U.S. technology companies in China, Microsoft’s decision came as a surprise. Employees were informed on Monday that their work related to the tech giant “will be terminated.” Chinese financial media outlet Caijing reports that this move will impact around 2,000 workers.
Sudden news. Wicresoft is headquartered in Seattle and employs more than 10,000 people globally. It specializes in providing consulting, technology solutions, and operational support to major international brands. In China, the company had offices in 20 cities, including Shanghai, Beijing, Shenzhen, and Hong Kong, where it managed several projects for Microsoft. Many employees were notified via email, and some were even asked to leave the next day.
Uncertainty. Wicresoft’s shutdown raises questions about who will manage Microsoft’s after-sales support in a market where access to technical services is crucial for many users and businesses. Wicresoft was responsible for providing technical support for key products such as Windows 10, Windows 11, and Office, tailoring these services to the local context.
According to Reuters, this transition aligns with Microsoft’s intention to centralize operations and reduce outsourcing in the country. However, it hasn’t clarified who will take over these responsibilities or when that will occur.
A boost for local alternatives. Microsoft’s decision is creating opportunities in China that local firms are quick to seize. One major beneficiary is Kingsoft Office, the developer behind WPS Office. This office suite is compatible with Microsoft formats and has already surpassed 100 million daily users in the country. Its familiarity with the local market, along with its functional resemblance to Microsoft Office, has made it increasingly popular among government agencies, banks, and telecommunications operators.
As of 2022, Chinese state-owned companies are required to submit quarterly reports detailing their progress in replacing foreign software with domestic alternatives. Beijing has promoted the policy amid ongoing technology and trade tensions with the U.S. According to The Wall Street Journal, it’s directly benefited companies like Kingsoft. As a result, there’s been a reduction in licenses for Microsoft Office and a broader deployment of WPS Office in strategic sectors previously dominated by the tech giant.
Not an isolated case. Over the past two years, Microsoft has been progressively diminishing its presence in China. In 2023, the company closed all its physical stores in the country. It also offered relocations to hundreds of employees in its AI division and implemented job cuts. More recently, the company has also tightened its internal security protocols, requiring employees in China to only use iPhones to access corporate platforms. This is due to restrictions stemming from the absence of Google Play in the country.
Microsoft’s IoT & AI Insider Lab in Shanghai opened in 2019 as the largest facility of its kind outside the U.S. It was designed to foster the development of strategic technologies in collaboration with local companies. The lab shut down in early 2024 after supporting more than 250 projects and training thousands of professionals. This is just another example of Microsoft’s new strategy in a country where it’s made substantial investments.
Escalating commercial tensions. Washington and Beijing have revived the trade war. China announced a tariff increase after President Donald Trump imposed the first set of tariffs. On Monday, Trump threatened to impose an additional 50% tariff if the Asian country doesn’t lift its retaliatory measures.
In this context, many publicly traded U.S. companies are experiencing sharp declines in the stock market, negatively impacting entire sectors and markets worldwide.
Images | Valent Lau | Rui Silvestre
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