Microsoft Terminates Wicresoft Support as it Gradually Shuts Operations in China

Wicresoft, a Microsoft-backed joint venture, will cease operations in China on April 8, Reuters reported. This move by Microsoft to shut operations in China will leave 2,000 staff without jobs according to China’s media house Caijing.

No More Outsourcing

According to the Chinese media outlet, the big tech’s decision to stop outsourcing after-sales support to Wicresoft triggered Microsoft’s staff layoffs in China. The decision has raised questions on how Microsoft intends to service its Office and Windows products for Chinese customers. The layoffs will affect Microsoft’s Chinese outsourcing team.

Microsoft has been facing fierce competition from local Chinese competitors including Kingsoft. The tech company is tightening its grip on the local software market, challenging Microsoft’s dominance in the Chinese market.

An internal communication circulating on Chinese social media platforms showed that the US big tech was wrapping up its operations in the Asian country. However, a Microsoft spokesperson termed it as inaccurate. Media outlet, Caijing reported that the communication referred to the joint venture, Wicresoft.

Since 2002, Wicresoft has been providing IT services in Shanghai. The company was the first joint venture firm that Microsoft set up in China. Wicresoft also operates outside China in countries such as Japan, the US, and Europe. According to its website, the company has a global workforce of more than 10,000 employees.

US-China Tensions

The tech giant is exiting the Chinese market amidst rising trade tensions occasioned by the US-China technology war. In January this year, the US blacklisted 25 Chinese tech companies, including Sophgo and Zhipu AI. The US added the blacklisted firms to its list of restricted entities. The US targeted Sophgo after a Huawei AI processor featured a TSMC-manufactured chip illegally.

Washington blacklisted Zhipu for using AI research to modernize the Chinese military. The US also tightened controls to keep AI chips from flowing into China in a bid to prevent diversion to Huawei and the Chinese military. The controls included additional rules for manufacturers and packaging entities that seek to export chips outside the US.
Under the controls, the US has tightened restrictions on DRAM, a chip that makes high bandwidth memory. AI processors use DRAM. Restrictions on DRAM are likely to impact technology and products sold to China’s memory chip manufacturer, Changxin Memory Technologies.The controls apply to chips with 16 or 14-nanometer nodes that meet specific parameters in AI applications.

Big Tech Chinese Exit

The latest decision to terminate outsourcing support from Wicresoft points to a bigger exit plan. Last week, the South China Morning Post reported that the Windows maker had closed its AI and IoT lab in Shanghai’s hi-tech zone. The closure of the facility was a major sign that the US big tech could be retreating from the Chinese market as the global trade war escalates.

According to locals who work in the Zhangjiang AI Island region, the lab ceased operations early this year. The purpose of Microsoft’s Shanghai lab was to facilitate local development of AI and IoT technologies. Opened in May 2019, the innovation lab served numerous Chinese AI and semiconductor firms.

By 2024, the Microsoft lab had supported more than 50 tech firms, enabling them to secure $1.3 billion in investment. Additionally, the lab trained close to 10,000 tech professionals and helped tech startups to realize 139 breakthroughs.

Last year, Microsoft requested its AI and cloud computing staff in China to consider moving to the US following tech restrictions on Beijing. Microsoft isn’ the only US tech firm to exit China. IBM closed down its R&D division last year, leaving 1,600 people jobless.