Big setback for China: Amazon shuts down Shanghai AI lab as US firms speed up retreat

With the closure of its Shanghai artificial intelligence (AI) lab, Amazon has become the latest Western technology giant to reduce its footprint in China.

The Financial Times has reported that Amazon has shut down Amazon Web Services’ (AWS) AI lab at Shanghai and has dissolved the entire team.

In the wake of geopolitical tensions with the United States and repressive policies of the Communist Party, Western tech giants have sought to reduce their activities in China in recent years and relocate many of their operations, including manufacturing of devices.

While the number of roles affected is not exactly known, the newspaper reported sources as saying that Amazon has more than 10,000 employees in China and the AWS at its peak had more than 1,000 staffers in the country.

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Amazon spokesperson Brad Glasser said, “We’ve made the difficult business decision to eliminate some roles across particular teams in AWS. These decisions are necessary as we continue to invest, hire, and optimise resources.”

Previously, analysts had said that Trump's policies could mean reduced inbound investment, mergers, and acquisitions for China as a result of tariffs and geopolitical tensions.

Amazon scales back in China over geopolitical tensions

Wang Minjie, a scientist at Amazon Web Services’ (AWS) Shanghai lab, said on social media that his team was “being dissolved due to strategic adjustments amid US-China tensions”, according to FT.

“Over the past six years, I’ve had the privilege of leading the team through the golden era of foreign research labs [in China],” Wang further said.

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Amazon is the latest Western tech giant to cut back its operations and presence in China in recent years.

Last year, IBM shut down its research and development (R&D) division in China because of regulatory issues and declining revenue. The closure affected around 1,000 jobs. Last year, Microsoft also asked hundreds of employees to relocate from China. In recent years, Apple and Dell have moved a large chunk of their manufacturing outside of China. Last year, around 15 per cent of all Apple iPhones were made in India.

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There are multiple reasons for such exits, ranging from the US-China tensions to China’s policies.

Firstly, As a result of Western export controls, it has become difficult for China-based researchers to collaborate with peers outside of the country. Export controls have also sought to block China’s access to most advanced hardware.

Secondly, geopolitical tensions and lessons from the Covid-19 pandemic, have also led companies to reduce their dependence on China and move at least manufacturing elsewhere. This diversification of manufacturing and supply chains has been dubbed as ‘China-plus one’ strategy.