Microsoft once regarded the idea of quitting China as unthinkable. That decision was lauded by democracy activists, but not Bill Gates and Microsoft’s then-CEO Steve Ballmer, who suggested Google was overreacting. The year was 2010 and Google was about to exit due to concerns over censorship and cyberattacks.
Since the U.S. began restricting AI exports, Microsoft Research China — now known as Microsoft Research Asia — has opened labs in Vancouver, Singapore and Tokyo. The firm has, however, struggled to convince developers to leave China. Because it had carved out a profitable business servicing Chinese companies like TikTok owner ByteDance, which need Western technology to manage overseas operations, according to three people familiar with the matter, microsoft ultimately decided to remain.
Microsoft’s response was Windows 10 China Government Edition, whose release was personally negotiated between chief executive Satya Nadella and finance ministry officials, according to a person familiar with the matter. It offered 1,000 top engineers relocation to the U.S. and three other Western countries in 2024, but only about a third accepted, the sources said.
The company also believed that it needed a presence to maintain access to China’s world-class engineering talent, two of them said. Microsoft considered shutting the lab down but ultimately decided to relocate some top talent, according to two people familiar with the matter.
