Is Microsoft quiet-quitting China?
What happened: This month, a couple of clues point to the possibility that Microsoft may be shoring up its China sanctions compliance, but doing so as quietly as possible:
- On March 31, Chinese and Western media reported that Microsoft had shuttered its Shanghai AI Lab, closing offices and moving out with no major announcements.
- On April 10, SCMP reported that the company suspended some services for clients in mainland China with little warning, including cutting off Microsoft 365 services to Sun Yat-sen University and BGI Group.
Hm: If we had to guess, we'd say Microsoft is reducing its compliance risk with US sanctions, either due to internal risk mitigation plans, or because they're under pressure from the US government to do so.
- Some entities affiliated with BGI are on the US Entity List.
- While Sun Yat-Sen University itself isn't on the list, it is home to the National Supercomputing Center in Guangzhou, which is indeed on the Entity List.
- Doing AI-related R&D in China is not politically palatable right now.
Why it matters: China hasn't been taking kindly to foreign firms that comply with US sanctions to the detriment of Chinese companies and institutions, and US tariffs are likely to reduce its tolerance further.
- If Beijing takes issue with these moves, the risk of retaliation against Microsoft could rise.