SEATTLE – When Microsoft opened an advanced research lab in Beijing in 1998, it was a time of optimism about technology and China.
The company hired hundreds of researchers for the lab, which pioneered Microsoft’s work in speech, image and facial recognition and the kind of artificial intelligence that later gave rise to online chatbots such as ChatGPT. The Beijing operation eventually became one of the most important AI labs in the world. Mr Bill Gates, Microsoft’s co-founder, called it an opportunity to tap China’s “deep pool of intellectual talent”.
But as tensions between the United States and China have mounted over which nation will lead the world’s technological future, Microsoft’s top leaders – including CEO Satya Nadella and President Brad Smith – have debated what to do with the prized lab for at least the past year, four current and former Microsoft employees said.
The company has faced questions from US officials over whether maintaining an 800-person advanced technologies lab in China is tenable, the people said. Microsoft said it had instituted guardrails at the lab, restricting researchers from politically sensitive work.
The company, which is based in Redmond, Washington, said it had also opened an outpost of the lab in Vancouver, British Columbia, and would move some researchers from China to the location. The outpost is a backup if more researchers need to relocate, two people said. The idea of shutting down or moving the lab has come up, but Microsoft’s leaders support continuing it in China, four people said.
“We are as committed as ever to the lab and the world-class research of this team,” Mr Peter Lee, who leads Microsoft Research, a network of eight labs across the world, said in a statement. Using the lab’s formal name, he added: “There has been no discussion or advocacy to close Microsoft Research Asia, and we look forward to continuing our research agenda.”
The debate at Microsoft stands out because the company is one of the few major US tech firms – alongside Apple and Tesla – to keep a foothold in China. As China nurtured a domestic tech industry and geopolitical tensions increased with the United States, American companies such as Google whittled down their presence there. Facebook and other US social media sites such as X, formerly Twitter, have been blocked in China for years.
LinkedIn, which Microsoft owns, shut down its professional social network in China in 2021, citing growing compliance demands. But Microsoft has maintained its Bing search engine as the only foreign search engine in China, though it is heavily censored, and it offers its Windows operating system, cloud computing and applications for corporate customers there.
Microsoft has debated the lab’s future for several years, five people with knowledge of the situation said. It has become a target of national security concerns amid the rise of AI and growing aggression between the US and China. The hypothetical risks are that China could hack or otherwise infiltrate the lab, or that its researchers could leave Microsoft to join Chinese companies that work closely with the government, the people said.
The Biden administration privately asked Microsoft about the lab while drafting a ban over the past two years on new US investments in companies building sensitive technologies in China that Beijing could use to enhance its military, two people familiar with the conversations said. (The proposed rules, issued in August, are not yet final.)
Senators asked Mr Smith about Microsoft’s ties to China at a subcommittee hearing on AI in September. He said the country accounted for 1.5 per cent of Microsoft’s sales, which were US$212 billion (S$282.4 billion) last fiscal year.
Microsoft faces “a tricky balance,” said Mr Chris Miller, the author of Chip War, a book that tracks the geopolitical history of tech. “They need to consider where the trust of the political system is going.”
The White House declined to comment.
Microsoft’s lab in Beijing was born when Mr Gates appointed Mr Kai-Fu Lee, a Taiwanese-born AI researcher, to build the operation. (Mr Lee later left to join Google and now runs a venture capital firm.)
