Global tech giant IBM is shutting its $90 million technology park in Tampines, costing up to 600 jobs in Singapore, and moving production of its high-end computer systems to the United States.
The move comes as analysts expect IBM to report weaker earnings, down around 3 per cent for its first quarter, after the close of trading in the US yesterday, in part due to an ageing mainframe product cycle.
The US firm will move the manufacturing of its mainframe computers IBM Z from Singapore to Poughkeepsie in New York.
It is part of "IBM's continual review of the most efficient way to source our products", said the New York-headquartered firm in a statement.
IBM has declined to reveal details of its retrenchment exercise in Singapore, but Today newspaper has estimated that up to 600 workers would be laid off by July at the company's manufacturing plant in Tampines.
A spokesman for the Ministry of Manpower has said that IBM had notified it of the retrenchment exercise.
For workers who are retrenched, Workforce Singapore and the National Trades Union Congress' Employment and Employability Institute will offer employment services support through the Adapt and Grow initiative, said the spokesman.
United Workers of Electronics and Electrical Industries executive secretary Melvin Yong said the union is working closely with IBM to help the affected workers.
IBM has stressed that Singapore remains a strategic location for the company as its Asia-Pacific headquarters, Watson Centre, cloud data centre, blockchain and other service units will remain operating on the island.
"IBM has been in Singapore for 66 years. It remains committed to being an essential part of its growth, and is working with many companies in Singapore to enhance its position as a worldwide innovation hub," said an IBM statement.
When the Tampines plant was set up in 2010, the company hailed it as one of the world's most technologically advanced manufacturing facilities to serve high-end clients across Asia, Africa and Europe.
An IBM executive told reporters then that the Singapore facility "gives (IBM) a geographical location close to these global clients, and provides IBM increased access to talent and suppliers crucial to the manufacturing process. It also presents us greater opportunity for operational efficiency and savings".
But in recent years, IBM has been facing increasing pressures due to declining sales of hardware servers as clients move into cloud computing.
Bloomberg reported that the company's workforce shrunk by 54,000 between the end of 2012 and the end of 2017 as it cut jobs in the US, Canada and other high-wage regions in cost-cutting efforts.
While its revenue grew last year, its fourth-quarter results were dragged down by poor hardware sales.
Revenue in the systems segment fell 20 per cent year on year due to a 44 per cent plunge in mainframe sales as the product is nearing the end of its cycle.
IBM started shipping its latest z14 mainframe in the third quarter of 2017 and enjoyed five straight quarters of growth.
Ahead of its earnings results for the latest quarter, analysts say it remains to be seen if IBM, with its impending acquisition of Red Hat, an open-source software company, can catch up with its rivals such as Google and Microsoft in cloud computing and mobile technology.
"The company continues to face structural risk from its installed base of clients migrating towards cloud and open source competitors in the long term due to IBM's under-investment in cloud and relatively closed strategy," analyst Ari Terjanian of Cleveland Research Company wrote in a note.
While the Red Hat deal is a step to address this issue, "it remains too early to judge whether these efforts will be successful".
