Satya Nadella Says Microsoft Prefers Avoiding China Amid US National Security Concerns

Microsoft Corp. MSFT’s CEO Satya Nadella has made his stance clear the tech giant is less focused on China’s domestic market, despite having several prominent Chinese customers with global operations.

What Happened: In a recent CNBC report, Nadella clarified Microsoft’s position at the Ignite conference in Seattle. “We are mostly focused on the global market ex-China,” he stated.

Notably, Microsoft provides artificial intelligence services to well-known Chinese companies like Li Auto LI and Xiaomi.

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These comments emerged at a time when business leaders are gathering in San Francisco amid escalating tensions between the U.S. and China's economies. This development followed the U.S. Commerce Department’s decision to introduce additional export restrictions on AI chips for China in the previous month.

"It's clear that the United States has a particular set of policy decisions that they're making on what it means to both have trade and competition and national security. Obviously, we are subject to what the USG decides, " Nadella said.

Why It Matters: Despite having a substantial presence in the Chinese market since 1992, Nadella stressed the need to abide by U.S. government restrictions when engaging in business activities in China.

Although a significant part of Microsoft’s business is based in the United States, Europe, and the rest of Asia, the company has relied on China for manufacturing, specifically for its Surface PCs. Nonetheless, Nadella does not anticipate this to be a major problem for the company unless there are disruptions in the supply chain.

This strategic shift comes amid a critical juncture, with U.S. tech leaders, including Microsoft’s Nadella, interacting with Chinese President Xi Jinping at the U.S.-hosted Asia-Pacific Economic Cooperation (APEC) summit in San Francisco. The meeting, the first of its kind hosted by the U.S. in over a decade, is seen as an opportunity for business executives to strengthen ties with China.

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