Adobe Closes Chinese R&D Center

Adobe Systems, the maker of popular design tools including Photoshop, InDesign, and the Creative Cloud is closing its Research and Development office in China before the end of the year, laying off approximately 400 workers in this location. The decision by Adobe (NASDAQ: ADBE) to close its only Chinese R&D center is a result of several factors.

The Chinese R & D facility was well known amongst close Adobe-watchers for its lack of innovation. Some within Adobe considered products sent to China as being put into “maintenance mode” where they were no longer seeing significant innovation, and were being kept on life-support to allow for ongoing sales. This allows Adobe to continue to milk the products for additional revenue, while only making modest changes. One recent upgrade of Adobe’s Illustrator product came out of the Chinese R&D facility with only a change to the color of the background, menus, and tools. Serious users and employees alike complained about the inability of the Chinese team to create meaningful additions to Adobe’s design tools.

Chinese officials are targeting U.S. technology companies, creating a hostile business climate for companies like Adobe. Recently Microsoft was raided by Chinese officials and the company has also been the target of litigation against their business practices. As other technology companies were targeted, Adobe officials didn’t want to risk becoming the next U.S.-based company to have their offices raided or dragged through legal proceedings within China. The decision to close the R&D facility is an effort to minimize their risk. Despite their effort to reduce their exposure to Chinese litigation, Adobe is maintaining several sales offices across the country.

A 25% drop in sales in China year-over-year for Adobe may also factor into their decision, especially when coupled with increased prevalence of piracy across China. This is Adobe’s worst sales performance in the past five years in China. With shrinking sales in a market that should be growing, it didn’t make sense for Adobe to continue to invest in building an R&D center for Asian customers.

Adobe is likely to replace the staff in other locations. As Adobe’s CEO has made it a priority to shift R&D work from the United States and move it to low-cost locations off-shore, it’s likely these positons will be added in India.

Regardless of where Adobe develops its software tools, American Graphics Institute will continue to offer Adobe training, including Illustrator courses for customers using these creative and design tools.