Microsoft officially announced on Monday July 13 that it has spun off XiaoIce, its Chinese and Japanese chatbot, to be operated as a standalone company. 

Former Executive Vice President Dr. Harry Shum, who was in charge of the company's AI Group and left Microsoft late last year, has been appointed as chairman of Beijing Hongmian XiaoIce Technology Co. Ltd., the new venture. Li Di, core member of the original development team, will serve as CEO.

The new company will take over the XiaoIce research and development, as well os business operations in both China and Japan, where the chatbot's version is called Rinna. 

Microsoft told PingWest in a statement that it will continue to license existing technology to, and maintain stakes in the new company. A spokesperson said that all Microsoft employees previously working on XiaoIce and Rinna have been extended offers to work at the spin-off. Chinese business outlet Caixin reported that the team has about 200 people in two countries.

XiaoIce is the first Microsoft spin-off after more than 20 years, since Expedia, the online travel service provider, became independent in 1999.

The chatbot was developed by Microsoft Search Technology Center Asia (微软亚洲互联网工程院), the same research outfit that developed Bing, the company's search engine. 

XiaoIce became a nationwide sensation soon after the 2014 launch with its playful dialogue capabilities that was unlike other chatbots at the time, and was immediately banned on WeChat. It also had a stint at a Shanghai television broadcaster as a presenter and weather forecaster in 2015.

One key reason for the decision to spin off XiaoIce was to better commercialize the chatbot technology developed by Microsoft, an American corporation, in China, amid ongoing US-China tension. 

XiaoIce has been partnering with Tencent, Xiaomi, ByteDance, among other Chinese companies, and is planning on providing more commercially available services based on natural language processing, a form of artificial intelligence technology, to other industries in China. Such services would often require data to be completely locally stored and processed in China, a better fit for a Chinese spin-off.