Fried Frank Harris Shriver & Jacobson's announcement of its withdrawal from Asia earlier this week could, in some respects, be seen as long overdue.

The firm confirmed on Monday (19 January) that it will close its Hong Kong and Shanghai offices by 30 June, though it still intends to maintain both a service office in Hong Kong and its Shanghai licence to practise.

Speculation that the US outfit may call time on its regional operations first started in 2013, when capital markets partner Victoria Lloyd left for Ropes & Gray amid an apparent retreat from Hong Kong capital markets work by Fried Frank. At the same time corporate partner Joshua Wechsler relocated to New York and the firm downsized its Hong Kong office by 6,000 sq ft, but denied it was scaling back in the region.

In truth Fried Frank has had a relatively lean team on the ground for some time, having gradually seen the departures of all but two of the eight Simmons & Simmons partners it recruited in 2006 for its big regional debut.

The firm currently has four partners and two consultants in Hong Kong, with no lawyers permanently based in Shanghai. It is offering to help with lawyer relocations in the run up to the closure, but it is understood that most of those affected are on the market locally.

"If anything I'm surprised it took them this long to do it [close the Asia offices]," says one Hong Kong partner with knowledge of the firm. "It will be interesting to see."

The rationale for pulling out completely, as Legal Week understands, was that the offices were too dilutive on firmwide partner profits, with Asia proving hard to crack in light of huge competition from international rivals and a US client base that is not very active in Asia.

The firm acknowledged in an internal memo to lawyers, seen by Legal Week, that its "growth potential in Asia was not sufficiently attractive from a commercial perspective without significant additional investment".

But competition in Hong Kong means profitability has long been an issue for many international firms, so why is Fried Frank leaving while its rivals stay despite fee pressure and local practice restrictions?

Some in Hong Kong suggest that Fried Frank, a relative latecomer to the region, struggled to build the right team and clients locally (it tried unsuccessfully to recruit a team from Latham & Watkins in 2011).

Others argue that the strategy was dictated from New York, with the firm appearing less committed to Asia than many of its rivals, meaning that even with the best team it would have found it hard to succeed.

"It's hard for people with that kind of leadership," says one local partner. "With [other firms] the strategy is defined by the partners collectively working here. That makes a huge difference. You can't blame New York because it has an agenda, but how to marry the New York agenda with local needs is a challenge."

Indeed, according to Shearman & Sterling Asia head Matthew Bersani, it is essential for firms choosing to work in Asia to have a global outlook. "For some firms having offices in Asia is not core to the strategy and is frankly dispensable once the losses are at a certain level; they can just close it without really affecting the rest of the network very much," he explains.

"But if we closed we wouldn't be an international firm – we would cease to be able to service our clients globally. That would be catastrophic."

Ultimately, many in Hong Kong respect Fried Frank for making a tough decision, pointing out that closing offices is better than keeping them open without the right business model or appetite.

What now remains to be seen is whether the firm's exit – which followed a review of its international offices – will be permanent or whether it will use its service base and Shanghai licence to one day return to the region.