Every country is vying for a head start in the race for the world’s quantum future. A year ago, the United States, the United Kingdom and Australia joined forces to develop military applications of digital technologies, specifically quantum computing technologies. This followed the US Congress passing the National Quantum Initiative Act in 2019, which outlined the country’s plans to rapidly create quantum computing capabilities.
Earlier in 2016, Europe funded a €1bn quantum computing research projectth The five-year plan (2021-2025) prioritizes the development of quantum computing and communications by 2030. Overall, between 2019 and 2021, China invested up to $11 billion, Europe had spent $5 billion, the US $3 billion and Britain about $1.8 billion in between to become tomorrow’s quantum superpowers.
As the scientific development of quantum technologies gathers momentum, the development of quantum computing has become a priority for nations looking to gain the next competitive advantage in the digital age. They seek this advantage for two very different reasons. On the one hand, quantum technologies are likely to transform almost every industry, from automotive and aerospace to finance and pharmaceuticals. According to BCG’s latest estimates, these systems could create between $450 billion and $850 billion in new value over the next 15 to 30 years.
On the other hand, as we argued in a previous column, quantum computing systems will pose a significant threat to cybersecurity around the world. Hackers can use them to decrypt the public keys generated by the RSA cryptosystem and breach the security of any traditionally encrypted device, system or network. It will pose strong cyber threat popularly called Y2Q (Years to Quantum) to individuals and institutions as well as to corporations and country governments. The latter have no choice but to face the unprecedented challenge by developing countermeasures such as post-quantum cryptography, which itself will require the use of quantum systems.
Countries have learned the hard way since the Industrial Revolution that general-purpose technologies like quantum computing are critical to competitiveness. Take semiconductor manufacturing, for example, which has recently been dominated by the US, China, South Korea and Taiwan. When the COVID-19 pandemic and other factors caused a sudden drop in production over the past two years, it caused production shutdowns and price increases in over 150 industries, including automobiles, computers, and telecom hardware. Many countries including European Union members, Brazil, India, Turkey and even the US have been hit hard and are now trying to rebuild their semiconductor supply chains. Similarly, China produces most of the world’s electric batteries, while the US contributes only about 7% of global production. That’s why the US recently announced financial incentives to incentivize companies to build more electric battery production capacity domestically.
Much worse could lie ahead if countries and corporations don’t immediately focus on increasing their quantum sovereignty. Because the development and deployment of such systems requires the efforts of both the public and private sectors, it is important that governments compare their efforts on both fronts with those of other countries.
The US is expected to be the global leader in quantum computing, which relies on its tech giants like IBM and Google to invent quantum systems, and numerous startups developing software applications. The latter attract almost 50% of investments in quantum computing by venture capital and private equity funds, BCG estimates. Although the US government has only allocated $1.1 billion, it has created mechanisms that effectively coordinate the efforts of all its agencies such as NIST, DARPA, NASA and NQI.
Breathing in the US: China, whose government has spent more on developing quantum systems than any other. . These investments have boosted academic research, with China producing over 10% of global research by our estimates in 2021 – second only to the US. The spillover effects are obvious: Less than a year after Google’s quantum machine solved a calculation in minutes that would have taken supercomputers thousands of years to unravel, the University of Science and Technology of China (USTC) had a problem three times harder cracked. As of September 2021, China hadn’t spawned as many startups as the US, but it was relying on its digital giants like Alibaba, Baidu, and Tencent to develop quantum applications.
Behind the US and China is the European Union Quantum computing efforts are being driven by both member states and the Union. The EU’s Quantum Flagship program coordinates research projects across the continent, but these efforts are not yet fully coordinated. Some important efforts, such as those of France and Germany, risk overlapping or under-exploiting synergies. While the EU has spawned several start-ups operating at different levels of the tech stack – such as Finland’s IQM and France’s Pasqal – many seem struggling to scale due to a lack of late-stage funding. In fact, according to BCG estimates, EU start-ups have attracted only about a seventh the funds of their American counterparts.
Finally, Great Britain was one of the first countries around the world to launch a government-funded quantum computing program. It relies on its education policy and universities; scholarships for postgraduate courses; and doctoral training centers to advance. Like the EU, the UK has spawned promising start-ups like Orca, which last year announced the world’s smallest quantum computer. However, UK startups may not find enough capital to scale, and many are likely to be taken over by the US’s digital giants.
Other countries like Australia, Canada, Israel, Japan and Russia are also in the quantum computing race and could carve out a role. In Canada, for example, there are several promising startups, such as D-Wave, a leader in computer annealing; while Japan is using public funds to develop its own quantum computer by March 2023. (For an analysis of the comparative standings and challenges countries face in quantum computing, see the recent BCG report.)
The Four Keys to “Quantum Sovereignty”
Meanwhile, the place of the quantum computing industry is shifting towards the challenges of developing applications and adopting the technology. This shift offers countries, especially the follower nations, an opportunity to catch up with the leaders before it’s too late. Governments must use four levers together to accelerate their quantum sovereignty:
* Laying the groundwork. Governments will need to invest more than they currently do if they want to develop quantum systems in the long term, even as they partner to bring the technology home in the short term. Once they have secured the hardware, states must create a common infrastructure to scale the industry. For example, the Netherlands has set up Quantum Inspire, a platform that provides users with the hardware to perform quantum calculations.
* Coordination of those involved. Governments should use resources and influence to coordinate the work of public and private actors, such as the US Quantum Coordination Office does. In addition, policymakers need to bring stakeholders together to support the development of the technology. For example, the US Department of Energy partnered with the University of Chicago; Together they set up an accelerator to bring start-ups together with investors and scientific experts.
* Ease the transition. Governments must support the transition of companies to the quantum economy. They should offer monetary incentives — such as tax credits, infrastructure subsidies, interest-free or soft finance, and free land — to encourage incumbents to quickly adopt quantum technologies. For example, the UK recently expanded its R&D tax break scheme to cover investments in quantum technologies.
* Develop the business talent. Rather than just nurturing academics and scientists, government policies must catalyze the creation of a new generation of entrepreneurial and managerial talent who can play key roles in quantum enterprises. To speed up the process, Switzerland, for example, has helped create a master’s program instead of just offering doctoral programs on the subject.
Not all general-purpose technologies compromise a country’s security and sovereignty like quantum computing does, but they are all critical to competitiveness. While many countries are talking about developing quantum capabilities, their efforts haven’t resulted in big strides like the US and China. It is time for every government to remember that if it loses the quantum computing race, its technological independence will erode – and unlike Schrodinger’s cat, there is no doubt that its global competitiveness will wither.
Read others wealth Columns by François Candelon.
Francois Candelon is Managing Director and Senior Partner at BCG and Global Director of the BCG Henderson Institute.
Maxime Courtaux is a project manager at BCG and an ambassador at the BCG Henderson Institute.
Gabriel Nahas is a senior data scientist at BCG Gamma and an ambassador at the BCG Henderson Institute.
Jean-François Bobier is a partner and director at BCG.
Some of the companies featured in this column are past or current customers of BCG.