According to McKinsey & Company, quantum computing has the potential to change the world. In a recent article, the firm noted, “Quantum computing, an emerging technology that uses the laws of quantum mechanics to produce exponentially higher performance for certain types of calculations, offers the possibility of major breakthroughs across sectors. Investors also see these possibilities: Funding of start-ups focused on quantum technologies more than doubled to $1.4 billion in 2021 from 2020. Quantum computing now has the potential to capture nearly $700 billion in value as early as 2035, with that market estimated to exceed $90 billion annually by 2040.” 

The Washington Technology Industry Association (WTIA) report, Quantum Information Sciences (QIS) in Washington state, prepared by Moonbeam for the association’s Advanced Technology Cluster, corroborated these findings from McKinsey—investment in QIS is picking up throughout the United States, as well as globally. While the U.S. is a leader in quantum computing, particularly in market share, the nation lags when it comes to government investment in the space. Specifically, the U.S. is outpaced by four countries that are heavily invested in quantum: China, Germany, France, and the U.K.   

This article will compare various ecosystems throughout the world and evaluate investment scenarios as they relate to QIS.

U.S. QIS Investment Trends

Taking a look at domestic investment, the U.S. has been actively funding QIS research and development for the past 15 years. However, there was a noteworthy uptick since 2019—more than half (55%) of all federal investment over the last 15 years was distributed between 2019 and 2022, according to the WTIA QIS report. The National Quantum Initiative Act (NQIA), provides a framework to strengthen and coordinate QIS R&D across federal agencies, investing in five key areas:

1. Quantum Sensing and Metrology (QSENS) Use of quantum mechanics to enhance sensors and measurement science 
2. Quantum Computing (QCOMP) Development of quantum bits and entangling gates, quantum algorithms and software, digital and analog quantum simulators, quantum computers and prototypes, among others 
3. Quantum Networking (QNET) Uses entangled quantum states distributed over distances and shared by multiple parties for new information technology applications and fundamental science 
4. QIS for Advancing Fundamental Science (QADV) Foundational efforts to invoke quantum devices and QIS theory to expand fundamental knowledge in other disciplines like biology and chemistry, among others 
5. Quantum Technology (QT) Several topics such as work with end-users to deploy quantum technologies and develop use cases, and basic R&D on supporting technology for QIS and Engineering

Three primary agencies drove the recent increase in QIS funding: Department of Energy (DoE), National Science Foundation (NSF), and National Institute of Standards and Technology (NIST). Quantum Computing (QC) and advances in fundamental science are the most heavily funded QIS research areas. 

Looking at all federal funding together, NSF, Department of Defense (DoD), DoE, and the National Aeronautics and Space Administration (NASA) are the top departments funding QIS.

The top vendors for federal agency contracts are consulting services and R&D, while grants are typically available to universities. Small Business Innovation Research (SBIR)/Small Business Technology Transfer (STTR) recipients have strong academic ties. Some of the top federal contract vendors, grant recipients, and SBIR/STTR are listed below:

Top Vendors with Federal Contracts for QIS:

• Alion Science and Technology (now Technical Solutions)
• University of Southern California
• California Institute of Technology
• Stevens Institute of Technology
• UES
• Boeing Company
• Raytheon BBN
• SRI International
• Physical Sciences
• Hypres
• Quantum Design
• QMagicQ
• Freedom Photonics
• Amethyst Research
• Physical Optics Corporation (Acquired by Mercury)
• Xiomas Technologies
• Infleqtion
• AdvR
• IBM

Top Grant Recipients for QIS:

• Massachusetts Institute of Technology (MIT)
• California Institute of Technology
• University of Maryland
• Regents of the University of Colorado
• University of Wisconsin
• University of Washington
• University of California – Berkeley
• University of Illinois
• Leland Stanford Junior University
• University of California, Los Angeles
• University of California, San Diego
• Harvard College
• University of Southern California
• Duke University
• University of Chicago

Top Recipients of SBIR/STTRs for QIS:

• Physical Sciences
• ADVR
• Q-CHEM
• Hypres
• NuCrypt
• Irglare
• Freedom Photonics
• Physical Optics Corporation (Acquired by Mercury)
• Quantum Technology Sciences
• Ocean Nanotech

For its part, Washington state is emerging as a notable center of excellence, spread among several areas, including software and manufacturing expertise, strong venture capital and angel investor activity, a growing workforce composed of graduates from STEM and quantum computing programs, strong support from academia, and dedicated state facilities contributing to forward progress on QIS development in the region. Nonetheless, Washington still has room to grow, particularly with regard to government investment in quantum computing. Historically, Washington has performed well on grants, but is lagging on SBIRs and contract awards. 

Global QIS Investments

On a global scale, other governments are actively investing in QIS; funding totaled an estimated $30 billion in 2022, with China accounting for nearly 50%, as shown below:

Globally, approaches to quantum technology research & development can be classified into three broad categories:

1. National Quantum Strategy: 37% (17 countries) have a coordinated national quantum strategy and 6.5% (3 countries) are currently developing that strategy 
2. Government-endorsed Initiatives: 26.1% (12 countries) do not have a national strategy, but have significant government or government-endorsed initiatives 
3. International Quantum Partnerships: 30.4% (14 countries) do not have significant initiatives, but are participating in international quantum partnerships), mostly throughout Europe. One of the most significant is the €1B European Union (EU) Quantum Flagship, which brings together stakeholders in government, academia, and industry from 32 countries within and beyond the EU. Other initiatives include QuatERA and OpenQKD.

Several countries around the world have major quantum R&D initiatives, strategies, and policy measures in place, including the U.S., EU, China, Canada, Germany, Australia, Russia, Japan, France, United Kingdom, India, Singapore, South Korea, Israel, the Netherlands, and Taiwan.

Market Share Analysis

North America, which includes the U.S., Canada, and Mexico, is currently the largest quantum computing market, a trend that’s likely to continue for the foreseeable future. Not surprisingly, the U.S. is the primary contributor to the growth of the North America market, accounting for 62.5% of the market share in QC technologies. The strong innovation ecosystem in the U.S. is likely to continue to drive significant growth in the coming years. Specifically, the project compound annual growth rate (CAGR) of the U.S. market from 2020 to 2026 is projected to be 33.4%. In Canada and Mexico, projected CAGR for the same period is 33.3% and 31.8%, respectively. 

North America has historically embraced new technologies, and QC is no exception. The region is mainly focusing on Quantum-assisted Optimization and Quantum Simulation, corresponding to over 65% of the market share of Quantum Computing Technologies. Emerging technologies such as AI, Big Data, and cloud in virtually every sector are driving huge data generation, which requires faster, more efficient, and cost-effective memory solutions to retrieve or add information.  

Europe is the second-largest QC market. The region’s strength lies in its scientists’ excellence and high level of cooperation throughout the continent, maximizing the benefit of collaborative science in a highly interdisciplinary field. As the chart below indicates, CAGR for Europe from 2020 to 2026 is around 33%, depending on the country. Germany leads the region with a CAGR of 33.7%.

Like North America, Europe is heavily investing in Quantum-assisted Optimization and Quantum Simulation, corresponding to over 80% of market share. Europe is mainly investing in superconducting qubits (39.2% market share) and trapped ions (32.8%).

R&D investment and strategic partnerships are key drivers of growth in the Asia-Pacific market. In fact, it’s projected to be the most promising region for quantum in the coming year. More than 70% of market share belongs to technologies such as superconducting qubits and trapped ions. Most of the region’s revenues come from China (33.9%) and Japan (33.6), two countries expected to track closely in revenues throughout the forecast period of 2020 to 2026.

Over 50% of the Asia-Pacific region’s market share in Quantum Computing Technologies is dedicated to Quantum-assisted Optimization. Quantum Simulation is second with 27% of market share.

 

Several Clusters Are Worth Watching Globally

Globally, QC clusters to watch include Washington state, Chicago, D.C./Maryland/Virginia, London, Paris, Tokyo, Beijing, and Seoul. Also of note is a potential opportunity to connect the broader North American ecosystem by connecting clusters through a flagship industry conference, according to the WTIA QIS report.

Beyond North America, several similar clusters (hubs, initiatives, and coalitions) are helping to drive forward progress for QIS and related R&D. Below are their primary locations and the names of several participants involved in the expansion of quantum worldwide:

When it comes to QIS companies, most are headquartered in the U.S., Canada, U.K., and China. The U.S. has the most by far, with 452 companies headquartered here.

North America has the most industry diversification when it comes to QIS companies, although it has a hefty concentration of companies in the information technology space (nearly 50%), as do Europe and the Asia-Pacific region. 

In addition, many QIS companies throughout the world are revenue-positive. Once again, North America leads the way, with 92% of companies generating revenue. However, Europe and the Asia-Pacific region aren’t far behind, with 88% and 86% of revenue-positive companies in the space, respectively.

Zooming In On Global QIS Ecosystems

Focused on information technology and B2B applications, U.K., Germany, and France are QIS leaders in Europe. Some notable QIS companies operating in Europe include:

• IQM
• Cambridge Quantum Computing
• ArQit
• Planqc
• ORCA Computing
• Nanoco
• Riverlane
• Pasqal
• QDI Systems

In Asia, a majority of the QIS activity is in Australia, China, and Japan, and is focused on information technology applications. 

Notable QIS companies in the region include:

• Zhejiang Quantum Technologies
• Mesolight
• QD Laser
• Hengtong Optic-Electric Co.
• ClassiQ
• Nanofiber Quantum Technologies
• HYQ
• Q-Ctrl
• Quantum Machines

Download the full report for additional information on local and global trends in quantum computing, its market share, and growth potential. This report was supported by a U.S. Economic Development Administration grant administered by the Washington State Department of Commerce.