Every country is vying to get a head start in the race to the worlds quantum future. A year ago, the United States, the United Kingdom, and Australia teamed up todevelopmilitary applications of digital technologies, especially quantum computing technologies. That followed the passage in 2019 of the National Quantum Initiative Act by the U.S. Congress, which laid out the countrys plans to rapidly create quantum computing capabilities.
Earlier, Europe launched a $1 billion quantum computing research project, Quantum Flagship, in 2016, and its member states have started building a quantum communications infrastructure that will be operational by 2027. In like vein, Chinas 14th Five Year Plan (2021-2025) prioritizes the development of quantum computing and communications by 2030. In all, between 2019 and 2021 China invested as much as $11 billion, Europe had spent $5 billion, the U.S. $3 billion, and the U.K. around $1.8 billion between to become tomorrows quantum superpowers.
As the scientific development of quantum technologies gathers momentum, creating quantum computers has turned into apriority for nations that wish to gain the next competitive advantage in the Digital Age. Theyre seeking this edge for two very different reasons. On the one hand,quantum technologies will likely transform almost every industry, from automotive and aerospace to finance and pharmaceuticals. These systems could create fresh value of between $450 billion and $850 billion over the next 15 to 30 years, according to recentBCG estimates.
On the other hand, quantum computing systems will pose a significant threat to cybersecurity the world over, as we argued in an earliercolumn.Hackers will be able to use them to decipher the public keys generated by the RSA cryptosystem, and to break through the security of any conventionally-encrypted device, system, or network. It will pose a potent cyber-threat, popularly called Y2Q (Years to Quantum), toindividuals and institutions as well as corporations and country governments. The latter have no choice but to tacklethe unprecedented challenge by developing countermeasures such as post-quantum cryptography, which will itself require the use of quantum systems.
Countries have learned the hard way since the Industrial Revolution that general-purpose technologies, such as quantum computing, are critical for competitiveness. Consider, for instance, semiconductor manufacturing, which the U.S., China, South Korea, and Taiwan have dominated in recent times. When the COVID-19 pandemic and other factors led to a sudden fall in production over the last two years, it resulted in production stoppages andprice increases in over 150 industries, including automobiles, computers, and telecommunications hardware. Many countries, among the members of theEuropean Union, Brazil, India, Turkey, and even the U.S., were hit hard, and are now trying to rebuild their semiconductorsupply chains. Similarly,China manufacturesmost of the worlds electric batteries, with the U.S. contributingonly about 7% of global output. Thats why the U.S. has recently announcedfinancial incentivesto induce business to create more electric battery-manufacturing capacity at home.
Much worse could be in store if countries and companies dont focus on increasing their quantum sovereignty right away. Because the development and deploymentof such systems requires the efforts of the public and private sectors, its important for governments to compare their efforts on both fronts with those of other countries.
The U.S. is expected to be the global frontrunnerin quantum computing, relying on its tech giants, such as IBM and Google, to invent quantum systems as well as numerous start-ups that are developing software applications. The latter attract almost 50% of the investments in quantum computing by venture capital and private equity funds, according toBCG estimates. Although the U.S. government has allocated only $1.1 billion, it has created mechanisms that effectively coordinate the efforts of all its agencies such as the NIST, DARPA, NASA, and NQI.
Breathing down the U.S.s neck: China, whose government has spent more on developing quantum systems than any other. . Those investments have boosted academic research, with China producing over 10% of the worlds research in 2021, according toour estimatessecond only to the U.S. The spillover effects are evident: Less than a year after Googles quantum machine had solved in minutes a calculation that would have taken supercomputers thousands of years to unravel, the University of Science and Technology of China (USTC) had cracked a problem three times tougher. As of September 2021, China hadnt spawned as many startups as the U.S., but it was relying on its digital giants such as Alibaba, Baidu, and Tencent to develop quantum applications.
Trailing only the U.S. and China, the European Unionsquantum computing efforts are driven by its member states as well as the union. The EUsQuantum Flagshipprogram coordinates research projects across the continent, but those efforts arent entirely aligned yet. Several important efforts, such as those ofFranceandGermany,run the risk of duplication or dont exploit synergies adequately. While the EU has spawned several startups that are working on different levels of the technology stacksuch as FinlandsIQM and FrancesPasqalmany seem unlikely to scale because of the shortage of late-stage funding. In fact, the EUs startups have attracted only about one-seventh as much funding as their American peers,according toBCG estimates.
Finally, the U.K. was one of the firstcountries in the world to launch a government-funded quantum computing program. Its counting on itseducational policiesand universities;scholarships for postgraduate degrees; and centers for doctoral training to get ahead. Like the EU, the U.K. also has spawned promising start-ups such asOrca,which announced the worlds smallest quantum computer last year. However, British start-ups may not be able to find sufficient capital to scale, and many are likely to be acquired by the U.S.s digital giants.
Other countries, such as Australia, Canada, Israel, Japan, and Russia are also in the quantum computing race, and could carve out roles for themselves. For instance, Canada is home to several promising startups, such asD-Wave, a leader in annealing computers; whileJapanis using public funds to develop a homegrown quantum computer by March 2023. (For an analysis of the comparative standings and challenges that countries face in quantum computing, please see the recentBCG report.)
Meanwhile, the locus of the quantum computing industry is shifting to 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 its too late. Governments must use four levers in concert to accelerate their quantum sovereignty:
* Lay the foundations.Governments have to invest more than they currently do if they wish to develop quantum systems over time, even as they strike partnerships to bring home the technology in the short run. Once they have secured the hardware, states must create shared infrastructure to scale the industry. The Netherlands, for instance, has set upQuantum Inspire, a platform that provides users with the hardware to perform quantum computations.
* Coordinate the stakeholders.Governments should use funding and influence to coordinate the work of public and private players, as theU.S. Quantum Coordination Office, for instance,does. In addition, policymakers must connect stakeholders to support the technologys development. Thats how the U.S. Department of Energy, for instance, came to partner with the University of Chicago; together, theyve set up anacceleratorto connect startups with investors and scientific experts.
* Facilitate the transition. Governments must support businesss transition to the quantum economy. They should offer monetary incentivessuch as tax credits, infrastructure assistance, no- or low-interest financing, and free landso incumbents will shift to quantum technologies quickly. TheU.K., for instance, hasrecently expanded its R&D tax relief scheme to cover investments in quantum technologies.
* Develop the business talent.Instead of developing only academics and scientists, government policies will have to catalyze the creation of a new breed of entrepreneurial and executive talent that can fill key roles in quantum businesses. To speed up the process, Switzerland, for instance, has helped create amasters programrather than offering only doctoral programs on the subject.
Not all general-purpose technologies affect a countrys security and sovereignty as quantum computing does, but theyre all critical for competitiveness. While many countries talk about developing quantum capabilities, their efforts havent translated into major advances, as in the U.S. and China. Its time every government remembered that if it loses the quantum computing race, its technological independence will erodeand, unlike with Schrdingers cat, theres no doubt that its global competitiveness will atrophy.
ReadotherFortunecolumns by Franois Candelon.
Franois Candelonisa managing director and senior partner at BCG and global director of the BCG Henderson Institute.
Maxime Courtauxis a project leader at BCG and ambassador at the BCG Henderson Institute.
Gabriel Nahasis a data senior scientist at BCG Gamma and ambassador at the BCG Henderson Institute.
Jean-Franois Bobier is a partner & director at BCG.
Some companies featured in this column are past or current clients of BCG.
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The U.S., China, and Europe are ramping up a quantum computing arms race. Heres what theyll need to do to win - Fortune