Steady progress closer to quantum advantage

A year of strong funding This, coupled with a solid fundamental foundation and significant technological advancements, reflects the strong momentum of quantum technology (QT).

McKinsey’s third annual updated analysis Quantum Technology MonitorRevealed that four industries—chemistry, life sciences, finance, and transportation—could be among the first to be impacted by quantum computing, with potential gains of up to $2 trillion by 2035 (see sidebar What is Quantum Technology?).

However, private and corporate funding to quantum technology startups in pursuit of this value has declined significantly. The amount of investment fell by 27% compared with the previous year, with investment in quantum sensing start-ups experiencing the largest decline. However, this decline was smaller than the 38% decline in investment in all new ventures globally. Notably, the majority of funding (62%) went to companies founded five or more years ago, reflecting a shift in investment toward more mature and promising new ventures with a focus on scaling.

Compared with the private sector, public investment grew by more than 50% in 2022, accounting for almost one-third of all investment in quantum technologies. A series of countries, led by Germany, the UK and South Korea, have announced significant new funding for QT development, bringing the total global public funding to date to approximately $42 billion.

The QT Foundation’s continued strong growth underscores this momentum. There has been a wave of new or enhanced products (e.g., startups offering quantum computing via the cloud) and significant technological advances, particularly in quantum error correction and mitigation, as well as a small increase in the number of patents filed. Furthermore, we see a significant increase in quantum technology courses offered by universities, with the EU leading in the number of graduates in QT-related fields.

In this article, we discuss these and other findings in more detail (see sidebar for more information about the study) Quantum Technology Monitor Research).

Private investment declines while public investment surges, with focus on scaling established new ventures

QT startups received $1.71 billion in investment in 2023, down 27% from the all-time high of $2.35 billion in 2022 (Exhibit 1). Still, the drop is small compared with the 38% drop for all new startups globally. The number of new QT startups established continues to slow down (13 in 2023, 23 in 2022). Deal sizes have also declined, with the average deal size in 2023 being $40 million, compared with $105 million in 2022 and $107 million in 2021. 171 pens.

There are many factors contributing to the decline in private investment in QT, including a shift in focus toward generative artificial intelligence and a lingering perception that QT is a long-term technology whose potential in various fields is still being understood and evaluated.

On the other hand, public funding for quantum technologies is up more than 50% compared to 2022. There is growing recognition of the importance of QT among wider governments; funding levels have increased significantly in South Korea and the UK in particular (Exhibit 2).

Most of these national initiatives are aimed at establishing technological leadership and sovereignty and stimulating private investment in the development of quantum technologies. For example, the goals of the UK National Quantum Strategy include providing $3.1 billion in public funding over ten years not only to make the UK a leading quantum economy, but also to create $1.3 billion in private investment in the quantum sector.

Where did the funds go? The vast majority of investment is in U.S. companies (more than twice as much as in the second country), followed by companies in Canada and the United Kingdom. Most venture capital funds are used to scale existing new ventures, with more than 75% of total investment dollars being used for Series B or follow-on financing rounds. This suggests that a more mature technology platform will be established for quantum computing and indicates an underlying risk aversion among investors towards early-stage startups and unproven technologies or methods, which also partly explains the comparison with 2022 , the number of new start-ups fell by 43%.

As quantum talent grows, countries need to focus on broad collaboration to build robust capabilities

Talent development has taken a significant step forward in 2023, reflecting the active focus on QT infrastructure. In 2023, 367,000 people will graduate with a QT-related degree. At the same time, the number of universities offering QT courses increased by 8.3% to 195, while the number of universities offering QT master’s degrees increased by 10.0% to 55. . This surge helps explain why scientists from EU institutions most often contribute to quantum-related publications.

Leveraging this talent and these investments to create value remains a challenge due to limited access to state-of-the-art hardware and infrastructure, limited awareness and adoption of quantum technologies, and a lack of interdisciplinary coordination (e.g., among academia) . and industry) needed to bring technology to market. Collaboration between industry, academia, and government is critical to accelerating the development of quantum technologies, industrializing technologies, managing intellectual property rights, and overcoming talent gaps.

To solve this problem, innovation clusters are emerging around the world. These clusters are coordinated networks of partnerships among researchers, industry leaders, and government entities that contribute to the technological advancement of quantum technologies and drive regional value creation (Exhibit 3).

Most clusters share the following elements:

• Academic Center. Large academic institutions offer vibrant research ecosystems and talent, as well as access to the latest scientific breakthroughs.
• governmental support. Government support for innovation clusters comes in the form of public funding to support technology development by institutions and new startups, as well as funding for national research center infrastructure, such as national laboratories, dedicated facilities and quantum technology development capabilities.
• Start a business. New start-ups are often spun out from the academic community but retain links to the academic community and leverage infrastructure within the research institution. Startups can also significantly benefit from mentorship (e.g., through accelerators and technology transfer organizations) to develop and commercialize innovations.
• Industrial Partnerships. Local companies or large corporate entities interested in applying quantum technologies provide researchers with funding or dedicated infrastructure.

The development and expansion of such regional innovation ecosystems, including research alliances, will be a decisive factor in achieving widespread adoption and commercialization of quantum technologies.

Technological breakthroughs, particularly in fault-tolerant quantum computing, reflect meaningful progress

The past year has marked continued advancements in all quantum technologies, with a range of enhanced and new QT products coming to market. One such advancement is the transition from the NISQ era to the FTQC era. Other key breakthroughs include:

• Quantum computing. Quantum error correction proposals and demonstrations by major companies show promise toward large-scale, fault-tolerant quantum computing. By combining new error correction schemes and breakthrough logical qubit architecture, qubit fidelity has reached a record high of 99.5% (QuEra, MIT and Harvard) and recently reached 99.9% (Microsoft and Quantinuum). Shifting the focus from pure hardware to software and architecture-based error mitigation and correction schemes promises to significantly reduce hardware overhead (e.g., physical qubit count per logical qubit) and accelerate the emergence of universal fault-tolerant quantum computers. surface.
• Quantum sensing. Researchers are developing improved techniques to control solid-state spin ensembles for a range of sensing applications. For example, MIT researchers have developed a new technique that could significantly increase the sensitivity of quantum sensing devices. Quantum sensing technology’s capabilities in monitoring, imaging, navigation and identification will have a significant impact, both on its own and as an enabler of processes. Our analysis shows that private sectors such as oil and gas, automotive and assembly, aerospace and defense, medical technology, media and entertainment, and the public sector are likely to experience the disruptive impact of quantum sensing after 2030.
• Quantum communication. Researchers are improving the performance of quantum key distribution, using innovative techniques to demonstrate longer transmission distances and higher data rates. Both China and Russia have successfully tested the longest quantum communication distance, with a distance of more than 3,800 kilometers. Researchers are also developing quantum memory platforms using trapped ions, rare earth ions and atomic vapors, and they are using trapped ions to demonstrate quantum repeaters operating at telecommunications wavelengths.

For complete insights and data, download the entire Quantum Technology Monitor.