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Quantum technologies have the potential to solve some of the most intractable global challenges, from limiting global warming to delivering game-changing reductions in drug discovery times.
Our latest Quantum Technology Monitor finds public and private funding continues to soar, with the goal of enabling the technology to realize its promise. Four industries—pharmaceuticals, chemicals, automotive, and finance—remain on track to become the first beneficiaries of quantum advantages, with the potential to capture nearly $700 billion in value as early as 2035. Our analysis points to financial services and life sciences grounds for the highest-value quantum computinguse cases over the longer term (Exhibit 1).
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However, with this fast-paced growth, demand for experts with advanced degrees in the field is outpacing available talent. Our research suggests greater emphasis is necessary to upskill undergraduates with relevant quantum technology experience.
Our most recent analysis of this technology’s evolution reveals the latest funding developments and the nature and cause of the talent gap. It also offers a closer look at the significant scientific progress taking place in China.
Funding for quantum start-ups doubled in 2021
Our research finds that funding of start-ups focused on quantum technologies more than doubled—from $700 million in 2020 to $1.4 billion in 2021 (Exhibit 2).
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The share of investments in quantum coming from venture-capital and other private-capital entities increased in the second half of 2021 and now account for more than 70 percent of investments (up from 50 percent in September 2021), suggesting growing confidence that the technology will provide returns.
Globally, the greatest share of these private investments (49 percent) is still in companies in the United States, followed by those in the United Kingdom (17 percent) and Canada (14 percent). Only about 6 percent of private investments in the field to date are in China. With the additional $1.9 billion in global public funding announced in the second half of 2021, the total announced funding for quantum technologies overall since 2001 now sits at about $31 billion.
About the Quantum Technology Monitor
Updated every six months, the Quantum Technology Monitor tracks the development of quantum technologies, players, and industry adoption globally to help leaders stay informed as this disruptive and dynamic technology makes its way from lab to real-world applications.
Our research covers the three main areas of quantum technologies: 1) quantum computing, a new technology for computation that delivers exponentially faster systems and will potentially enable new territories of computing; 2) quantum sensing, a new generation of sensors built from quantum systems; and 3) quantum communications, which will enable the secure transfer of quantum communications across space. It is based on McKinsey research from various data sources, including publicly available data sources, expert interviews, and McKinsey analysis. This research does not provide a definitive or exhaustive list of start-up and funding activities, as not all deal values are publicly disclosed. Minor data deviations may exist due to updates of the respective databases.
Of the three main areas of quantum technologies, quantum computing continues to attract the most investment, with $3 billion raised by the end of 2021, which makes sense given it also represents the largest potential market, estimated to be upward of $90 billion annually by 2040 (see sidebar, “About the Quantum Technology Monitor,” for an overview of the three areas).
Quantum sensing and quantum communications both experienced increased investment activity in the second half of 2021, reaching totals of $400 million and $700 million in total investment, respectively (compared to $300 million and $600 million in the prior six-month period). We find that in the United States, the government is more willing than private investors to fund efforts in these areas, but still more than half of US public funding is dedicated to quantum computing, with the remainder going to quantum sensing and communications together.
More start-ups founded, but momentum slowing
In the second half of 2021, we saw a significant number of new quantum computing start-ups founded, with an additional 15 new companies entering the field. One quantum computing start-up made history as the first to go public. Tech incumbents also continued to ramp up partnerships in this area to bring end-to-end solutions to the marketplace. One global technology leader, for example, joined forces with a quantum computing software provider to develop integrated hardware and software solutions.
However, looking back further, to three years ago, our research finds that the rate of new quantum technology start-ups coming to market globally may be starting to slow (Exhibit 3). We believe the reasons for this are varied. Buoyed by about 65 percent of quantum investments, the hardware market has become saturated, raising the bar for entry for newcomers. Despite the level of investment, hardware remains too immature to enable a significant number of use cases, limiting the opportunities for fledgling software players. Investor preferences in more established start-ups may be further tamping down activity. Most of the funding (90 percent) is directed to Series A, B, C, and D companies, limiting available capital for companies just starting out. Lack of talent may also play a role.
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Public funding in China accelerates quantum technology activity
One new addition to our research has been a deeper look at China, where significant government funding has helped accelerate scientific progress and the development of quantum technologies. As part of its 14th five-year plan for quantum technology (2021–2025), China has announced the most public funding to date of any country, more than double the investments by EU governments ($15.3 billion compared to $7.2 billion) and eight times more than US government investments (Exhibit 4).
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This has spurred the development of a dozen Chinese research institutes for quantum technologies along with the country’s first doctoral program in quantum technologies, creating a culture conducive to rapid advances. Today China holds more than half of the patents in quantum technologies, compared to about 11 percent by the European Union and 10 percent by the United States (Exhibit 5).
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The rise of quantum computing
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Greater emphasis on upskilling experts is needed
As the ecosystem of quantum technology players expands, so too does the demand for experts in the field. Our research finds a significant talent gap has evolved. When we compared active job postings for quantum computing experts to the number of graduates ready to fill these positions each year, demand outpaced the number of graduates by three times (Exhibit 6).
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One way to potentially close this gap is through further development of master’s degree programs to upskill undergraduates. While there are a significant number of universities with research programs dedicated to quantum technologies, relatively few worldwide (only 29 of the 176 universities) offer master’s degrees in quantum technologies. Almost half of these programs (41 percent) are in the United States.
For more data, download the full report.
Mateusz Masiowski is a capabilities and insights specialist in McKinsey’s Wroclaw office, Niko Mohr is a partner in the Düsseldorf office, Henning Soller is a partner in the Frankfurt office, and Matija Zesko is a capabilities and insights specialist in the Zurich office.
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