Quantum computing could create up to $850bn of value globally over the next 15-30 years — but Europe is in danger of falling behind the US and China, warns a new report from Boston Consulting Group.
That’s a big worry because quantum is, according to BCG’s managing director and senior partner François Candelon, the most important next tech revolution — and dropping behind in the quantum race could mean dropping behind in many other areas too.
“It’s a massive enabler for all the other elements,” he says. “You take AI, machine learning, drug discovery, pricing in financial markets — these will all be opened up by quantum.”
Quantum will also play an increasingly big role in cybersecurity in the years to come — making quantum capability strategically important for European governments too.
Investments are on the up
The past two years have seen a big step up in global investment in quantum. In 2021, equity investment into quantum computing startups increased 8x in comparison to 2019.
That means a wave of quantum startups will be heading to market in the next decade, making now the time to strike if European governments want to avoid becoming dependent on quantum innovation from the US and China.
“2025 to 2035 will be the decade of quantum moving from R&D to adoption,” says Candelon. “This decade will be absolutely critical for governments and the issue of sovereignty will be very important during this period.”
Advances in quantum cryptography pose a potential risk to defence, utilities and banking systems which are reliant on traditional encryption — and stand to make companies, governments and nations cyber-vulnerable.
Technological sovereignty was prominent in European Commission president Ursula von der Leyen’s 2019 inaugural address, amid growing concern about the power and pervasiveness of US big tech, the role of Chinese tech and investments in strategic domains overseas, and the data practices and intentions of both. This sentiment has only gained in political currency since the onset of the pandemic and the continuing supply chain issues it brought about.
Why is Europe falling behind?
The US is the clear frontrunner in the quantum race, according to the BCG report. But the EU, China and the UK do still have the opportunity to play a leadership role, it suggests.
In Europe, public support for quantum is strong. Investment levels (when looked at on aggregate) are twice that of the US and can credibly rival China. In 2018, the EU launched the Quantum Flagship fund, a 10-year €1bn research commitment.
Europe’s talent pool is also strong and the region remains dominant in academic output in the field.
However, Europe’s private investment landscape is weaker compared to the US, when it comes to both startups and established companies.
European countries also need to come together to advance in quantum, says Candelon — and they’re not currently doing so. “Europe is an illusion; there is limited coordination between countries.”
“We have France and the Netherlands trying to build quantum networks [in isolation], and therefore we might not have enough for a real network.
“Or take France and Germany. France’s plans are very focused on investing in the technologies, whereas Germany’s plans are more practical and focused on the use cases — but there is no connection to bring these together.”
Four key recommendations
Candelon has four central recommendations for Europe to ensure that quantum startups can get off the ground and scale up on home turf.
First, he argues that the EU needs to get more involved in connecting the dots between national initiatives and coordinating efforts across the region.
Second, defence, military and intelligence players need to become much more centrally involved in quantum efforts. “It’s difficult to do [in Europe] at the moment, but we need to involve military and defence players in civil quantum initiatives. You’ve seen this in the UK, US and Australia, for example, where the recent AUKUS pact explicitly mentions quantum collaboration,” he says, referring to the trilateral security pact centred around shared nuclear submarine technology announced in late 2021.
It’s very difficult to understand why [...] 25% of European quantum investment is going to US companies
Third, Europe needs to connect supply and demand, and actively encourage private companies’ early adoption of quantum. Some companies have got ahead of the curve — banking group Credit Agricole has a partnership with quantum tech firms Pasqal and Multiverse Computing to apply quantum computing to real-world financial use cases in capital markets and risk management, and airframe manufacturer Airbus is working with QC Ware on flight path optimisation algorithms — but Candelon says these are fairly isolated examples.
“We need to find financing mechanisms or ways to incentivise traditional companies to consume quantum and therefore help the local innovation ecosystem to blossom,” he says.
Finally, Europe needs to massively scale up the amount of private investment heading towards European quantum startups. The EU could, Candelon argues, set up a specific fund for quantum, as it has for semiconductor chips technologies. “It’s very difficult to understand why Europe is receiving just 2% of US private investment in quantum, but 25% of European quantum investment is going to US companies."
“We created policies restricting foreign investment,” he says, referring to examples such as foreign direct investment screening, “but it’s having a negative impact on our ecosystem.”
Europe has a well-known deeptech scaling problem — and needs to ensure that quantum startups don’t all suffer as a result, says Candelon. “We have to make sure the Quantum Flagship is not only focused on research grants and pilots, but also funding for scale up.”