A quantum wake-up call for European CEOs

Quantum computing could significantly reshape key industries in Europe. The region’s executives and entrepreneurs should act now to harness its potential.

Several recent breakthroughs in research on quantum computing and its industrial applications have reinforced its tremendous potential. The demonstration of large-scale quantum computers, 1 research on noise-free quantum computation, 2 and the implementation of commercial quantum computers are just a few examples that highlight exciting possibilities.

Despite the uncertainty of the timetable and the path forward, companies are salivating at the massive market opportunity that could be unlocked. For example, charge-transport modeling in the battery-technology business could be worth at least $5 billion yearly. Big pharma could apply quantum computing to protein structure and interactions, an opportunity worth $200 billion. Telecoms could use it to optimize their capital spending, worth a potential $50 billion to $70 billion. These applications are just a small sample of the value at stake.

In the wake of the COVID-19 crisis, Europe has made a significant push on investments in quantum computing, with Germany alone confirming €2 billion of funding. 3 In the race to commercialization, however, Europe trails the United States and China, in part because of its significantly weaker coordination between research, start-ups, venture capital, and leading industries. To pursue this unique opportunity while avoiding long-term business implications in several core industries, European executives need to ensure their efforts are better integrated with ongoing initiatives in the public sector, develop a sufficient talent pipeline, and build partnerships.

An increase in investment and research

Activity and interest in quantum computing have been on the rise. The impact of unlimited computer power, for example, has been heralded by both technology giants and the media, leading to a growing thirst for information on progress. Interest varies considerably by region, however, with China recording the greatest number of internet searches for the term.

Several metrics illustrate this spike. Over the past decade, Europe has been the leader in research on quantum computing as measured by the number of publications, outpacing the United States and other countries by a wide margin (Exhibit 1).

Europe leads other regions in research contributions to quantum computing since 2010.
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A similar picture evolves in public funding for quantum computing, where total European investment amounts to around $7.6 billion (Exhibit 2), substantially ahead of the United States ($2.2 billion) and China ($2.5 billion).

Europe leads in public investment in quantum computing since 2010.
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However, a different picture emerges in viewing the commercialization of research as measured by number of patents (Exhibit 3). The Chinese government provides funding to major scientific institutions through state-controlled sources to commercialize quantum computing, and the country’s patents exceed those of the United States. The United Kingdom is the only single European country within the top seven issuers of patents in quantum computing, but the European Union’s combined total of member-nation patents would make it third in the overall ranking.

Patent-family activity grew rapidly from 2010–20.
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While China and the United States have built large-scale centers of excellence, research activity in Europe typically occurs in numerous smaller centers. This diffusion has made it more difficult to attract industry attention and facilitate collaboration. Governments and public-sector institutions have started to act—for example, by making significant investments in initiatives such as the Munich Quantum Valley, which should drive consolidation in the coming years.

A similar picture emerges when considering the amount of private-sector funding along with the number of start-ups. While private-equity (PE) firms have invested about $1 billion in quantum-computing start-ups across the United States and Canada, European PE investments have stagnated at $265 million (Exhibit 4).

Europe trails the United States and Canada in private funding and number of start-ups in quantum computing since 2010.
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Newly funded start-ups in the United States total 60 since 2017, in Europe approximately 30. This shortfall is another symptom of the apparent inability of EU organizations to translate foundational research into commercial applications. Europe needs to focus much more on the connection between foundational research and commercial success. Indeed, its entrepreneurs and industry leaders have a significant opportunity to harness and profit from foundational research.

A threat and an opportunity for Europe’s core industries

Europe’s struggle to translate basic research into industrial and commercial applications could have long-term implications: the industries that could be most disrupted by quantum computing—finance, global energy and materials (GEM), and advanced industries—are at the core of the region’s economic success. On the other hand, they are also the industries that could benefit most from even early use cases of quantum computing.

In finance, quantum computers could potentially breach all classical security protocols and encryption mechanisms. For GEM and advanced industries, the advent of quantum simulations of new materials and chemical compounds would make traditional chemical and clinical tests obsolete.

While the possible size of the market opportunity is massive, even taking initial use cases into account, the magnitude and timing of the threat is not easy to quantify. Only about 10 percent of the major PE investments in quantum-computing companies have a physically viable solution. And, according to many scientists, in most cases the timeline for solutions to become physically viable might be very long, as one needs a scalable quantum computer, which could take ten or 20 years.

How Europe can build on its advantages

There is a high probability that the commercial offerings in Europe’s core industries will come from China or the United States. However, European CEOs, in principle, have much greater access to talent in the quantum-physics field. In 2019, for example, Germany awarded the same number of PhDs in physics—about 1,800—as the United States. In many cases, talent is just waiting to be engaged.

Much work remains to be done before quantum computing becomes widely available. Still, these trends should be a wake-up call to European senior management in finance, GEM, and advanced industries. Given the increase in publications, advanced institutions, and public funding, Europe’s entrepreneurs and industry leaders alike have a unique opportunity to take action.

There are several areas where CEOs can act:

  • Do a complete review and assessment of the following:
    • Ongoing initiatives. Many institutions have started initiatives, but they do not have senior-management attention at this stage.
    • Current trends. Conduct workshops with both academic and business experts on current key trends for your industry.
    • Investment opportunities. There is a wide variety of activities within the quantum space, and prioritizing opportunities based on a detailed analysis of trends is crucial to avoid investing in an area that is already overcrowded or not viable. The actual feasibility of quantum computing at scale and its commercial application still need be proven, even for those companies that have already received funding.
    • Existing talent. Most companies are unaware of the existing talent available within their organization in the quantum-computing space.
  • Integrate the ongoing public-investment initiatives—for example, the European research flagship initiative, which has ongoing R&D efforts at universities to align with and foster the commercialization of basic research.
  • Hire quantum-computing experts and teams within industries to define use cases that solve a specific business problem for individual companies and ensure existing talent is used more wisely.
  • Establish partnerships with universities that have quantum-computing or physics programs to develop a talent pipeline. For instance, the Max Planck Institute of Quantum Optics has a partnership with Harvard University’s Department of Physics. 4 Companies could also form coalitions with smaller research centers across Europe to learn from them and to garner industry attention.

Overall, while Europe has a strong foundation in quantum-computing research, it is currently lagging behind leading countries in commercialization. Governments and public institutions in Europe have made significant investments during the past several years; now industry leaders and entrepreneurs must look to harness the benefits from commercializing quantum-computing applications. The region is well equipped to scale its efforts, as the pool of talent is deep and important foundational research is currently being conducted. It also has every reason to proceed aggressively, since its core industries will be strongly affected. Quantum computing can be turned from a risk to a real opportunity for key European industries if CEOs are proactive and prepare for the commercialization of this powerful technology now.

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