Europe threatens to fall behind in quantum computer race

Quantum computing could create up to $850 billion in value worldwide over the next 15-30 years — but Europe is in danger of falling behind the US and China, a new report from Boston Consulting Group warns.

That’s a major concern, because according to BCG’s CEO and senior partner François Candelon, quantum is the most important next technology revolution – and falling behind in the quantum race could fall behind in many other areas as well.

“It is a huge enabler for all other eelements,” he says. “Take AI, machine learning, drug discovery, pricing in financial markets – these will all be opened by quantum.”

Quantum will also play an increasingly important role in cybersecurity in the coming years, making quantum capabilities also strategically important for European governments.

Investments are on the rise

The past two years have seen a major leap forward in global investment in quantum. In 2021, equity investment in quantum computing startups increased 8x compared to 2019.

That means a wave of quantum startups will hit the market over 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 where quantum moves from R&D to adoption,” Candelon says. “This decade will be absolutely crucial for governments and the issue of sovereignty will be very important during this period.”

Advances in quantum cryptography pose a potential risk to defense, utilities and banking systems that rely on traditional encryption – and will leave businesses, governments and countries cyber-vulnerable.

Technological sovereignty featured prominently in the inaugural address of European Commission President Ursula von der Leyen in 2019 amid growing concerns about the power and ubiquity of US big tech, the role of Chinese technology and investment in strategic domains abroad, and the data practices and intentions of both. This sentiment has only grown in political currency since the start of the pandemic and the ongoing supply chain problems it brought with it.

Why is Europe lagging behind?

The US is the clear frontrunner in the quantum race, according to the BCG report. But the EU, China and the UK still have the potential to play a leading role, it suggests.

In Europe, public support for quantum is high. Its investment levels (considered aggregated) are twice that of the US and can credibly compete with China. In 2018, the EU launched the Quantum Flagship Fund, a research commitment of €1 billion for 10 years.

Europe’s talent pool is also strong and the region remains dominant in academic output in the field.

However, the European private investment landscape is weaker compared to the US, both when it comes to start-ups and incumbents.

European countries also need to work together to make progress in quantum, Candelon says — and they’re not currently doing that. “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 may not have enough for a real network.

“Or take France and Germany. France’s plans are very much focused on investing in the technologies, while Germany’s plans are more practical and focused on the use cases – but there is no link to bring them together.”

Four key recommendations

Candelon has four central recommendations for Europe to ensure that quantum startups can get off the ground and scale on their own.

First, he argues that the EU should be more involved in linking national initiatives and coordinating efforts across the region.

Second, defense, military and intelligence players need to be involved much more centrally in quantum efforts. “It’s hard to do” [in Europe] right now, but we need to involve military and defense players in civilian quantum initiatives. You’ve seen this in the UK, US and Australia, for example, where the recent AUKUS pact makes explicit mention of quantum cooperation,” he says, referring to the trilateral security pact on shared nuclear submarine technology announced at the end of 2021.

“It’s very hard to understand why […] 25% of European quantum investment goes to US companies”

Third, Europe needs to match supply and demand and actively encourage private companies to adopt quantum early on. Some companies are leading the way: banking group Credit Agricole has partnered with quantum technology 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 partners with QC Beware of algorithms for optimizing flight paths, but Candelon says these are fairly isolated examples.

“We need to find funding mechanisms or ways to incentivize traditional businesses to consume quantum and thus allow the local innovation ecosystem to thrive,” he says.

Finally, Europe needs to massively scale the amount of private investment going into European quantum startups. The EU could, says Candelon, set up a dedicated fund for quantum, as well as for semiconductor chip technologies. “It is very difficult to understand why Europe receives only 2% of US private investment in quantum, but 25% of European quantum investment goes to US companies.”

“We have created policies that restrict foreign investment,” he says, citing examples such as screening of foreign direct investment, “but it negatively impacts our ecosystem.”

Europe has a well-known deeptech scaling problem — and make sure that quantum startups don’t all suffer, Candelon says. “We need to ensure that the Quantum Flagship is not only focused on research grants and pilots, but also on funding for scale-up.”

Thomas Brown writes about business innovation for Sifted and tweets @ThinkStuff

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