The state of quantum computing: Strong funding yet not enough talents

Quantum technologies have the capacity to solve some of the world's most difficult problems, such as curbing global warming and offering game-changing reductions in drug discovery timeframes.

Quantum computing is receiving increasing amounts of public and private financing in an effort to make the technology live up to its potential. Pharmaceuticals, chemicals, automotive, and finance are on track to be the first industries to profit from quantum advantages, with a potential value of roughly $700 billion as early as 2035.

With such rapid growth, however, the demand for specialists with advanced degrees in the subject is exceeding available talent. According to research, there should be more focus on upskilling undergraduates with relevant quantum technology experience.

Funding for startups doubled

According to a McKinsey report, funding for startups specializing in quantum technology increased significantly between 2020 and 2021, rising from $700 million to $1.4 billion.

The second half of 2021 saw an increase in the proportion of quantum investments coming from venture and other private capital firms, which currently account for more than 70% of investments (up from 50% in September 2021), indicating rising confidence that the technology will generate profits.

The majority of these private investments (49 percent) are still made in US-based businesses, followed by those in the UK (17 percent) and Canada (14 percent). Only 6% of private investments in the sector have been made in China thus far. With the additional $1.9 billion in global public financing revealed in the second half of 2021, there has now been around $31 billion disclosed in total funding for quantum technologies since 2001.

Quantum computing, one of the three primary fields of quantum technologies, continues to draw the most investment, with $3 billion raised by the end of 2021. This is not surprising given that it represents the largest potential market, with a projected annual revenue of over $90 billion by 2040.

In the second half of 2021, investment in quantum sensing and quantum communications increased, reaching totals of $400 million and $700 million, respectively (up from $300 million and $600 million in the previous six months). Although the US government is more willing than private investors to contribute financially to these projects, more than half of US public funding is allocated to quantum computing, with the remaining funds going to a combination of quantum sensing and communications.

More startups, less momentum

In the second half of 2021, a substantial number of new quantum computing startups were formed, with an additional 15 new companies entering the field. Also, the first public offering of a quantum computing startup made history. Tech industry leaders also kept improving their relationships in this field to deliver complete solutions to the market. One major player in technology, for instance, collaborated with a developer of quantum computing software to provide integrated hardware and software solutions.

However, if we go back to three years ago, we can see that companies developing quantum technology are beginning to decline worldwide. There are several causes for this. The hardware market has become saturated, helped by around 65 percent of quantum investments, boosting the entry barrier for newcomers. The potential for emerging software players is constrained by the fact that hardware still needs to be revised to support many use cases, notwithstanding the degree of investment. Investor preferences for larger, more established startups might further slow things down. A 90 percent focus on Series A, B, C, and D companies limits the amount of capital accessible for newly founded organizations. Another factor can be a lack of talent.

China drives the industry

The development of quantum technologies is largely driven by activities in China, where substantial government investment has accelerated the rapid advancement of quantum technologies and science. China has promised the greatest public support to date for quantum technology as part of its 14th five-year plan (2021-2025), more than double the expenditures made by EU governments ($15.3 billion compared to $7.2 billion) and eight times more than those made by the US government.

As a result, China has established 12 quantum technology research institutes and the nation's first doctoral program, fostering an environment encouraging quick progress. China has more than half of all quantum technology patents, compared to roughly 11% for the European Union and 10% of the United States.

Upskilling experts

The need for specialists in the industry grows along with the ecosystem of quantum technology players. There is a substantial talent gap nowadays. When active job advertising for quantum computing specialists was compared to the number of graduates prepared to fill these positions each year, demand was three times more than supply.

This gap could potentially be closed through the continued growth of master's degree programs to upskill undergraduates. Only 29 of the 176 universities in the world provide master's degrees in quantum technologies, despite the fact that there are many institutions with research programs focused on these technologies. Forty-one percent of these programs are located in the United States.