Steady progress in approaching

the quantum advantage

Quantum technology could create value worth trillions of dollars within the next
decade. The third annual Quantum Technology Monitor synthesizes the latest
opportunities in this burgeoning field.

This report is a collaborative effort by Michael Bogobowicz, Kamalika Dutta, Martina Gschwendtner, Anna Heid,
Mena Issler, Niko Mohr, Henning Soller, Rodney Zemmel, and Alex Zhang, representing views from McKinsey Digital.

© Getty Images

April 2024
 A year of strong funding coupled with sturdy years ago, reflecting a shift in investments toward
underlying fundamentals and significant more-established and promising start-ups, with a
technological advances reflected strong focus on scaling them.
momentum in quantum technology (QT).
In contrast to the private sector, public
Updated McKinsey analysis for the third annual investments increased more than 50 percent over
Quantum Technology Monitor reveals that four 2022, making up almost a third of all investments
sectors—chemicals, life sciences, finance, and in quantum technology. A range of countries, led
mobility—are likely to see the earliest impact by Germany, the United Kingdom, and South
from quantum computing and could gain up to Korea, have announced significant new funding
$2 trillion by 2035 (see sidebar “What is quantum for QT development, bringing the global public
technology?”). funding total to date to about $42 billion.

Private and corporate funding for quantum Underscoring this momentum was continued
technology start-ups in pursuit of that value, strong growth in QT foundations. There was a
however, took a notable dip. Investments wave of new or enhanced offerings (for example,
decreased 27 percent from the previous year, start-ups that made their quantum computing
with the biggest drop in quantum sensing start- accessible through the cloud) and significant
ups. This decline, however, was smaller than the technological advancements—especially in
38 percent decline in all start-up investment quantum error correction and mitigation—as well
worldwide. Notably, the majority of funding (62 as a small increase in patents filed. In addition, we
percent) went to companies founded five or more found a notable increase in quantum technology

What is quantum technology?

Quantum technology encompasses three subfields:

— Quantum computing (QC) is a new computing paradigm leveraging the laws of quantum mechanics to provide significant
performance improvement for certain applications and to enable new territories of computing compared to existing
classical computing.

— Quantum sensing (QS) includes a new generation of sensors, based on quantum systems, that provide measurements of
various quantities (for example, electromagnetic fields, gravity, or time) and that are orders of magnitude more sensitive
than classical sensors.

— Quantum communication (QComm) is the secure transfer of quantum information across distances, and it could ensure
security of communication even in the face of unlimited (quantum) computing power.¹

1
Quantum cryptography draws on the exchange of a secret key to encrypt messages based on the quantum mechanical phenomenon of entanglement. Unlike any
classical cryptographic protocol, it is in principle not possible to “eavesdrop” on messages exchanged with quantum cryptography without detection. However,
early implementations have been shown to have some weaknesses due to, for example, physical implementations of the protocols.

2 Steady progress in approaching the quantum advantage

programs offered by universities, with the European compared to the 38 percent decrease for all start-
Union taking the lead in the number of graduates in ups globally. The slowdown in the number of new
QT-related fields. QT start-ups founded continues (13 in 2023 versus
23 in 2022). Deal sizes have decreased as well, with
In this article, we’ll go into these and other findings in the average deal size being $40 million in 2023
greater detail (for more on the research, see sidebar compared to $105 million in 2022 and $107 million
“About the Quantum Technology Monitor research”). in 2021. In line with this development, deal counts
dropped to 171 in 2023 from 206 in 2022.

Private investment dropped while There are several factors causing the decrease in
public investment surged, with a focus private investment into QT, including a significant
on scaling established start-ups shift in focus toward generative AI as well as lingering
In 2023, $1.71 billion was invested in QT start-ups, perceptions of QT being a long-term technology
which represents a 27 percent decrease from whose potential in various sectors is still being
the all-time high of $2.35 billion in 2022 (Exhibit understood and evaluated.
1). Nonetheless, the decrease is smaller when

Web <year>
<Title>
Exhibit <x> of <x>
Exhibit 1
Total investments
Total inquantum
investments in quantumtechnology
technologystart-ups
start-ups decreased
decreased by by
2727
percent
percent year-over-year
year-over-year in 2023. in 2023.

Annual raised start-up investment,¹ $ million

2,500

>74% 2022: $2.35 billion

of total investment
allocated to QC start-ups –27%
2,000 Annual change
in QT start-up
investment

2023: $1.71 billion

1,500

1,000

500

0
2002 2006 2010 2014 2018 2022
1
Based on public investment data recorded in PitchBook; actual investment is likely higher.
Source: PitchBook

McKinsey & Company

Steady progress in approaching the quantum advantage 3

 About the Quantum Technology Monitor research

Our research covers the three main areas of quantum technologies: quantum computing, quantum sensing, and quantum
communication. The analysis is based on inputs from various data sources, including publicly available data sources and expert
interviews. Because not all deal values are publicly disclosed, this research does not provide a definitive or exhaustive list of
start-up and funding activities. Minor data deviations may exist as databases are updated.

Public funding for quantum technologies, on computing and signals investors’ potential risk
the other hand, jumped more than 50 percent aversion to early-stage start-ups and unproven
over 2022. While China and the United States technologies or approaches—which also partially
have previously dominated QT public investment, explains the 43 percent drop in new start-ups
new announcements from Australia, Canada, compared to 2022.
Germany, India, Japan, the Netherlands, South
Korea, and the United Kingdom reflected a
growing realization among a broader range of With quantum talent growing,
governments of the importance of QT; South countries need to focus on broad
Korea and the United Kingdom, in particular, collaborations to build strong
made significant increases to their funding levels capabilities
(Exhibit 2). Talent development took a notable step forward
in 2023, reflecting a positive focus on building
Most of these national initiatives aim to establish QT’s foundations. There were 367,000 people
technological leadership and sovereignty and who graduated in 2023 with QT-relevant degrees.
spur private investments for quantum technology Meanwhile, the number of universities with QT
development. For example, the aim of the United programs increased 8.3 percent, to 195, while
Kingdom’s National Quantum Strategy, which those offering master’s degrees in QT increased
includes $3.1 billion in public funding over ten by 10.0 percent, to 55. The European Union and
years, is not only to allow the United Kingdom to the United Kingdom have the highest number and
be a leading quantum-enabled economy but also density, respectively, of graduates in QT-relevant
to generate $1.3 billion in private investment in fields. This surge helps explain why scientists
quantum technologies. from EU institutions contributed most often to
quantum-relevant publications.
Where did the funding go? The vast majority of
investments have been in US companies (more Building off of this talent and these investments
than two times the amount compared to the next to generate value is still a challenge because
country), followed by companies in Canada and of limited access to state-of-the-art hardware
the United Kingdom. The majority of venture and infrastructure, limited awareness and
capital funding went to scaling up established adoption of quantum technologies, and a
start-ups, with more than 75 percent of the total lack of interdisciplinary coordination (such as
investment value going to series B or later funding between academia and industry) required to
rounds. This suggests the establishment of more- bring technologies to market. Collaboration
mature technological platforms for quantum between industry, academia, and government is

4 Steady progress in approaching the quantum advantage

Web <year>
<Title>
Exhibit <x> of <x>

Global2 public investments in quantum technology reached $42 billion

Exhibit
Global public investments in quantum technology reached $42 billion in 2023.
in 2023.

Announced government investment,¹ $ billion Announced before 2023 Announced in 2023

China 15.3 15.3

Germany 2.9 2.3 5.2

United Kingdom 1.2 3.1 4.3

United States 3.8 3.8

0.1
South Korea 2.3 2.4

France 2.2 2.2

<0.1
Japan 1.8 1.8

India 1.0 0.7 1.7

0.4
Canada 1.0 1.4
0.1
Netherlands 0.9 1.0

Russia 0.8 0.8

0.4
Israel 0.4

Others 1.8 1.8

1
Total historic announced investment; timelines for investment vary by country.

McKinsey & Company

essential to accelerating development of quantum talent, as well as access to the latest scientific
technology to industrialize technology, manage breakthroughs.
intellectual property, and overcome talent gaps.
— Government support. Government support for
To address this issue, “innovation clusters” innovation clusters comes in the form of public
are emerging worldwide. These clusters are funding to support technology development at
coordinated networks of partnerships between institutions and start-ups, as well as funding
researchers, industry leaders, and government infrastructure for national research centers
entities that contribute to the technological such as national labs, dedicated facilities,
advancement of quantum technologies and drive and capabilities for quantum technology
regional value creation (Exhibit 3). development.

Most clusters share the following elements: — Entrepreneurship. Start-ups are typically
spun off from academic groups but retain
— Academic hubs. Large academic institutions ties to academic groups and take advantage
provide vibrant research ecosystems and of infrastructure within research institutions.

Steady progress in approaching the quantum advantage 5

 Web <year>
<Title>
Exhibit <x> of <x>
Exhibit 3
innovation ecosystems
Building innovation ecosystems and
and clusters
clusters requires
requires a range
a range of support
of support
actions from stakeholders.
actions from stakeholders.

Support actions by ecosystem stakeholder

Government Research institutions Corporate end users Start-up accelerator Infrastructure

• Develop national • Develop beyond-the- • Develop quantum programs • State-of-the-art
quantum strategy state-of-the-art adoption road maps • Operate as exclusively equipment
• Identify priority quantum technologies • Co-develop quantum-focused • Capital
innovation areas • Partner with relevant technology programs to grow investments
for investment players to collaborate • Build quantum quantum start-ups • Talent
• Address policy on full-stack quantum workforce • Offer coaching and • Physical space
challenges solutions • Utilize quantum as necessary platform for • Training and
• Foster effective a service start-ups to take ideas education
local ecosystems into implementation

Quantum companies Academia (education Investors Administrative organization

• Experiment with proofs of and research) • Access expertise in • Interface with cluster members
concept • Train and educate the technology to inform for strategic partnerships in
• Build strategic road map to next generation of investment avenues research, knowledge and
integrate into business talent in quantum and • Prioritize high- technology transfer, and
• Build internal quantum workforce related areas potential technologies workforce and ecosystem
• Start-ups: • Produce cutting-edge • Access cluster's development
• Obtain funding research start-up network • Manage a portfolio of industry
• Receive mentorship from • Design study programs for investment partners to spur the creation
network for quantum and growth of ventures

McKinsey & Company

Start-ups also benefit significantly from a determining factor for achieving wide adoption and
mentorship (for example, through accelerators commercialization of quantum technology.
and tech transfer organizations) to develop and
commercialize innovations.
Technology breakthroughs,
— Industry partnerships. Local companies or large particularly in fault-tolerant quantum
corporate entities that are interested in applying computing, reflect meaningful
quantum technologies provide funding or progress
dedicated infrastructure to researchers. The past year marked continued advances for all
quantum technologies, with a range of enhanced
Developing and scaling such regional innovation and new QT offerings coming to the market. One
ecosystems (including research consortiums) will be advance was the transition from the NISQ1 era to the

1
NISQ stands for noisy intermediate-scale quantum, an era in quantum computing characterized by use of quantum processors containing up to
1,000 qubits, which were prone to noise and error.

6 Steady progress in approaching the quantum advantage

 FTQC2 era. Other key breakthroughs included the sensing devices. Quantum sensing technology’s
following: capabilities in monitoring, imaging, navigation,
and identification will have a significant impact,
— Quantum computing. Quantum error-correction both on their own and as enablers of processes.
proposals and demonstrations by large Our analysis shows that private sectors such
companies show promise of steps toward as oil and gas, automotive and assembly,
large-scale, fault-tolerant quantum computing. aerospace and defense, medtech, and media
Record qubit fidelity of 99.5 percent (by QuEra, and entertainment, as well as the public sector,
MIT, and Harvard) and, most recently, 99.9 could experience disruptive impact from
percent (by Microsoft and Quantinuum) were quantum sensing after 2030.
achieved by combining new error-correction
schemes and groundbreaking architectures for — Quantum communication. Researchers are
logical qubits. Shifting the focus from hardware improving the performance of quantum key
alone to software and architecture-based distribution, demonstrating longer transmission
schemes for error mitigation and correction distances and increased data rates using
promises to significantly reduce the hardware innovative techniques. China and Russia both
overhead (for example, physical qubit counts for successfully tested the longest established
each logical qubit) and accelerate timelines for quantum communication, which was over a
the advent of universal fault-tolerant quantum distance of 3,800 kilometers. Researchers
computers. are also developing platforms for quantum
memories using trapped ions, rare earth ions,
— Quantum sensing. Researchers are developing and atomic vapors, and they are using trapped
improved techniques to control ensembles ions to demonstrate quantum repeaters, which
of solid-state spins for a range of sensing operate at telecom wavelengths.
applications. Researchers at MIT, for example,
developed a novel technique that could For the full set of insights and data, download the
significantly improve the sensitivity of quantum entire Quantum Technology Monitor.

Michael Bogobowicz is a partner in McKinsey’s New York office, where Rodney Zemmel is a senior partner; Kamalika
Dutta is a specialist in the Berlin office; Martina Gschwendtner is a consultant in the Munich office; Anna Heid is an
associate partner in the Zurich office; Mena Issler is an associate partner in the Bay Area office, where Alex Zhang is a
consultant; Niko Mohr is a partner in the Düsseldorf office; and Henning Soller is a partner in the Frankfurt office.

Copyright © 2024 McKinsey & Company. All rights reserved.

2
FTQC stands for fault-tolerant quantum computing, an era in quantum computing in which computation involves low logical error rates.

Steady progress in approaching the quantum advantage 7