McKinsey's latest report: Quantum computing use cases are getting closer to reality
The accelerated development of quantum computing is a powerful reminder that this technology is rapidly moving towards commercial viability. For example, in the past few months, a research center in Japan announced a breakthrough in entangled qubits, which can improve error correction in quantum systems and may make large-scale quantum computers possible [1]. An Australian company has developed a software that has been shown in experiments to improve the performance of any quantum computing hardware [2].
With the acceleration of breakthroughs, investment funds continue to flow in, and quantum computing startups have surged [3]. Major technology companies are also continuing to develop their quantum capabilities: Alibaba, Amazon, IBM, Google, and Microsoft have launched commercial quantum computing cloud services.
Of course, all these activities do not necessarily translate into commercial results. Although quantum computing is expected to help companies solve problems beyond the capabilities and speed of traditional high-performance computers [4], it is currently at an early stage, and use cases are mainly experimental and hypothetical. In fact, experts are still discussing the most basic topics in the field.
Nonetheless, these activities show that CIOs and other leaders who have been following the news of quantum computing can no longer be just bystanders. Leaders should begin to formulate their quantum computing strategies, especially in industries such as pharmaceuticals, which may benefit early from commercial quantum computing. Changes may come as early as 2030, as several companies predict that they will launch a usable quantum system at that time.
To help leaders start planning, McKinsey conducted extensive research and interviewed 47 experts around the world on the following topics:
Quantum hardware, software and applications; emerging quantum computing ecosystems; possible commercial use cases; and the most important drivers of the quantum computing market.
In the "Quantum Computing: Emerging Ecosystems and Industry Use Cases" report, McKinsey discussed the evolution of the quantum computing industry and delved into the possible commercial uses of the technology in the pharmaceutical, chemical, automotive, and financial sectors, which may be in the short term Obtain significant value from quantum computing. Then, the report outlines a way forward and how industry decision makers can begin their efforts in quantum computing.
Evolving ecosystem
An ecosystem that can support the quantum computing industry has begun to show [5]. The report research shows that the value of quantum computing participants is nearly 80 billion U.S. dollars (not to be confused with the value that quantum computing use cases may generate).
1. Funds
Since quantum computing is still an emerging field, most of the funding for basic research in this field still comes from the public sector (Figure 1).
Figure 1 China and the European Union are far ahead in public funding for quantum computing.
However, private funding is increasing rapidly. In 2021 alone, public financing of quantum computing start-ups exceeded $1.7 billion, more than double the total financing in 2020 (Figure 2). The report predicts that with the commercialization of quantum computing, private funds will continue to increase substantially.
Figure 2 Since 2015, entrepreneurial activity and investment in quantum computing have soared.
2. Hardware
Hardware is an important bottleneck in the ecosystem. The challenges are both technical and structural. First, it is necessary to expand the number of qubits in a quantum computer while achieving a sufficient level of qubit quality. Secondly, the entry barrier for hardware is also high, because it requires a rare combination of capital, experimental and theoretical quantum physics experience, and deep knowledge (especially domain knowledge to implement related options).
Several quantum computing hardware platforms are under development. The most important milestone will be the realization of fully error-correcting and fault-tolerant quantum computing, otherwise quantum computers will not be able to provide accurate results (Figure 3).
Figure 3 Mature quantum computing hardware will make more use cases feasible
Experts differ on whether quantum computers can create important commercial value before they are fully fault-tolerant. However, many people say that imperfect fault tolerance does not necessarily make quantum computing systems unusable.
When can we achieve fault tolerance? Most hardware companies are reluctant to disclose their development roadmaps, but some companies have publicly shared their plans. Five manufacturers have announced plans to have fault-tolerant quantum computing hardware by 2030. If this timetable is established, by then, the industry may establish a clear quantum advantage for many use cases.
3. Software
The number of software-focused startups is growing faster than any other link in the quantum computing value chain. In the software field, industry participants currently provide customized services, with the goal of developing turnkey services when the industry becomes more mature. With the continuous development of quantum computing software, organizations will be able to upgrade their software tools and eventually use quantum tools entirely. At the same time, quantum computing requires a new programming paradigm and software stack. In order to build a developer community around their products, larger industry participants usually provide their software development kits for free.
4. Cloud-based services
Ultimately, cloud-based quantum computing services may become the most valuable part of the ecosystem and can create huge returns for the people who operate them. Most cloud computing service providers now provide access to quantum computers on their platforms, which allows potential users to try the technology.
Since personal or mobile quantum computing is unlikely to appear in this decade, the cloud may be the primary way for early users to experience the technology before the larger ecosystem matures.
Industry use cases
Most known use cases can be divided into four prototypes: quantum simulation, quantum linear algebra for AI and machine learning, quantum optimization and search, and quantum factorization. The report describes these use cases in detail and outlines the issues that leaders should consider when evaluating potential use cases.
This report focuses on potential use cases in several industries that have shown the greatest short-term benefits from this technology: pharmaceuticals, chemicals, automobiles, and finance. Overall (and conservatively speaking), the value at risk of these industries may be between US$300 billion and US$700 billion (Figure 4).
Figure 4 It is conservatively estimated that the value of pharmaceutical, chemical, automotive and financial use cases may be as high as nearly 700 billion US dollars.
1. Pharmaceutical
Quantum computing has the potential to completely change the research and development of the molecular structure of the biopharmaceutical industry, and provide value in production, and further provide value to the downstream of the value chain. For example, in terms of research and development, it takes an average of US$2 billion and more than ten years for a new drug to enter the market after discovery [6]. Quantum computing can reduce the reliance on trial and error in target identification, drug design, and toxicity testing, so it is more efficient, which makes research and development faster, more targeted and more accurate [7]. Faster development schedules can provide products to the right patients faster and more efficiently-in short, it will improve the quality of life for more patients. The production, logistics, and supply chains of the pharmaceutical industry can also benefit from quantum computing. Although it is difficult to estimate how much revenue these advancements can bring or how much impact on patients, in a $1.5 trillion industry (the pharmaceutical industry is predicted to be worth $1.5 trillion in 2021), the average earnings before interest and taxes (EBIT) ratio 16% (according to McKinsey's calculations), even if revenue increases by 1% to 5%, it will bring in additional revenue of 15 to 75 billion U.S. dollars and EBIT of 2 to 12 billion U.S. dollars.
2. Chemical
Quantum computing can improve chemical R&D, production and supply chain optimization [8]. Considering that quantum computing can be used to improve catalyst design in production. For example, new and improved catalysts can save energy in existing production processes—a single catalyst can produce up to 15% efficiency gains—innovative catalysts can replace petrochemical products with more sustainable feedstocks, or decompose carbon into carbon dioxide . The chemical industry spends 800 billion U.S. dollars each year on production (half of which depends on catalysis). In this context, a 5% to 10% increase in actual efficiency means an increase in value of 20 to 40 billion U.S. dollars.
3. Car
The automotive industry can benefit from quantum computing research and development, product design, supply chain management, production, and travel and traffic management [9]. For example, this technology can reduce manufacturing process-related costs and cycle time by optimizing elements (including welding, gluing, and painting) in complex multi-robot processes (paths for robots to complete tasks), such as path planning. Even an increase in productivity of 2% to 5%—in an industry that spends US$500 billion in manufacturing costs each year—can create value of US$10 billion to US$25 billion a year.
4. Finance
Quantum computing use cases in the financial sector will go further in the future, and the advantages of possible near-term uses are speculative. This report believes that the most promising use cases of quantum computing in the financial field are investment portfolio and risk management [10]. For example, a highly efficient quantum-optimized loan portfolio focused on collateral can enable lenders to improve their products, possibly lowering interest rates and freeing up funds. It is too early and complicated to evaluate the potential of quantum computing to increase the value of collateral management, but as of 2021, the global loan market is worth US$6.9 trillion, which shows that quantum optimization has a significant potential impact [11].
The way forward for quantum computing
At the same time, business leaders in every industry should prepare for the maturity of quantum computing.
By about 2030, McKinsey believes that quantum computing use cases will have a hybrid operating mode, somewhere between quantum and traditional high-performance computing. For example, traditional high-performance computers may benefit from quantum algorithms [12].
After 2030, a large amount of ongoing research by private companies and public institutions is still critical to improving quantum hardware and realizing more and more complex use cases. Six key factors will determine the commercialization of the technology: funding, accessibility, standardization, industry alliances, talent, and digital infrastructure.
Leaders outside the quantum computing industry can take five specific steps to prepare for the maturity of quantum computing:
Follow the development of the industry, cooperate with internal quantum computing expert teams or industry entities, join the quantum computing alliance, and actively screen quantum computing use cases.
Understand the most important risks, disruptions and opportunities in their industry.
Consider whether to cooperate or invest in quantum computing companies (mainly software) to promote the acquisition of knowledge and talents.
Consider hiring internal quantum computing talents. Even a small team of three experts may be enough to help the organization explore possible use cases and screen potential strategic investments in quantum computing.
Prepare by building a digital infrastructure that can meet the basic operational requirements of quantum computing; provide relevant data in a digital database, and set up routine computing workflows to prepare for quantum when more powerful quantum hardware becomes available.
Leaders in every industry have an unusual opportunity to be vigilant about the technology that defines this era. Strategic insight and soaring business value may be rewards.
original report: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/quantum-computing-use-cases-are-getting-real-what-you-need-to-know
References and notes:
[1]Mayank Sharma, “There’s been another huge quantum computing breakthrough,” TechRadar, September 9, 2021, techradar.com.
[2]Brad Bergan, “A new quantum computing method is 2,500 percent more efficient,” Interesting Engineering, November 5, 2021, interestingengineering.com.
[3]https://www.mckinsey.com/~/media/mckinsey/featured%20insights/the%20rise%20of%20quantum%20computing/quantum%20technology%20monitor/2021/mckinsey-quantum-technology-monitor-202109 .pdf
[4]https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/a-game-plan-for-quantum-computing
[5]https://www.mckinsey.com/~/media/mckinsey/featured%20insights/the%20rise%20of%20quantum%20computing/quantum%20technology%20monitor/2020/mckinsey-quantum-technology-monitor-202012 .pdf
[6]https://www.mckinsey.com/industries/life-sciences/our-insights/recalculating-the-future-of-drug-development-with-quantum-computing
[7]https://www.mckinsey.com/industries/life-sciences/our-insights/pharmas-digital-rx-quantum-computing-in-drug-research-and-development
[8]https://www.mckinsey.com/industries/chemicals/our-insights/the-next-big-thing-quantum-computings-potential-impact-on-chemicals
[9]https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/will-quantum-computing-drive-the-automotive-future
[10]https://www.mckinsey.com/industries/financial-services/our-insights/how-quantum-computing-could-change-financial-services
[11] According to Research and Markets, as of 2021, the total global loan market is US$6.9 trillion. Global data on the default rate is not yet clear, but it is conservatively estimated to be 5%, and it is assumed that the default loss (the value of the asset lost at the time of default) is 50% of the initial value of the loan.
[12] Juan Miguel Arrazola et al., “Quantum-inspired algorithms in practice,” Quantum, August 2020, Volume 4, pp. 307–31, quantum-journal.org.
