Untangling the Quantum Computing Landscape

THE COWEN INSIGHT

Quantum Computing is still in its infancy but is poised to be a source of technology disruption in the future and is estimated to grow at 50% CAGR through CY25. A demand inflection could depend on the timing of fault-tolerant systems. Superconducting gates have the early lead, but ion trap competition is rising

Our inaugural report on the Quantum Computing (QC) industry includes a comprehensive analysis of the fast-growing competitive landscape and a technology primer on the quantum modalities leading the industry’s expansion, especially superconducting gates and ion trap devices. We also introduce our QC market model and forecast industry revenues of ~$2.5B by CY25.

LIKELYHOOD FOR DISRUPTION & EARLY ADOPTION

QC is a nascent, disruptive technology that can drive a several orders of magnitude leap in compute performance even before fault-tolerant quantum systems can be fully industrialized. In the interim, we expect QC will be complementary to “classical” (current digital) computing. Superconducting gate technology has the most adoption momentum currently, given performance scaling leadership though alternative modalities including ion trap, photonics, and cold/neutral atom devices are also likely to make material progress and warrant monitoring.

PATHS FOR QC GROWTH

Given the early-growth stage of the QC industry, we estimate the TAM can grow at a 50% CAGR from a low base of ~$475M in CY21 to approach ~$2.5B by CY25 and ~$19B by CY30. This is predicated on continued hardware infrastructure build out, availability of enterprise software products, and meaningful adoption of Quantum Computing as a Service (QCaaS) offerings. We estimate hardware accounts for 60-70% of industry revenues today, given heavy R&D and Capex spending but anticipate this ratio to decline to 50% by CY30. We believe superconducting quantum systems will drive much of the hardware value given their relatively high cost ($3-5M each). Roughly one-third of the companies in the space have adopted this modality.

WHAT TO WATCH – SUPERCONDUCTING VS. ION TRAP TECHNOLOGY 

The expanding competitive landscape and differentiated quantum modalities in development suggest there is no one dominant technology at this juncture. While it is not clear whether QC will have a VHS vs. Betamax moment, superconducting gates are often compared to ion traps. Especially given that both modalities have seen the most industry adoption thus far.

We believe superconducting gates have an early advantage based on gate performance and scaling. We expect this lead can be sustained given roadmaps that are underpinned by mature semi-chip manufacturing processes. Low coherence times and fidelity rates (i.e., less time to perform useful work and with low accuracy) are key hurdles but scaling or error correction algorithm advances could remedy this. Conversely, ion trap’s strength lies in coherence time and fidelity, given use of laser-based control and cooling. However, qubit density in an ion trap is limited, and scaling via interconnected and entangled ion traps has yet to be fully proven. We believe other QC approaches, including photonics and cold atoms could see material progress and remain competitive in the coming years as well.