The News: In separate announcements, Palo Alto, California, firm PsiQuantum and Boston, Massachusetts, firm QuEra announced they were selected as planned funding recipients from the Australian and Japanese governments, respectively. The PsiQuantum press release and the QuEra press release provide more details.
Quantum in Context: Government Money Pours into Private Firms
Analyst Take: Building an eventual error-corrected quantum computer that is large, fast, and powerful enough will require hundreds of millions to billions of dollars. Most small companies do not have that kind of money now, nor do they have guaranteed sights on funding that large. I estimate it will be at least 2030 before we reach Practical Quantum Advantage. While large companies such as Amazon, Google, IBM, and Microsoft could, in theory, pay this bill, small companies need governments to step in with funding that may be longer-term than private investment firms typically support. There is also the “quantum sovereignty” factor, where governments want to ensure they have internally developed quantum computers they can use within their borders when and how they wish.
The Kudos
It’s not easy getting government funding. First, it needs to exist and usually becomes available after legislation. The politics don’t end there, as federal and regional interests and concerns collide in what is and should be a competitive process. Second, if you are a company not primarily based in a country, there must be a good reason for that country’s government to give you money. Minimally, you must set up a non-trivial presence and guarantee local jobs.
Doing this can give a company a running head start to set up operations in another part of the world and get access to necessary supply chain components and workforce talent.
Per the PsiQuantum press release:
The Australian Commonwealth and Queensland Governments will invest $940M AUD ($620M USD) into PsiQuantum through a financial package, comprised of equity, grants, and loans.
That’s a lot. Note the mention of equity and loans, so this is not a pure cash investment.
In QuEra’s case, its press release states that it
has been awarded a 6.5 Billion JPY contract (approximately $41 million) by Japan’s National Institute of Advanced Industrial Science and Technology (AIST) to deliver a state-of-the-art quantum computer, advancing quantum capabilities in Japan.
AIST was established in 2001 and is part of the Japanese Ministry of Economy, Trade and Industry (METI).
Congratulations to both companies for their challenging and successful work in getting these funding awards.
These are not the first quantum companies to receive government funding outside their home countries. For example, US-based Infleqtion was selected as part of Japan’s Quantum Moonshot program and received an AUS$29M investment from Australia’s Breakthrough Victoria. The latter manages the AUS$2B Breakthrough Victoria Fund for the government of Victoria.
Of course, many companies have gotten private foreign investments, as IonQ did in 2019 with Samsung and Mubadala.
The Gotchas
Whenever you read about these kinds of government investments, look for the words “awarded” and “selected.” These words may mean that though a government agency chose the company, the money is not yet in the company’s bank account. A contract phase may come next, as well as political objections to the selection. The contract talks may fail, leading to no investment.
What are the conditions of the award and contract? On what schedule will the money become available? Will the company need to meet milestones for funding to continue? The milestones may include meeting local hiring and revenue targets. It is wise for later investors to review the progress made under such previous government awards.
Are the awards earmarked for certain kinds of expenses or percentages of them? I have seen examples where government funding only covers 50% of the cost of a program. If the company cannot make money quickly from the program’s technology or other products, it can burn through cash to satisfy the government contract.
The Necessary Coordination
It is unlikely that a small company with a few dozen or a few hundred employees can scale to meet all the demands of producing a quantum computing system with Practical Quantum Advantage. While a company’s leadership may optimistically and publicly state that they will grow to meet the needs of such a huge endeavor, they may privately turn to each other and ask, “Ok, now how do we really do this?”. Well, they probably won’t do it alone. They need to establish some vertical integration and strong partnerships.
On April 25, I gave a talk at the Quantum.Tech USA 2024 conference called “Why we need a Quantum Computing Apollo Program.” I ended the discussion with a slide entitled “What do we need to do better?”. It had three points directed at the public and private sectors:
- Commit to top-down, long-term, coordinated leadership funded by private and public investment with focused academic research.
- Build commercial “quantum prime” companies (credit: Scott Faris) willing to subcontract to, partner with, or acquire necessary component and supply chain companies.
- Invest sufficiently in technologies we will need in 2, 4, 6, … years, avoiding duplicative investment in technologies and companies unlikely to survive in the long run.
Again, congratulations to PsiQuantum, QuEra, Australia, and Japan for these announcements. They are significant and vital achievements for the companies, countries, and quantum computing.
Look at the big picture, both widely across technology, supply chain, and workforce, and long-term about spending the right money at the right time to deliver what we seek: an immensely powerful quantum computer that delivers on the promises so many of us have made in the past several years.
Key Takeaway: PsiQuantum and QuEra were awarded significant funding wins by Australia and Japan, respectively, for developing quantum computers. These are strong recognition of the value of their different technologies and their ability to convince others that they deserve large investments. Now comes the hard part: getting the money and delivering.
It’s fascinating that these two awards came so close together. The US and Australia are in the Quad security dialogue with Japan and India, and the AUKUS security partnership with the UK. These countries are starting to step up with significant funding grants to foreign but in-alliance private companies. This money will strengthen the economic ties among the nations and help develop quantum computing systems capable of competing with those being built by their geopolitical adversaries.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author is a former employee of IBM and Infleqtion and holds an equity position in each company. The author does not hold any equity positions with any other company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Quantum in Context: A Qubit Primer
Quantum in Context: Microsoft & Quantinuum Create Real Logical Qubits
Quantum in Context: Extreme Software Optimization with Superstaq
Author Information
Dr. Bob Sutor is an expert in quantum technologies with 40+ years of experience. He is the accomplished author of the quantum computing book Dancing with Qubits, Second Edition. Bob is dedicated to evolving quantum to help solve society's critical computational problems.
