An interesting analogy for what we think may happen in the quantum computing industry can be found in the graph below that shows how the technology of choice changed in the semiconductor industry between 1971 and 1999. These changes in technology are very common in many areas of industry. Perhaps we are seeing it now in the auto industry which appears to be in the midst of a long conversion from the internal combustion engine to electric automobiles.
How companies navigate through these technology changes will determine how successful they will be in retaining or capturing overall market share as the market grows. Wikipedia has an interesting table that shows how dynamic the semiconductor industry has been with this table that shows the market share leaders for the past 25 years.
You can see that of the top three suppliers in 1975, only TI has remained in the top 10. And TI’s position which was number 1 in 1975 and is now down to number 9 in 2020. The semiconductor operations of Motorola and Philips were ultimately merged into a company now called NXP Semiconductors. NXP is still around, but it is not even in the top 10. To be sure, other factors also played into the changing leadership in the semiconductor market including changes in product types, the advent of the foundry business, conversions of some companies from an integrated device manufacturer (IDM) to a fabless companies, and other factors.
We fully expect that the quantum computing industry over the next 25 years will be as dynamic as the semiconductor industry has been over the last 25 years. The ramifications will be that some quantum companies will go out of business, some companies will merge together (we are already starting to see this happen), some will pivot to a different qubit technology, some may try to pivot from hardware to software, some could even pivot to a new field unrelated to quantum technology.
Although every hardware company will tell you that the technology they are working on is the best and will be the future of the industry, the reality is that no one really knows. It may be quite possible that some of the smaller companies working on photonic or cold atom or quantum dot technologies may develop something far better than the current leading superconducting and ion trap technologies.
So our recommendation to companies working in quantum technology (or investors for that matter) is to stay flexible and keep a close eye on developments in the industry. Many of the quantum software companies are already doing this by providing “hardware agnostic” solutions that can work with many different hardware platforms using different backend hardware interface modules in the software. But we also see some of the larger hardware players implementing what we view as implementing “insurance policies” by establishing relationships with some of the smaller hardware companies.
For example, IBM has included ColdQuanta, Equal1, Archer, and Xanadu as members of the IBM Quantum Network. We don’t think it is a coincidence that all these companies are working on technologies that could be alternatives to the superconducting approach that IBM is using. And backend modules have been developed so that Qiskit can be used with AQT and IonQ ion trap based computers. Similarly, Amazon AWS, which has an internal program to develop a superconducting based computer is partnering with D-Wave, Rigetti, and IonQ while Microsoft Azure has partnerships with Quantum Circuits, IonQ, and Honeywell. Even Google is now supporting access to IonQ’s ion trap computer via the Google Cloud. They’ve also been an investor in IonQ for many years through their GV (formerly Google Ventures) corporate venture capital group.
Should any of these smaller companies come up with a solution that demonstrates clear advantages over other approaches, some of these early connections could easily be transformed into a much closer relationship including possible acquisitions.
So don’t simply expect that the future course of quantum technology will be an extrapolation of the past. We expect to see many new twists and turns as the quantum industry advances. But the challenge will be to monitor these closely while making sure that any new claims of groundbreaking advancements are really true.
July 3, 2021