Root Causes 241: Is China Outspending the West in Quantum Computing?

Hosted by

Fellow

Original broadcast date

September 12, 2022

A December 2021 report appears to indicate that China as vastly outspending Western countries in quantum computing. In this episode we examine this claim, including the role of private industry as opposed to government funding, the importance of international cooperation, and the vast implications of winning the race for quantum computing.

Podcast transcript

Lightly edited for flow and brevity.

TCTim CallanWe’ve been talking a lot about post-quantum cryptography lately based on the fact that there was a major news item, which is that NIST announced its winners, like, a couple months ago. And that has brought our attention back to an interesting document that came out from McKinsey Digital in December of last year, December 2021, and I know you and I were planning on talking about that, Jay, and we never quite got around to it, but with all the quantum stuff going on, we thought it was good to go back and look at this document again.

And so, just if you to look it up, listener, this is called “Quantum Computing Use Cases Are Getting Real - What You Need to Know” It was published November 14, 2021 from McKinsey Digital. That should be everything you need to do the search and find the document and I think today we’re talking about we wanted to focus in - it’s a nice long doc. There’s a lot here, and we might return to this because there’s more things I think to unpack. But today we really wanted to focus on what’s covered in Exhibit 1, which you’ll’ find inside the document. And the gist of it, this today, Jason, maybe I’ll just read this. What this is, is the title of it says, “China and the European Union Leads Significantly on Public Funding for Quantum Computing.” And then they have a bar chart of announced planned government funding in the billions. And I’m just gonna read the numbers. China - $15.0 billion; EU - $7.0 billion; United States – $1.3 billion; United Kingdom - $1.2 billion; India - $1.0 billion; Japan $1.0 billion; Russia - $0.7 ; Canada - $0.6; Israel - $0.5; Singapore – $0.3; Australia - $0.2 and others – which is approximately 195 countries around the world - $0.1. So when you look at and certainly when you look at the chart, that seems to be a rather – and there’s also a breakdown of the European funding sources, which we can return to if you want to – but when you look at that chart, that seems to be a rather stark picture. And certainly that’s how this appears. And some people in the media have grabbed on to this sort of stark picture. What’s your take on that, Jason?

Jason SorokoTim, the reason why we are revisiting this is because we’ve been asked quite often to comment on or refer to various kinds of eureka moments that are happening, slowly but surely, within the quantum computing space. In other words, quantum computers are progressing along. You just heard the numbers that you spelled out there, Tim. There’s a lot of billions in there and so therefore, a lot of money and a lot smart people. When you combine money and people, you’re going to make things happen. And so things are happening, and I think the reason why this McKinsey report has referred to a number of times now and especially that particular chart that puts China out front, is because I think people are worried that a disproportionate number of the eureka moments are happening in jurisdictions outside of the West.

TCTim CallanThere’s kind of, I would say two sets of potential consequences for this, if you will. One is just in terms of the – I don’t know if battle is quite the right word – but the tension that always exists between nations. So one of the things that people talk about a lot is harvest and decrypt. This basic idea that if I’m sitting inside of your network, maybe I can’t read your blobs, but maybe I can store your blobs. And then later on, when a quantum computer makes it possible, I will go read you blobs. And so, if you imagine there is probably espionage going on where people from China are trying to get inside of the Pentagon systems and people from the U.S. are trying to get in China’s systems - that the country that is first able to do that decryption has an advantage. They’re learning the other guy’s secrets before the other guy is learning their secrets. So that would be kind of point number one, what people have keyed on for the difference between these two. Or extrapolating that idea, you could also apply the same idea to - it wouldn’t even have to be government secrets, it could be industrial secrets. It’s widely believed that Chinese state-sponsored actors are conducting industrial espionage in order to help Chinese business. So, that would be a variation on the same theme. So that theme number one.

Theme number two, though, is just the fact that whichever country leads in the actual development of quantum computers, there will be above-board economic gains that will be vast. That the people who get the best quantum computers first will be able to use those for perfectly legal and legitimate and non-shady operations, and by having the better technology, you win in the economy. You win in the market. And that is a potentially frightening point about this as well. What do you think – do you agree, Jay?

Jason SorokoThere’s no question. And therefore, that McKinsey report spelled out just the disproportion amount of centralized government funding compared to all these geo-political players, all of which have different points of view and obviously, can be antagonistic against each other.

TCTim CallanOr at least are competing for the same markets. Same compute spend.

Jason SorokoThat’s it. And so, Tim, I think there’s something interesting to be said here, because I think that bar chart is accurate. In fact, for number for Canada sparks very true. That .6 you said, is a number that is floated around within Canada quite a bit. So I think they got it right. I think what’s interesting, though, is what’s missing is the fact that what that chart does not include, and I think when you put your eyes on that chart and you pull away, you might not realize that does not include commercial spending. In other words, Google. In other words, all the other big computing players, IBM, Microsoft – all these players that are almost, sometimes in themselves, as large as any nation state in terms of not just their spend but in their total program for quantum computing, and that does not show up on this chart.

TCTim CallanThat’s a very important point. Of course, the companies we talk about are very dominantly U.S.-based. So if you look at the U.S. number, in particular, it looks disproportionately small. We gotta a $1.3 for U.S., a $1.2 for U.K. So that would suggest, you’d say, wow, the United Kingdom at a third of the size of the United States is spending what is essentially the same amount. Or you use that Canada number you talked about before, $0.6. You would say, wow, Canada, at essentially one-tenth of the size population wise is doing 50% as much quantum computing research. In that regard, you might think that the U.S. is a horrible laggard in terms of performing inside. And you’d say, that’s weird. It’s weird for the country that has been on the cutting edge of computing advances for the past 70 years to suddenly be such a laggard. But your point, Jason, is this is perhaps arguably that we’re not really keeping score correctly, or we’re not looking at the whole score.

Jason SorokoThat is true. Especially in terms of spend and in terms of just shear amount of concentrated effort that’s going on. I think if this chart were to be written in terms of total effort, dollars plus commercial dollars plus everything else, I think that the United Sates would be on top, and it would be very disproportionately weighted toward the United States.

TCTim CallanWe’re not going to see – like, think about – okay, I’m going to name three companies here that are all going to - if they don’t win their particular race, then it’s not gonna be for want of trying - and that is Google, Amazon and Microsoft. All three of these companies really, they are in such a pitched battle for the public cloud, and I’m of the belief that almost everybody listening to this podcast, the first time they have a workstream that is being done by a quantum computer - which will happen in the future, we will all get there – the first time they have a workstream that is being done by a quantum computer that for almost everybody listening to this podcast, it will be on a public cloud service.

Jason SorokoIt will be the way that quantum computing is democratized. There isn’t going to be a quantum laptop or a quantum even server rack, that you’re gonna just have in your office. It’s going to be a very specialized machine that is parallelized off of the public cloud. You're right, Tim, that is how it’s going to be distributed to people.

TCTim CallanAnd so, we know that Google and Amazon and Microsoft and many others will not be sanguine loosing this race or losing this race without giving it their all, and all three of those companies are located in, what country? The United States. You also mentioned IBM. Where are they located? The United States.

Jason SorokoYou got it. And of course, every one of these companies has worldwide research officers. It is in fact a global effort, but make no mistake, these companies are domiciled in the United States. Decisions are made out of the United States.

There’s one particular concept I want to merge into this, Tim, which is, there’s so many of these – you gotta imagine the way that journalists write the stories around this. They pick up on buzz around, oh my goodness, there’s a brand new whizbang way to stabilize a qbit. Fantastic. And we’ve been hearing about these now for quite a while. In fact, we’ve podcasted on some of these in the past. And what I think is happening is exactly what you just said. You were talking about pitched battle between very, very large mega corporations. Pitched battle even between even nation states.

Quantum is – to get there, to get the most number of stable qbits the quickest, that is a pitched battle. I think the one thing that is going to be missing from most journalism and what I’m trying to inject back into the conversation is, isn’t it interesting that Professor Mosca, from the University of Waterloo, who we’ve spoken about before, the guy who came up with Zed date concept – even though you’ve got these billions of dollars begin spent and pitched battles at the geopolitical and commercial level, billions of dollars, the quest toward the number of stable qbits, the number of eureka moments through time has followed a fairly linear fashion, and that’s another way of saying there has been slow but steady progress.

Now that’s not ever gonna make a sexy headline for a journalist. You're not gonna get a click. But that is what I wanna inject back into the story which is when you start seeing, especially for people in the PKI world, which is what this podcast – that’s our focus – we worry about, oh my goodness, is there going to be a mathematical breakthrough, an engineering breakthrough that just brings Shor’s algorithm on top of a stable, general quantum computer sooner than later and then, oh my goodness, hey NIST, how fast can you standardize on those post-quantum cryptographic algorithms? Michele Mosca, I think has said it best. It's gonna take until 2026/2030 in order for these things to become stable enough, really no matter what. And it’s amazing how right he’s been in terms of that statement. It doesn’t make for sexy headlines, but it has been the truth.

TCTim CallanAnd yet, at the same time, just having a little bit of an edge, getting there a little faster or a little better than the other guy will probably translate to vast advantages down the road. I mean part of what you see when you look at the number of countries that are putting significant amount of money into this, is you see a pretty dramatic difference between this and the first computing revolution.

The first computing revolution - again, it took place kind of in the 1950s and 60s - was a small number of scientists, really forward thinking types, most located in the United States who were working on this and the rest of the world just kind of didn’t notice. And that’s not how this one’s going down at all. When we see that a lot of countries are investing considerable funds and saying we are going to make sure that we are not left behind on this.

Jason SorokoI think you're absolutely right.

TCTim CallanThese are economic powerhouses.

Jason SorokoBut it’s important for everybody, and that edge is so important. In fact, let me call out one specific edge that I think is important, and it has been called out in cybersecurity, is the idea of most times when we’re talking about quantum computing and we’re talking about fully generalized gated quantum computing. And just realize that is not the only form of quantum computing that is out there. There are also forms of it such as quantum annealing of which there are variations similar to Shor’s algorithm which could potentially break things such as RSA and ECC. So that’s very interesting, and keep in mind that there are some companies out there, some commercial ventures, that is their edge. And some whole entire countries have taken that as, well, that’s gonna be the way that we’re gonna crack this, and have our own edge in quantum computing.

And I’ll just mention it quickly. D-Wave out of Western Canada – they’re a big leader in that worldwide, and isn’t it interesting, Tim, a country as small as Canada has the highest per capita spending from a nation state level than all the countries you listed? It’s really, really amazing. And that’s just to make your point. Having any kind of an edge.

TCTim CallanI have to let you brag just a little, Jay.

Jason SorokoThat’s the way it is.It’s only because I’m very proud. We’ve worked side-by-side with folks from ISARA. In fact, we’ve had a quest on recently from Crypto4A. All these people very deeply ensconced in the quantum world, and all Canadian as well.

TCTim CallanAnd in the cryptography world and Canadian.

Jason SorokoThe reason I throw that in there is just to balance out in terms of partnerships with the United States. That level of concentration and work doesn’t show up on that McKinsey list. Even though that McKinsey list is so important to point out, the fact that centralized economies or EU-type level of partnerships from a nation state level have huge impacts, and everybody’s looking for that edge. I’m really trying to help to make your point again, Tim, which is there are many edges and everybody’s got a way of an angle toward creating those edges for themselves from different kinds of spending, different types of technology.

TCTim CallanAnd you’ve also touched on, I think, another important piece of color here, which is, if you think about it, not just in terms of the individual countries which is how this is broken out, it’s kind of broken out that way. They lumped EU together, but if you also look at the relationships between those countries to your point, all else being equal, the United States would rather that somebody in Canada achieved a break-through moment than somebody in China. Just because of the closeness of the two countries and their companies and their economies and their governments. Ditto for the United States, or any EU nation or Japan or Israel or Australia, and now we’re listing a whole lot of the countries on this list. So there is a block of countries that tend to be more cooperative, both governmentally and economically. We could kind of broadly characterize those as the NATO Nations or the NATO nations, plus a few. And when you lump that block together, then if you compare that to something like China, you're not going to see this disparity anymore. So, that’s something to think about as well – that business is international, and technology is international, and where those relationships flow and where that communication flows is an important part of this while thing also.

Jason SorokoTim, I want to throw in this just because of people who might not be in the biz or have read about this. I think an emerging country in quantum is going to end up being Japan, and I’ll tell you why. It’s because I think that there’s a general sense within that country that during some of their economic malaise over the past 20 years or so, where they were ticking along, but they really didn’t have the impetus to do a lot of compute innovation. I think that they’re seeing quantum as their next way to get back on track to be a leader.

TCTim CallanWell, it’s a paradigm shift. It’s a classic paradigm shift. Go back to the Innovators’ Dilemma. If you haven’t read it recently, it’s a great book. It keeps being relevant. And as this paradigm shift occurs - during times of technology paradigm shifts, there are winners and there are losers. And another thing you could see when you look at this chart is you can see people who are committed to being winners, not losers.

Jason SorokoJapan is interesting in the fact that, yes, you can think about it as a Western leaning, fully Western, but interesting in the way that their large corporations tend to cooperate and tend to be able to be not necessarily centralized government controlled, but they almost act like it, just in terms of their discipline and how they can work together. And I can see Japan just as a country making the decision, this is our time to shine again. I think that they’ve made that decision, and I think that Japan is going to be an emerging player as a country commercially as a nation state in quantum, and if any country can come out with superb engineering within this, that’s one country that could do it.

TCTim CallanWell, alright. Let’s keep our eyes on that. Who knows, maybe if things break there, we’ll go back to that. But I think that interesting. And, this is just one little, one little chart in this long document. So, we probably will be returning to this document in the future, because that’s certainly an interesting breakdown in terms of how these countries are approaching this.

Jason SorokoIt seems to keep coming up, so that’s why we wanted to mention it again, and give it some more context.

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