The Next Big Arms Race Is Quantum

The following article is based on our recent FS Insider podcast: Quantum Is the Next Trillion Dollar Disruptor Technology, and China Has Big Plans For It.

Big things are happening in the quantum realm.

Quantum technologies have advanced beyond theoretical discussions to commercial-stage development and application, primed to transform industries while sparking intensifying competition in scientific research and technology. According to Woody Preucil of 13D Research & Strategy, quantum sensors in particular are the furthest along, underpinning new economic opportunities and a new trajectory in the US-China technological arms race.

First off, what are quantum sensors and how are they being used?

Quantum sensors leverage the strange but precisely measurable properties of quantum mechanics to detect infinitesimally small changes in physical attributes at the atomic scale. Without facing quantum computing’s difficulties maintaining qubit stability, their ability to improve measurement precision is up to 1000x greater than conventional sensing devices and has enabled breakthrough applications. For example, SandboxAQ’s magnetocardiography enhances electrocardiograms' monitoring of heartbeats' magnetic activity, assisting doctors' diagnoses. Such innovations portend revolutionizing industries from healthcare to materials analysis as firms uncover insights into complex molecular and atomic-level systems.

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McKinsey estimates quantum sensors’ initial market value at $5 billion based on current usage. However, Preucil notes their widespread adoption could vastly impact sectors worth over $1 trillion in total, such as medical devices valued at $500 billion annually. By surpassing current GPS capabilities, quantum navigation technologies also target the $300 billion location industry. Early entrants like NXT Energy apply these groundbreaking tools to remotely identify underground oil and gas reservoirs. Meanwhile, quantum sensing serves military interests, driving integration into defense technologies by aerospace firms and contractors.

China's Quantum Leap

Rapid experimentation across applications from precision manufacturing to drug discovery has spurred an intensifying geopolitical contest between the US and China. A report from the Australian Strategic Policy Institute showed China leading the US in 53 of 64 critical technologies, demonstrating its growing momentum in scientific research leveraged for national aims. Given sensing's defense relevance, major players like BAE Systems and Raytheon conduct quantum programs while SK Telecom develops quantum-secured 5G networks and industrial leak detection sensors.

Crucially, quantum communication has emerged as an unequivocal area of Chinese dominance according to Preucil. Their operational quantum network between Beijing and Shanghai allowed for a hackproof encrypted data transfer via quantum satellite, giving them a strategic edge in building out encrypted global digital infrastructure. Meanwhile, Beijing leads the race to deploy quantum technologies for military advantage, exemplified by difficult-to-track weaponry locating sensors.

An Unhackable BRICS Network

Through its BRICS alliance, China is taking steps to create an unhackable economic sphere insulating members from sanctions utilizing quantum communication, challenging Western influence. Other nations recognize quantum’s capacity to redistribute global economic and technological power, motivating heavy investment. Although US firms maintain quantum computing primacy at present, China is making great strides and may take the lead in this fast-moving technology.

On the corporate side, businesses anticipate $450-850 billion in annual incomes according to Boston Consulting Group, Preucil said, as quantum systems scale. Early corporate backers like Hitachi may gain advantage over laggards. Yet Preucil advocated diversified sector plays against risks amid growing scarce high-level technical talent.

With precision sensing applications establishing the first beachheads, quantum technologies have reached operational reality. Promising disruptions across industries and intensifying geopolitical competition promise to drive further massive investment and brighten quantum technologies’ prominence in global innovation arms races for decades to come. Those positioning at the vanguard of research, commercialization and deployment of these emerging quantum capabilities are well-placed to influence technological progress and international competitiveness in the years ahead.

To listen to this full audio interview, see Quantum Is the Next Trillion Dollar Disruptor Technology, and China Has Big Plans For It. If you’re not already a subscriber to our FS Insider podcast, click here to subscribe.

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