Alphabet Creates a New Subsidiary to Focus on Quantum Technology

Tell me what Quantum Technology is first?

Good question - Quantum Technology (QT), according to one expert is defined as:

Quantum technology is a class of technology that works by using the principles of quantum mechanics (the physics of sub-atomic particles), including quantum entanglement and quantum superposition.

Quantum technologies can be classified as 1st generation and 2nd generation technologies. Lasers, GPS, MRI are a few examples of 1st generation QT. Quantum Computing (QC), Quantum Communications (QComm) and Quantum Sensing (QS) are examples of QT, that fall in the second generation. According to McKinsey report:

QC exponentially decreases processing time, in many cases, making it possible to solve previously intractable problems. QS will allow for more accurate measurements and could offer higher accessibility than existing sensors (for instance, through device miniaturization). QComm will enable strong encryption protocols that could greatly increase the security of sensitive information, and it will also enable some critical quantum-computing functions.

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What has Alphabet Announced?

Today, March 22nd, Alphabet announced that it’s spinning out its six-year-old quantum tech group, Sandbox AQ, into its own standalone company. Jack Hidary, the former director of AI and quantum at Sandbox and a longtime X Prize board member, will continue to lead the 55-person, Mountain View, based organization as CEO.

Sandbox, positioned as an enterprise software-as-a-Service (SaaS) company, developing commercial products for telecom, financial services, healthcare, government, computer security and other sectors, is rolling out with an undisclosed “nine-figure” funding. Investors and board advisors include Alphabet Chairman and CEO Eric Schmidt, Breyer Capital, Section 32 and Guggenheim Investments, among others.

Sandbox is the not the first company to classify itself as Quantum Technology focused company. Rigetti Computing and IonQ went public through special purpose acquisition company (SPAC) mergers and D-Wave is planning to do the same.

Market for Quantum Computing and Why of Alphabet's Business Strategy?

According to McKinsey, it's not the QC that is the driver (for now), rather two related technologies - quantum sensing (QS) and quantum communication (QComm). According to McKinseys's findings:

  • By 2023, 20% of global organizations are expected to budget for quantum computing projects, up from less than 1% in 2018. 
  • Many tech giants and start-ups have invested significantly in quantum technologies, with confirmed and announced deals for 2021 alone totaling about $2.1 billion.
  • By 2030, QS and QComm alone could generate $13 billion in revenues

Alphabet’s decision to spin out Sandbox is driven by that fact that while true quantum computing may be a few years out, related technology, like quantum-sensing technologies are fast materializing. Sandbox, therefore is more focused on how quantum tech intersects with AI.

According to Breyer, “There are quantum sensing technologies today that are being piloted at some of our great hospitals in the United States that I think will revolutionize areas such as cardiology [and] drug discovery."

So what's the key takeaway then?

First mover advantage is where companies like Alphabet want to focus on. QT, QC, QComm, QS require high level of investments to make them mature and mainstream. Alphabet has the deep pockets to invest in these technologies and create the value driven services of tomorrow.