The global quantum computing sector experienced a profound transformation in 2024, as revealed by McKinsey’s Quantum Technology Monitor 2025 report. The findings indicate that most new startups emerging in 2024 have positioned themselves in the components and application software segments, signalling a significant value shift toward the latter.

This transition reflects the industry’s trajectory from hardware-centric development to a future driven by software-enabled use cases.

The quantum computing value chain is traditionally divided into five main elements: equipment and components, hardware, systems software, application software, and services. For much of the sector’s development, the equipment and components segment has commanded the largest market value share. This dominance stems from component manufacturers’ ability to supply parts compatible with multiple hardware technologies, maximising revenue opportunities while minimising dependency on a single platform.

In 2024, however, the emergence of 11 out of 13 new startups in the components and application software categories highlights a dual trend: the resilience of the component market today, and the long-term strategic focus on applications. Application software companies often specialise in sector-specific solutions, from pharmaceutical research to logistics optimisation, capitalising on the unique demands of quantum-enabled problem-solving.

The report suggests that while components offer lower-risk, hardware-agnostic opportunities, the value chain’s centre of gravity will increasingly move toward application software and cloud-based services over the next decade. As quantum hardware becomes more stable and standardised, its role will shift from being the focal point of development to serving as a backbone for a broad range of industry-specific applications.

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The staged evolution of the value chain

Today’s quantum computing market remains largely pre-profit for most players, as hardware systems are still in their formative stages and commercial-grade applications are scarce. Tech giants such as Google and IBM continue to concentrate their efforts on hardware development, recognising its foundational role in enabling the rest of the value chain.

Over the next five to ten years, profitability is expected to increase as standardisation erodes component margins and hardware becomes more widely deployable. Given the scarcity of advanced systems and the specialised expertise needed to operate them, hardware and services are projected to deliver the highest returns in this period.

Ultimately, at complete market uptake, the balance will tip decisively toward application software and cloud services, where most value is likely to be captured as end-users become fully “quantum-native”.

The most significant breakthrough in quantum computing in 2024 centred on advances in quantum error correction (QEC), a cornerstone technology for achieving stable and reliable systems. QEC works by mapping multiple physical qubits into a single logical qubit, enabling error detection and correction. By reducing the effects of noise and mitigating decoherence, QEC paves the way for quantum processors to scale effectively while maintaining accuracy.

Leading tech companies — including Google, IBM, and Microsoft — announced significant strides in QEC during 2024, marking a turning point in the race for practical quantum advantage. These developments are significant as they address one of the industry’s biggest bottlenecks: the fragility of quantum states. Improved error correction not only strengthens the performance of existing systems but also makes the development of complex application software more feasible, accelerating the shift in the value chain.

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As a discipline, quantum control is increasingly recognised as a strategic priority across the hardware and software layers. By integrating robust error correction protocols into the design of systems and applications, developers can ensure that quantum solutions meet the reliability standards demanded by enterprise and scientific users.

With QEC breakthroughs enhancing system stability, the next frontier for quantum computing lies in tailored applications. Industries with computationally intensive challenges — such as materials science, energy optimisation, and pharmaceuticals — stand to gain the most from specialised quantum software. These niche solutions will become critical differentiators in a market where standardised components and hardware will eventually level the playing field.

While hardware innovation remains vital for startups, the largest long-term opportunity lies in solving real-world problems through quantum-enabled applications. As the value chain evolves, success will hinge on the ability to integrate cutting-edge quantum control technologies into industry-specific software solutions, creating the conditions for quantum computing to deliver on its transformative promise.

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