Xanadu takes C$195 million from Ottawa and still sends its chip packaging abroad

Xanadu on Friday received a C$195 million repayable loan from Canada’s federal government to build a photonics manufacturing facility in Toronto.

The quantum computing company still outsources most of the chip packaging and assembly to contractors in other countries.

Inception fills a 158,000-square-foot Campbell’s Soup factory in Etobicoke

Xanadu signed a definitive agreement for the funding, which is a repayable contribution through Innovation, Science and Economic Development Canada’s Strategic Response Fund, the successor to the Strategic Innovation Fund.

The loan is for the establishment and operation of the facility over the next five years, and the company will have to make a significant co-investment of its own.

The C$195 million is about half of the up to C$390 million Xanadu has been seeking from both Ottawa and the Ontario government.

The request is part of Project OPTIMISM, expected to cost C$893 million in total and create up to 275 highly skilled jobs.

According to a press release from Xanadu, the federal commitment is the largest government investment in quantum manufacturing in Canadian history. CEO Christian Weedbrook said he hopes Ontario money will follow, but he had no firm update on those talks.

The plant has a name, Inception, borrowed from the Christopher Nolan film, and an unusual address.

It will be housed in the old Campbell’s Soup factory in Etobicoke, a 158,000-square-foot Art Deco building that the soup maker left in 2019 and that QuadReal Property Group has renovated. Xanadu is taking over the whole building.

Weedbrook joked about company T-shirts that read, “from soup to qubits.”

“When you go from soup cans to qubits, you’re looking at the future and you’re telling the country, this is what we see,” Canada’s Minister of AI and Digital Innovation Evan Solomon said. “I feel like we’re here at the launch of Starship Enterprise,” he said.

Inception is built for manufacturing, packaging, and assembly of quantum components with cleanrooms, 24/7 test facilities, and first-of-its-kind heterogeneous integration. The process combines diverse photonic elements on one chip.

Tooling partners include ASMPT, Bluefors, DISCO, EVG, FiconTEC, and MPI.

Three months of outside work is meant to become eight hours in-house

Most of that work has until now been outsourced to third-party firms in other countries, Weedbrook said, and Inception is meant to bring that work in house.

Packaging is the example he mentioned. It takes the company’s outside partner as long as three months to house and connect a photonic chip, and Weedbrook said Xanadu expects to do it in eight hours once the plant is running.

Xanadu plans to use Inception early next year and will expand its 320-person team by hiring in advanced manufacturing, engineering, and science, Weedbrook said.

The first quantum data center it plans to power with these components is not targeted until 2029.

Xanadu, which was founded in 2016 and is listed on the Nasdaq and TSX as XNDU, has received government money in the past.

The cumulative total to date is C$78 million, which includes C$40 million from the Strategic Innovation Fund and as much as C$23 million from the first phase of the Canadian Quantum Champions Program.

Its own filing lists risk factors, including net losses, a limited operating history, and substantial doubt about the company’s ability to continue as a going concern.