Homomorphic encryption (HE) Research:CAGR of 9.1% during the forecast period

1.Definition of Homomorphic encryption (HE)
Homomorphic encryption (HE) is a special encryption mode in cryptography. It allows users to send encrypted ciphertext to any third party for computation without prior decryption; that is, computation is performed on the ciphertext. Although the concept of homomorphic encryption first appeared 30 years ago, the first fully homomorphic encryption framework supporting arbitrary operations on ciphertext appeared relatively late, proposed by Craig Gentry in 2009.

Homomorphic encryption is a form of encryption that allows computation on an encrypted file to generate an encrypted result, which, after decryption, matches the result of the operation performed on the plaintext. The purpose of homomorphic encryption is to allow computation on encrypted data.

Figure 1. Product Picture

Homomorphic encryption (HE)

2.Global Market Size, Type and Application Market Status and Forecast (2020-2031)
According to the new market research report "Global Homomorphic encryption (HE) Market Report 2025-2031", published by QYResearch, the global Homomorphic encryption (HE) market size is projected to reach USD 4.38 billion by 2031, at a CAGR of 9.1% during the forecast period.

Figure 2. Global Homomorphic encryption (HE) Market Size (US$ Million), 2020-2031

Homomorphic encryption (HE)

Above data is based on report from QYResearch: Global Homomorphic encryption (HE) Market Report 2025-2031

Figure 3. Global Homomorphic encryption (HE) Top 25 Players Ranking and Market Share

Homomorphic encryption (HE)

Above data is based on report from QYResearch: Global Homomorphic encryption (HE) Market Report 2025-2031

According to QYResearch Top Players Research Center, the global key manufacturers of Homomorphic Encryption include IBM Corporation (U.S.), Microsoft (U.S.), Duality Technologies (U.S.), Enveil (U.S.), etc. In 2024, the global top four players had a share approximately 66.9% in terms of revenue.

In terms of product type, currently Fully Homomorphism is the largest segment, hold a share of 92.3%.

In terms of product application, currently Financial & Insurance are the largest segment, hold a share of 30.7%.

3.Market development trend of Homomorphic encryption (HE)
3.1 Industry Development Trends
1) Performance Optimization and Improved Computational Efficiency

With technological advancements, particularly in quantum computing and parallel computing, the computational performance of homomorphic encryption is expected to improve significantly. Researchers are working to optimize homomorphic encryption algorithms, reducing computational overhead and making them more feasible for large-scale data processing and real-time computing scenarios. In the future, with increased computational efficiency, homomorphic encryption will be able to play a role in more practical applications, such as data-intensive industries like finance and healthcare.

2) Combination of Cloud Computing and Data Privacy Protection

With the widespread application of cloud computing and big data, data privacy has become a key focus for enterprises and users. Homomorphic encryption can perform computations without decrypting data, ensuring data privacy during transmission and storage. In the future, as cloud service providers increase their demand for privacy protection, homomorphic encryption will become an important technology for data protection on cloud computing platforms, driving the widespread adoption of encrypted computing in the cloud.

3) Expansion of Cross-Industry Applications

As homomorphic encryption technology matures, its application scenarios will gradually expand to more industries, including healthcare, financial services, and e-commerce. In these industries, the demand for data privacy protection and encrypted computing is growing rapidly. Especially in the healthcare industry, homomorphic encryption can ensure that sensitive personal health data is not compromised during analysis and sharing, driving data-driven innovation.

4) Standardization and Compliance Development

With the widespread application of homomorphic encryption, the industry's demand for technical standards and compliance frameworks is increasing. Governments and industry organizations worldwide are actively promoting the standardization process of homomorphic encryption and developing relevant privacy protection and encryption security regulations. This will help promote the global application of homomorphic encryption technology and improve its acceptability and operability. In the future, with the advancement of standardization, more companies will adopt homomorphic encryption technology to meet increasingly stringent compliance requirements.

3.2 Market Drivers
1) Increased Demand for Data Privacy and Security

With rising global demands for data privacy protection, particularly driven by regulations like GDPR, businesses and governments are increasingly seeking data encryption technologies. Homomorphic encryption, capable of performing computations without decrypting data, has become a key technology for meeting data privacy needs. As data breaches and privacy issues continue to surface, the market demand for homomorphic encryption will be further driven.

2) Growth in Cloud Computing and Big Data Applications

The rapid development of cloud computing and big data has prompted enterprises to store more data in the cloud for sharing and analysis. In this context, ensuring the privacy and security of cloud data has become a core industry issue. Homomorphic encryption technology can process encrypted cloud data without decryption, preventing data leaks, and thus has become a significant technological driver in the cloud computing and big data fields.

3) The Integration of Artificial Intelligence and Machine Learning Technologies

Artificial intelligence and machine learning are increasingly reliant on big data analysis, especially in fields like healthcare and finance, involving the processing of large amounts of sensitive data. Homomorphic encryption can protect data privacy while still supporting complex computations and analyses. In the future, with the continuous development of AI and ML technologies, the demand for encrypted computing will increase significantly, thereby promoting the widespread application of homomorphic encryption technology.

4) Promotion by Government Regulations and Industry Standards

With increasing attention to data privacy protection, governments worldwide have successively introduced relevant laws and regulations, requiring companies to take strict security measures during data storage, processing, and transmission. These laws and regulations will promote the widespread application of homomorphic encryption technology, especially in highly sensitive industries such as healthcare, finance, and insurance. Homomorphic encryption can help companies meet legal compliance requirements, becoming an important tool for ensuring compliance.

3.3 Market Challenges
1) Computational Efficiency and Performance Issues

Homomorphic encryption allows computation on encrypted data, but this process is typically much slower than ordinary computation. Existing homomorphic encryption technologies, such as fully homomorphic encryption (FHE), consume significant computational resources and time, especially when processing complex data. Therefore, improving the computational efficiency of homomorphic encryption algorithms and reducing encryption computation time has become a key challenge for achieving large-scale applications.

2) Key Management and Security Issues

The security of homomorphic encryption is highly dependent on key management and storage. Because the computational process of homomorphic encryption is extremely sensitive to key usage, key leakage or tampering can lead to the collapse of the entire encryption system's security. Furthermore, key management becomes more complex, especially in multi-party computation and cloud computing environments; ensuring key security and validity is a significant challenge.

3) Legal and Compliance Issues

Against the backdrop of increasing concerns about data privacy and security, the legal requirements for data encryption vary across different regions. Ensuring that homomorphic encryption technology meets the compliance requirements of different countries and regions, especially in cross-border data transmission and processing, has become a major challenge for the technology's promotion and application. The lack of a standardized and compliance framework limits the global application of homomorphic encryption.

4) Cost and Accessibility Issues

Due to the complexity of homomorphic encryption algorithms, the implementation cost of related technologies is currently high. For many small and medium-sized enterprises (SMEs), the hardware and software costs required to implement homomorphic encryption solutions may be too expensive. Furthermore, the adoption rate of homomorphic encryption technology remains low, with a lack of sufficient technical support and talent, which exposes enterprises to significant investment risks when adopting this technology.

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