The strong y-o-y growth rate in Q1 is partly due to the comparison being made with a relatively weak Q1 2020 – a time when the impact of COVID-19 was relatively severe with many key countries in the supply chain in lockdown. However, comparisons with Q1 2019 and Q1 2018 suggest that demand has recovered quite quickly and is now at more typical Q1 levels. A 4% q-o-q decline was not unexpected due to normal seasonal variations in the electronics sector.
Gold used in electronics rose 13% y-o-y to 66.4t during Q1. Demand for gold across all major applications in the sector increased from the historic lows recorded in Q1 2020. In stark contrast to the caution displayed in the midst of the pandemic, confidence appears to be returning; consumers that have been able to save throughout lockdown are now increasingly keen to spend. In particular, auto sales are experiencing strong recoveries worldwide; in China, for example, sales in March surged by 75% y-o-y.1 However, this rapid recovery has not come without challenges; severe chip shortages have been widely reported by manufacturers in the automotive industry, leading some to issue warnings about the potential impact on annual earnings.2
LED demand strengthened during Q1. Growth in LED gold use – of between 10 and 13% y-o-y – was driven by strong demand for high-end consumer electronics, such as laptops, tablets and TVs, as well as the recovery in the automotive sector. 3D sensors within mobile and AI devices also provided strong support, alongside the growing use of UV-LEDs within the biomedical sector, primarily in bactericidal wearable devices. However, the threat of migration to mini-LED technology (which, in some cases, uses less gold) remains; indeed, during the quarter it was reported that Epistar – a major LED manufacturer headquartered in Taiwan, province of China – has now transferred 15% of its total capacity to mini-LED fabrication. While this undoubtedly represents a threat to gold demand, it does not remove the need for gold entirely; mini-LEDs still require the use of gold bonding wire, albeit in far smaller quantities, and they are currently more expensive than the incumbent technology, so are likely to experience challenges with regard to uptake.
The wireless sector maintained steady growth of 2-4% y-o-y during Q1 thanks to robust demand for 5G infrastructure and devices. Many countries continue to install 5G infrastructure at a pace. China, for example, is targeting the installation of 600,000 5G base stations in the short term, with a vision of providing all tier 1-3 cities across the country with access to 4G/5G connectivity by 2025 – an objective that will require an estimated 10m base stations countrywide. 5G is also becoming increasingly common in handheld devices; for example, over a third of all smartphone shipments in 2021 are expected to be 5G enabled. These devices require an increased number of power amplifiers, which depend on gold for their reliable operation. Longer term, the growing trend towards 3D sensing chips in smartphones and partially-autonomous automotive systems will further support gold demand in the wireless sector. Finally, a proliferation of low earth orbit satellites (LEOs) is driving further demand for high-end wireless devices – an area that represents an expanding use for gold.3
The memory sector also maintained steady growth in Q1, recording increased gold demand of 3-6% y-o-y. Conditions in the market for memory chips remain tight, with all major sectors competing for limited supply. The surge in demand as the world emerges from the worst of the COVID-19 pandemic has encouraged inventory building, which – along with driving prices higher – has exacerbated shortages in the automotive sector. Memory chip fabricators such as Samsung and YMTC are attempting to increase supply, but this could take months, and supply is expected to be tight until Q3.4 Beyond these supply issues, the outlook for gold use in the sector is broadly positive as most devices and vehicles are predicted to require ever-larger memory chips. For example, estimates suggest that the memory requirements in vehicles (primarily due to in-car entertainment and autonomous driving systems) could double on average over the next two years. However, challenges remain from both miniaturisation of chip architecture (which potentially reduces the quantity of gold used in a semiconductor) and the threat of manufacturers switching to silver bonding wire.
Finally, the Printed Circuit Board (PCB) sector performed strongly during Q1, registering a rise of 15-18% y-o-y. This was primarily due to the comparison with a weak Q1 2020 when China – the world’s largest PCB manufacturing country – was in lockdown. Strengthening automotive demand has also boosted usage, along with strong PC and smartphone shipments.
Each of the major electronics fabrication hubs around the world recorded increases in gold demand during Q1; the four key hubs of Japan, Mainland China and Hong Kong, South Korea and the US recorded increases of 11.6%, 27.4%, 13.5% and 5.7% respectively.