Demand for gold in technology has recovered rapidly from the lows of Q2 2020, 18% higher y-o-y at 80t. It must be noted, however, that Q2 was the weakest quarter of 2020, when COVID-19 was severely impacting both the electronics supply chain output and global consumer confidence. Taking the five-year average of Q2 electronics demand prior to 2020 of 65t indicates that the sector has quickly returned towards more typical Q2 levels. Other industrial and dental demand have also both recovered y-o-y, but remain below their five-year averages prior to 2020 of 13t and 4t respectively. H1 technology demand of 161t was fractionally above that of H1 2019 (160.6t).
Gold used in the electronics sector rose 16% y-o-y to 66.3t during Q2. Demand for gold increased across all major electronics applications from the historic lows recorded during Q2 2020 as consumer confidence continued to improve, and manufacturers return to more normal operating environments. There have been challenges, however; widely-reported chip shortages continued to impact the automotive industry1 and increasingly encroached on some parts of the consumer electronics sector. For example, while Samsung recently forecast a strong second quarter operating profit of US$11bn (largely due to healthy demand and strong pricing for memory chips), this was offset to some degree by weaker sales of devices, which were impacted by component shortages.2
The memory sector continued to experience steady growth, with demand rising 2-4% y-o-y. However, the supply of memory chips remains tight and many device manufacturers have been accumulating stock due to fears of shortages later in the year. In contrast, fabricators such as Micron and Samsung are carrying historically low levels of stock, while continuing in their efforts to bring additional supply to the market.3 Looking further ahead, a large expansion of memory capacity is expected in China in 2022 as new assembly and test facilities are commissioned.4 The outlook for gold in the memory sector is generally positive, but some challenges remain. The recent crackdown on cryptocurrency mining in China, for example, is beginning to impact demand for high-end graphics cards in the country and this is forecast to continue throughout 2021.5 Finally, ongoing challenges remain from both miniaturisation of device architecture (which potentially reduces the quantity of gold used in memory chips) and the threat of manufacturers switching to silver bonding wire.
LED demand remained strong during Q2. Gold volumes used in LED production increased by between 12-18% y-o-y across major markets. Several key sectors saw ongoing recovery, including automotive, where both electrification and a general recovery in sales from last year’s COVID-related weakness has boosted demand. The general display sector has experienced a similar recovery, with PC and notebook shipments rising during the quarter. The gradual return of major events around the world is starting to drive growing demand for video wall display units, a major user of high-end LED chips. Although a minor component of the overall LED sector, Infrared LED (IR LED) demand is buoyed by the continued popularity of healthcare sensors, such as skin sensors and heart rate-tracking capabilities built into watches and smartphones.
However, as we have previously reported, the threat of migration to mini-LED and / or micro-LED technology (which, in some cases, uses less gold) remains. While this shift undoubtedly represents a risk for gold, it does not remove the need for gold entirely: mini-LEDs still require gold bonding wire – albeit in far smaller quantities – and mini-LEDs are currently more expensive than the incumbent technology, which will likely present a challenge with regards to uptake.
Q2 is traditionally a slow quarter for the wireless sector, but gold demand still grew 5-8% y-o-y.6 5G infrastructure deployment continued in many countries around the world, providing strong support for wireless technology alongside a range of applications in sectors such as consumer electronics and automotive. As previously reported, aerospace is also a growing area in this sector: a proliferation of low earth orbit satellites (LEOs) is generating demand for high-end wireless devices which represents an expanding use for gold. While chip shortages reportedly curtailed smartphone manufacturing by ~5% during Q2, reports suggest that Apple are aiming to have 90 million handsets ready for launch in 2021, an increase of 20% compared with previous launch numbers which should support demand.7 However, in a potential threat to this important sector, recent reports suggest that certain Android manufacturers have changed their designs to eliminate 3D sensing in mobile devices due to the cost increase when upgrading from 4G to 5G technology. This has temporarily slowed 3D sensor growth as shipments fell to ~80% of previous forecasts. Longer term, though, the outlook for wireless demand remains positive as evolving technology drives demand for gold across several applications.
The Printed Circuit Board (PCB) sector also performed steadily during Q2. Major markets registered increased gold demand of between 6% and 10% y-o-y. This was driven by the ongoing recoveries in the automotive and consumer electronics sectors, alongside emerging aerospace, AI and 5G applications. Overall, the PCB sector has a positive outlook, benefitting from both a healthy supply chain, which is recovering quickly from COVID-19, and continued strong demand across a range of sectors.
At the aggregate level, 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 6.6%, 10.5%, 11.2% and 30.5% respectively.
Other Industrial and dentistry
Other industrial applications recorded a healthy y-o-y increase of 31% to 10.8t during Q2, while dental demand rose 12% y-o-y to 2.9t. Strong demand for plating salts used in costume jewellery and luxury accessories was the main driver for the recovery, which was tempered to an extent by the resurgence of COVID-19 in India and a consequent fall in demand for jari – a gold thread used in clothing. However, as mentioned previously, these rises should also be taken in the context of a particularly weak Q2 2020.