Gold used in the electronics sector continued to recover. As large parts of the world emerged from the COVID-19 pandemic, improving consumer confidence created strong demand for big ticket items such as vehicles and high-end consumer electronic devices. Q3 also saw notable product launches from major manufacturers such as Samsung and Apple,1 further bolstering confidence in the sector. The shift towards home working in some parts of the world continued, but demand for related devices is slowing as saturation nears. The industry is also facing some major structural challenges that may impact demand in the coming quarters; these are discussed in more detail below.
The memory sector performed strongly, lifted by healthy consumer electronics demand. Inventory building by device manufacturers has pressured component suppliers’ inventories, and this will likely support gold demand through to the end of 2021 as major suppliers look to rebuild these stocks. Samsung, the world’s largest DRAM and NAND manufacturer, recently reported its highest profit in three years on the back of memory chip price rises and strong device sales.2 However, there are potential headwinds: memory demand in laptop and PC devices is likely to fall as home working slows. NAND chips also continue to undergo technology advances, with stacking technology set to increase in 2022.3 This will likely reduce the volume of gold required per chip, but increased wafer output may offset this.
The Printed Circuit Board (PCB) sector also had a strong quarter, reflecting robust demand across each end-product segment. Healthy PC shipments and smartphone launches provided strong support during Q3, alongside rapid developments in aerospace applications which continued to fuel demand for High Density Interconnect (HDI). HDI tends to have a higher wiring density per unit area than traditional PCBs, and hence uses more gold. Strong demand from high-performance computing, artificial intelligence, and 5G infrastructure applications also contributed to demand during the quarter.
LED demand registered a small fall as migration to mini-LED continued. Following the traditionally busy second quarter (where LED demand spikes as new consumer electronic devices are assembled in preparation for Q3 launches) the third quarter tends to be the slowest of the year in the LED market, and this was exacerbated by the ongoing implementation of mini-LED technology in some markets (mini-LED requires smaller quantities of gold bonding wire than traditional LEDs). Previous expectations were for mini-LED to be a ‘transitioning technology’ as the industry moves towards gold-free micro-LEDs, but this now appears less certain as manufacturers increasingly invest in mini-LED and product launches are slated to ramp up in 2022 in the consumer electronics sector. Finally, infrared and ultraviolet LEDs (IR LED and UV LED) are increasingly being incorporated in a range of household appliances and wearable technologies. Although currently a minor component of the overall LED sector, demand for these products is experiencing notable growth rates.
Demand in the wireless sector remained healthy. Ongoing 5G infrastructure deployment in many countries around the world continues to provide strong support for wireless technology. Additionally, many new smartphones are now 5G-enabled, which requires increased use of power amplification chips. Other high-tech sectors continue to provide growth opportunities, such as the expansion of automation technology, a buoyant satellite technologies sector, and ever-increasing vehicle electrification. However, gold usage in this sector faces threats in certain areas. 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. Additionally, Huawei, a major Android device maker, continues to face severe US sanctions, ultimately threatening gold demand for use in their devices.
While Q3 performance was strong, the sector faces notable challenges in coming quarters. Widely reported chip shortages in the automotive sector appear to have worsened and are severely impacting new vehicle sales worldwide. Total auto sales in China, for example, suffered in September 2021, with most manufacturers reporting notable falls.4 These shortages are also spreading to other parts of the industry. Apple, for example, recently indicated that it is likely to deliver 10 million fewer units of its new flagship iPhone 13 in 2021, citing supply issues from chip manufacturers such as Broadcom and Texas Instruments.5 These significant industry-wide challenges are likely to create uncertainty in the coming quarters.
Another looming challenge for the industry relates to energy availability. Many industries in major provinces in China have been impacted by power rationing and enforced cuts in a drive to meet targets for reducing energy and emission intensity.6 With over 50% of the world’s 2,600 PCB factories being based in China, this threatens to have a significant impact on PCB supply. Some manufacturers have already reported major production halts, and the impact of this is likely to feed through into the broader supply chain during Q4’21 and beyond.
On a country level, each of the four major electronics fabrication hubs around the world again recorded increases in gold demand during Q3. Japan, Mainland China and Hong Kong SAR, South Korea and the US recorded increases of 10.3%, 6.9%, 9.4%, and 12.3%, respectively.