While 2021 can broadly be considered a year of strong recovery in the technology sector from the depths of COVID-19 in early and mid-2020, it has not been without its challenges. As we reported through the year, the pandemic continued to impact both supply and demand across all technology sectors. Many large manufacturers have had to inject ingenuity and agility into their operations to cope with a range of situations, including sudden localised lockdowns and energy rationing.
The electronics industry has been particularly vulnerable to these events given its reliance on vast fabrication plants, and stories of entire chip manufacturing operations temporarily relocating have not been uncommon during the last two years. However, these efforts have been worthwhile simply because demand for high-end consumer electronics has, on the whole, remained strong and the pandemic has effectively fuelled a global shortage of semiconductors.1 Stark illustrations of this include the recent announcement by Apple’s main chip supplier, Taiwan Semiconductor Manufacturing Company (TSMC), that it is setting aside over US$40bn for expansion in 2022,2 and the World Semiconductor Trades Statistics group forecasting continued growth across all categories and regions of the semiconductor market in 2022.3
Electronics
Gold used in the electronics sector rose 2% y-o-y to 71t during Q4. Having made double-digit gains throughout the first half of 2021, growth slowed in the second half and the final quarter saw the smallest y-o-y increase of 2%. This is indicative of gold demand returning to more ‘normal’ levels as the worst impacts of the pandemic on this segment of the industry were concentrated in the first half of 2020. However, while the percentage increase is relatively small, this is the first time quarterly electronics demand has exceeded 70t since Q4 2017.
Gold used in LEDs grew on the back of the ongoing recovery in the automotive sector, but challenges remain. This was supplemented by strong demand for high-end LEDs, such as UV-LEDs and IR-LEDs, both of which are used in healthcare sensors including skin sensors and heart rate-tracking functionality in smartphones and watches. These types of wearable technology are becoming increasingly popular, and will continue to support demand for high-end LEDs. This was balanced to an extent by inventory adjustments by some major LED backlight end-users (such as TV manufacturers) who reportedly carried high stocks from Q3. Looking forward, the threat of migration to mini-LED and/or micro-LED technology (which, in some cases, uses less gold) remains. For example, Apple is incorporating mini-LEDs into some of its products,4 and Sony is following suit in its 2022 TV technology5. This will continue to build pressure on the traditional LED market in 2022 and beyond.
Printed circuit board (PCB) demand remained strong thanks to steady performance across key sectors. The ongoing recovery in the automotive sector combined with high demand from high-performance computing, 5G infrastructure and AI applications saw gold demand increase during the quarter. The supply situation also steadied, with production returning to normal after the disruption caused by power outages in China during the third quarter. Looking into 2022 and beyond, the outlook is broadly positive as major industries are likely to continue relying on increased electrification, which will provide support for high-end PCBs.
The memory sector continued to experience steady growth but this may slow as we enter 2022. Cryptocurrency mining drove strong demand for high-end graphics DRAM chips during the quarter, but the threat of miniaturisation in NAND chips remains, with major manufacturers such as Samsung and Hynix working to develop new architectures that may need smaller quantities of connecting gold bonding wire. Additionally, as the impact of COVID on the industry continues to retreat, demand for new devices and infrastructure to support home working is likely to slow. However, given that the recovery of the automotive and consumer electronics sectors are set to continue, we believe 2022 will remain broadly flat as these competing factors begin to balance one another out.
Finally, the wireless sector also performed well with strong demand across various applications. The recovering automotive sector, alongside high-end satellite and 3D imaging sensors, provided a strong base for demand during the quarter. Looking ahead, smartphone shipments have been slated to return to pre-pandemic levels in 2022, with almost 50% of those devices being 5G-enabled6 . A gradual easing of chip shortages will further support the steadier supply of consumer electronics. Overall the outlook for gold demand in the wireless sector remains positive.
At an aggregate level, three of the four major electronics fabrication hubs around the world recorded increases in gold demand during Q4; Mainland China and Hong Kong SAR, South Korea and the US recorded increases of 4%, 4.1% and 0.9% respectively, while the fourth (Japan) was flat.
Other industrial and dentistry
Other industrial applications recorded a healthy y-o-y increase of 6% to 12.5t during Q4, while dental demand fell 7% y-o-y to 2.7t. The recovery in the other industrial and decorative segment was chiefly due to India, where the improving economy helped boost demand for jari, a gold thread used in saris. Italy also contributed to the growth, thanks to improved demand for high-end plated accessories.
Structural losses continued in the dental sector, where migration to lower-cost and cosmetically preferred alternatives continues.
