Gold usage in industrial applications suffered one of the weakest quarters on record as the global cost of living crisis slammed the brakes on consumer spending, translating to sharp inventory reductions across much of the electronics sector. The worst of this should come in the first half of the year before the outlook turns more positive and inventory levels stabilise – particularly if inflationary pressures ease, as some forecasts suggest.1 The second half may be stronger than H1 – even if the US and other economies enter recession – as new products are launched and manufacturing ramps back up to more normal levels.
Electronics
Gold used in electronics experienced another significant fall during Q1, with major declines registered across all sectors of use. Taking PC and smartphone shipments as examples, analysts at Gartner have forecast2 declines to continue well into 2023 after a weak 2022. In the absence of meaningful new technology consumers are retaining devices for longer, and manufacturers are passing on inflationary component costs to users, further dampening demand.
Demand for Printed Circuit Boards (PCBs) fell rapidly during Q1. A significant proportion of PCB demand comes from PCs – a segment which has experienced rapid inventory reduction. Healthy demand from the automotive sector has provided some support, but not enough to offset the impact of weakened consumer electronics demand.
Memory chips, traditionally a steady source of demand, also fell in Q1. Samsung, one of the world’s largest memory chip manufacturers, reported a 96% fall in Q1 profits and, tellingly, reported that they were “…lowering the production of memory chips by a meaningful level, especially [the manufacture] of products with supply secured”. 3
Gold used in Light Emitting Diodes (LEDs) fell dramatically, almost halving from year-earlier levels. Even the relatively buoyant automotive sector was unable to steady the ship, with backlight applications also seeing falls. UV-LED demand has been hit by weakness in consumer electronic sales, and this is likely to continue during H1 as many new product launches have been postponed. In addition, increased uptake of mini-LEDs (which use less gold than traditional LED technology) remains a threat, although this may be slowed by current market weakness.
The wireless sector was similarly weak during Q1. This was a direct consequence of the weakening smartphone market – the largest source of demand for power amplifiers,4 which are currently at high inventory levels like many other chips. Some relatively niche applications (such as 3D imaging, aerospace/satellite and LIDAR) remained steady, but these are as yet a minor component of demand and unable to cushion falls seen in the power amplifier sector.
At the aggregate level the four major global electronics fabrication hubs recorded a y/y fall in gold demand during Q1: Japan (16%), South Korea (29%), US (6%) and Mainland China and Hong Kong SAR (19%).
Other industrial and dentistry
Other industrial applications (which include gold used in plating as well as decorative items such as gold thread) recorded a smaller but visible y/y decrease of 3% to 12t during Q1, with most countries seeing modest losses. Demand in Italy was down by a notable 5%. In contrast, India saw slight growth as the ongoing post-COVID recovery brought some relief. Dental demand fell 12% y/y to 2t on price-driven substitution from gold to other precious metals.
