The total volume of gold used in the technology sector fell to 81.1t during Q2, a 3% y-o-y decline. This was the third consecutive quarter of falling demand, due to a range of challenges in the electronics sector, including the ongoing trade dispute between China and the US. However, there are signs of recovery and we expect declines to continue to slow throughout H2 2019.
Electronics
Gold used in electronics fell 3% to 64.7t during Q2, due to a broad slowdown across the sector. This slowdown has been starkly illustrated by the World Semiconductor Trade Statistics Organisation, which recently revised its earlier forecast of a 3% fall in semiconductor demand in 2019 to a fall of 12.1%, followed by a recovery of 5.4% in 2020.1
Printed circuit board (PCB) demand was the one positive of the quarter, rising by 1-3% y-o-y. After the traditionally weak first quarter, PCB demand saw marginal growth on the acceleration of 5G-related applications, which are expected to be the key driver throughout the rest of the year. Longer term automotive-related applications are expected to provide ongoing support as the electric vehicle market continues to grow.
The light emitting diode (LED) sector recorded another weak quarter, with gold used in these applications down 4-8% y-o-y. The ongoing US-China trade friction continued to weigh heavily on the sector, with pressure also coming in the form of high inventory levels on the back of falling demand. Additionally, mini-LED started to gain share in backlighting applications; this is expected to begin competing with gold bonding wire-containing OLED in the display market this year. Given the shift of chip-bonding technology to chip scale package (CSP), gold offtake in the LED segment is likely to remain soft.
The memory sector saw a repeat performance of Q1, with an average decline of 2-6% y-o-y during the quarter. Demand from smartphones, other consumer products and data storage centres remained weak. Oversupply produced price pressures, which in turn led to major memory manufacturers reducing their utilisation and CAPEX investment to minimise losses; for example, South Korean chip manufacturer SK Hynix has reportedly delayed its plans to ramp up production at its newly commissioned Chinese plant.
The wireless sector recorded a decline in the region of 6-10% y-o-y, a notable improvement on Q1. This was driven by the launch of several 5G smartphones and increased orders for 5G base stations. With the acceleration of 5G commercialisation, demand for power amplifier (PA) modules will rise significantly as the PA usage will be two-to-three times that of 4G in order to support high data transfer rates through multiple frequency bands. Looking further ahead, the utilisation of wireless factories is expected to strengthen each quarter, benefitting from growth in 5G applications and optical sensors.
The key eastern fabrication hubs of Mainland China and Hong Kong (SAR) and Japan registered Q2 falls in gold volumes, of 5.3% and 4.0% respectively. As in Q1, the US bucked this trend, with a 3.0% increase.
