Third quarter demand for gold in industrial applications fell sharply, as tightening monetary policies further weighed on consumer confidence. In the electronics sector, falling consumer demand increased pressure on the entire supply chain, leading to falling orders, rapid industrial utilisation cuts and a spate of profit warnings by many major chip manufacturers .1 Restrictions imposed by the US on semiconductor chip and equipment exports to China are also damaging to supply chains, not just in China but across the East Asian semiconductor market as it scrambles to reorganise its supply infrastructure .2 This adds further complexity to a sector which is continuing to deal with the aftermath of the COVID-19 pandemic, and ongoing geopolitical challenges around the world.
Electronics
Gold used in the electronics sector fell sharply during Q3, down 9% y-o-y to 63t. This decline, during what is traditionally the strongest quarter of the year, was driven by falling consumer electronics demand. The resulting inventory increases at manufacturers caused them to reduce their orders for chips, which in turn led to falling utilisation rates at semiconductor fabrication plants around the world. The world’s largest chip manufacturer, Taiwan Semiconductor Manufacturing Co. (TSMC), reported strong Q3 profits but sounded a warning for Q4, cutting its annual investment budget for 2022 by 10% and predicting near term challenges to revenue as demand slows 3.
Demand for gold in the Light Emitting Diode (LED) sector continued its rapid decline in the third quarter on weak consumer electronics demand. The laptop and PC sector has been particularly hard hit; according to research firm Gartner, PC shipments in Q3 were down 20% y-o-y to 68 million units. This is the steepest decline reported by Gartner in nearly three decades.4 Separately, demand for high-end LEDs (e.g. UV-LEDs and IR-LEDs used in healthcare applications like skin sensors and heart rate-tracking in watches and smartphones) cooled as wearable device sales slowed, reversing several quarters of strength. Finally, the ongoing shift to mini-LED technology (which uses less gold) remains a threat, but implementation costs remain relatively high and the broader market challenges may further slow uptake of these devices.
The memory sector witnessed declining demand for gold during Q3, with further falls expected in the coming quarters. The sector was hit by both falling demand for consumer electronics and slowing orders for hyper-scale data centres. The significant drop in crypto mining in recent quarters has also continued to have a negative impact on graphic card demand, causing a surge in inventory at some manufacturers. In response, chip makers have begun cutting output and investment. For example, Kioxia, one of Japan’s largest memory chip manufacturers, has announced chip production cuts of ~30% at its Yokkaichi and Kitakami flash memory plants from October 5. However, given current difficulties in the wider market, migration to miniaturised architectures (which use less gold) are likely to be postponed until mid-late 2023, providing some respite to gold demand in the memory sector in the short term.
Demand in the wireless sector experienced major declines during Q3. Weak smartphone demand over recent quarters led to ballooning stocks of power amplifiers. With demand predicted to remain weak in key markets, orders have been slashed to run inventory levels down to more manageable levels. As reported in Q2, demand for gold in 5G infrastructure installations remained steady thanks to significant pre-orders from governments and large companies, and this situation is likely to continue in the near future. Other application areas, including uses in low Earth orbit satellites (LEOS6) and light detection and ranging (LIDAR7) , remained steady, but make up a relatively small proportion of demand in the wireless sector so do not offset the falls reported in the consumer electronics segment of the market. However, once the inventory corrections noted above have run their course, the sector is expected to return to more normal operations and high-end chips will continue to drive gold offtake in wireless applications.
Finally, the Printed Circuit Board (PCB) sector remained stable during the quarter. The hangover of the automotive chip shortage provided some support for PCBs, as high-density qualified devices remained in strong demand by car manufacturers. However, faltering consumer electronic demand began to impact the PCB sector during Q3, and it is likely this will worsen during the final quarter of 2022. Longer term, optimism remains as emerging applications such as high-speed computing, LEOS and the ongoing evolution of the automotive electronics market are likely to support demand in the PCB sector.
At the aggregate level, all four major electronics fabrication hubs around the world recorded significant y-o-y declines in gold demand during Q3; South Korea, the US, Japan and Mainland China and Hong Kong SAR registered figures of 7t (-7%), 16t (-2%), 18t (-11%) and 16t (-16%) respectively.
Other Industrial & dentistry
Other industrial applications fell by 2% y-o-y to 11t, primarily as a consequence of disruptions in China. There were small increases recorded in Italy due to growth in plating salt demand and in India thanks a broad economic recovery in the country. Dental demand fell to a new quarterly low, declining 11% y-o-y to 3t on the back of further structural decline in the main Japanese market
