Thursday, March 15, 2012

Another Inflation-Caused Substitution: Computer Chip Makers are Replacing Gold with Copper

An EPJ reader emails:
Hi Bob,

Big fan of your EPJ website and daily alert. Been following you for over a year - I'm very likely one of your top 10 readers. Thought you might be interested in this:

While many people have noticed clothing companies opting for cheaper materials, the same is with computer chips.

I work in the electronics industry (for obvious reasons I won't give the name of the company) and we make computer chips. As you may or may not know, the majority of computer chips (maybe 80%) have some gold in it. It is used for interconnects between the die and chip package. While the amount is probably negligible (on the order of a few cents per chip), when there are millions of them being produced, that adds up pretty fast. Also, it is great if companies can shave a dime off the cost of a computer chip.

Given the rising price of gold, the last few years we've had to switch to copper to maintain prices. Copper has different mechanical properties from gold and because of the different properties, it requires different machines, capabilities, expertise to do it right. Short term: Yields drop and capital expenditures go up. Initially they started doing this in the 80s when gold was peaking, but when it collapsed they reverted back to gold. This movement started up again a few years ago, and chip-containing-gold is expected to be phased out by the middle of this decade.

Inflation is really starting to creep. It seems you're right on the money -- again.


  1. So long as investment demand for gold replaces industrial use of gold, everything is a wash, but how long might that go on?

    As i recall copper corrode easily from things in the air such as sulfur (and?)... Does this mean the things which use these copper chips will have a shorter life and are less reliable?

  2. Speaking of computer chips, does anybody know how to recover gold (or in some cases platinum) from old chips? I've got this friend who owns a lot (and I do mean A LOT) of old electronics (computers, radios, TV's, washing machines, etc). Recently he's been talking about getting rid of that, as it takes up too much of his space. I wonder whether it would be worth to save him the trip to junkyard, take possession of this stuff, and try to get some gold out of it myself.