Silver will play key role in 5G rollout

While rising gold prices are dominating the headlines, silver is quietly experiencing its own explosion in demand.

The growing appetite for the lustrous, white metal stems in part from its use in components needed in rapidly evolving technologies, led by the voracious appetite of fifth generation (5G) telecommunications and related electronic applications and systems.

But silver, long valued for its beauty and rarity, has been around for millennia.

Other than in currency and as an investment medium (coins and bullion), the soft metal is also used in solar panels, water filtration, jewelry, ornaments, high-value tableware and utensils, electrical contacts and conductors, specialized mirrors, window coatings, catalysis of chemical reactions, as a colorant in stained glass and in specialized confectionery.

The precious metal exhibits the highest electrical conductivity, thermal conductivity, and reflectivity of any metal, and is found in the Earth's crust in the pure, free elemental form as an alloy with gold and other metals, and in minerals such as argentite and chlorargyrite.

Today, most silver is produced as a byproduct of copper, gold, lead, and zinc refining.

Its compounds also are used in photographic and X-ray film. In addition, diluted solutions of silver nitrate, and other silver compounds are used as disinfectants and microbiocides (oligodynamic effect), added to bandages and wound-dressings, and in catheters and other medical instruments.

Market uncertainty

Though the price of silver has been fairly volatile during the past decade – ranging from US$14 per ounce to US$50/oz between 2009 and 2018, the metal's price is currently at a six-year high, amid rising safe haven demand and tight supply.

The uncertainties presented by the COVID-19 pandemic make forecasting silver market conditions very challenging in the near term, according to The Silver Institute.

With the difficulties currently facing the global economy, key areas of silver demand - including industrial fabrication and jewelry and silverware offtake - are anticipated to decrease this year, solely as a result of the global pandemic.

The latest World Silver Survey, published by The Silver Institute and Metals Focus, indicates that in 2019 the silver market experienced an overall global silver supply increase despite a 1% decrease in mine production. In 2020, mine production is expected to fall 5% to 797 million oz, while overall global silver supply is projected to drop by 4% to 978 million oz. That would be the lowest level in global silver supply since 2009.

Many forecasters expect the precious metal's price, currently hovering between US$24/oz and US$25/oz, to stabilize going forward in the US$16-US$19 range in the near term due to various factors. These include rising investment demand in the face of decreasing interest rates in the United States, increasing sales of electric vehicles and potential investment in green technologies, offset by industrial slowdown in China, and fear of a global economic slowdown, which could decrease industrial demand for silver.

A bright spot in the current forecast, however, stems from the key role the metal is expected to play in the next generation of telecommunications technology.

Advent of 5G

The innovation called 5G, which some forecasters predict will be a game-changer, is still in the early stages of deployment, with annual 5G-related silver demand currently totaling about 7.5 million oz, according to a recent report released by The Silver Institute.

The report, titled "Silver's Role in a Future 5G Connected World," details an anticipated rollout of 5G in the coming years, along with accompanying electronic applications. Prepared for The Silver Institute by the California-based research firm, Precious Metals Commodity Management LLC, the report forecast yearly demand for silver dramatically increasing to about 16 million oz by 2025 and as much as 23 million oz by 2030.

By comparison, silver's use in the once-emerging photovoltaic industry totaled roughly 40 million oz a year in 2010, but by 2018, that total had doubled, climbing to 80.5 million oz.

The anticipated exponential growth in silver demand driven by 5G will come not only from the evolution of mobile broadband networks, but also from new unique network and service capabilities spawned by 5G technology, experts predict.

"5G is not just an incremental improvement over 4G - it is the next major evolution of mobile communication technology with performance improvements of several orders of magnitude over today's networks. 5G enables a huge diversity of tasks that 4G cannot perform. 5G will have a 100% better capacity than 4G, which will dramatically improve internet speeds," the report said.

For example, downloading a two-hour film takes 26 hours on 3G, six minutes with 4G and as little as 3.6 seconds with 5G, according to industry estimates.

But it's not just downloading speeds that will massively improve, response time, or latency, will be much faster, too. 4G responds to commands within just under fifty milliseconds, which will drop to as little as one millisecond with 5G, or 400 times faster than the blink of an eye, the report said.

A world of possibilities

In addition to its fast download speed and low latency, 5G can become the connective tissue for a host of applications and industries, including the Internet of Things (IoT), which will be able to link and control robots, medical devices, industrial equipment, and agricultural machinery remotely, along with numerous other applications. It also will facilitate autonomous driving technology, as well as augmented and virtual reality. Moreover, it has the potential to transform the internet, according to the report.

The rollout of 5G will not just be another migration from one generation to the next; it will require significant upgrades on infrastructure and the introduction of other hardware, such as mobile phones and IoT devices. Millimeter waves, small cell networks, massive multiple input multiple output, beamforming (modifying radio signals to improve transmission speed) and full duplex (transmission of data in two directions simultaneously) will be the five key 5G enabling technologies that will largely make up the 5G architecture. Due to the large data transfer capabilities, cloud computing and storage is set to significantly increase, too.

Transformation will be the name of the game in many other industries, too, according to the report. 5G will facilitate not only increased download speeds, fewer delays, better connectivity with less energy consumed, but it also will indirectly facilitate the development of many industries, such as automotive, manufacturing and healthcare, just to name a few, to reach the next level.

"5G will be the glue in an ecosystem of improved connectivity between all sorts of devices, and as such, it is expected that connected devices, such as the IoT, will significantly increase over the next five years. Silver will benefit from this development over the forecast horizon. Everything 5G-related will be based on electronic devices, such as semiconductors, multi-layer ceramic capacitors, micro electro-mechanical systems, and many more, which to one degree or another consume various amounts of silver," the report predicted.

"Thrifting and substitution pressures are always present in electronic applications, and we expect that particularly in the case of gold to continue. Silver, on the other hand, will be one of the go-to metals for future 5G enabled electronic applications," its authors added.