“Lab-grown diamonds are clearly here to stay,” emphatically states consulting firm Bain & Co., in the recently released 2018 report on the international diamond industry, produced in cooperation with the Antwerp World Diamond Council.
ABOVE: Synthetic diamond disks grown by chemical vapor deposition (CVD). Photo courtesy of Element Six.
Indeed, the report adds, given the pace of declining production costs and wholesale and retail prices, lab-grown stones are likely to become accessible to a wider consumer audience. This wider availability could well have a positive impact, potentially increasing demand for diamonds in general.
In the short to medium term, the Bain reports states, the growth of lab-grown diamonds in the market will be limited by manufacturing capacity, access to technology and intellectual property, and availability of funding.
AS TECHNOLOGY IMPROVES, SYNTHETIC PRICES FALL
Advancements in technology have put lab-grown diamond producers into a more competitive position, the Bain report states. This is particularly true for those company producing synthetic diamonds using chemical vapor deposition (CVD) technology, who have seen the cost of producing a one-carat diamond fall from $4,000 in 2008 to between $300 and $500 today.
Lab-grown diamond producers using CVD have two options. The first is produce gem-quality production for retail jewelry sales, and the second is to produce diamonds for high-tech applications, such for the semiconductor and medical tools industries. As the Bain report points out, the latter option has the greatest potential for long-term growth and profitability, as well as low barriers to entry.
The current capacity of companies producing gem-quality, lab-grown polished diamond capacity is estimated by Bain to be at 2 million carats, the majority of which is melee of diamonds of sizes less than 0.18 carats. However, the report notes, by 2030, the market could grow to between 10 million and 17 million carats per annum “if the segment can sustain its current growth rate of 15 percent to 20 percent annually, supported by consumer demand and attractive economics.”
FUTURE TO DEPEND ON MARKETING EFFORTS
De Beers Groups’ entry into the synthetic diamond sector, through the launch of its Lightbox Jewelry line, was a major development for the industry, the Bain report stated, and, in particular, so were the company’s efforts to position the new product as a fashion item, rather than as fine jewelry.
Lightbox does not provide grading reports for its products, the report notes, with the given reason being that grading reports record elements pertaining to a diamond’s individuality and rarity, which is not appropriate for products that are mass-produced according to a particular recipe.
If the natural diamond industry is successful in differentiating its stones from lab-grown diamonds, the Bain report says, the effect on natural diamond demand by 2030 will be limited up to 5 percent to 10 percent in value terms.
Ultimately, Bain continues, it is marketing and consumer perception will determine the effect of lab-grown diamonds on the natural diamond market. In the absence of effective marketing, which draws a clear distinction between natural and synthetic stones, consumers could come to consider them as interchangeable.