According to the report, it today costs about $300 to $500 per carat to produce a single lab-grown diamond, compared with $4,000 per carat in 2008.
Lab-grown diamonds are produced from a carbon seed, either under conditions of high pressure and high temperature, known as HPHT, which mimic the geological conditions that were present when natural diamonds were formed, or by layering carbon from gases in a microwave plasma oven, in a process known as chemical vapor deposition, or CVD.
The CVD method, which originally was intended to provide synthetic diamond materials that would be used in the manufacture of computer chips for the electronic industry, is fast becoming the dominant method so producing gem-quality laboratory-grown diamonds for jewelry.
SYNTHETIC RETAIL PRICES DOWN 50 PERCENT IN TWO YEARS
The falling cost of producing laboratory-grown diamonds is having a substantial effect on the economics of the still-developing industry sector. As production costs have dropped, the Bain report notes, retail prices have followed.
According to the report, retail price of gem-quality laboratory-grown diamonds have almost halved in the past two years, and over the same period wholesale prices fell by three-fold.
The report adds that prices are expected to decrease even further as production efficiencies increase, with new competitors entering the market and the segment commoditizing.
The falling cost of CVD production is not the only factor. De Beers Lightbox company, a producer of synthetic diamond jewelry, has also played a key role.
Using high-quality HPHT-produced stones, when De Beers launched launched the Lightbox product line in 2017, it departed from the practice used up until then by other synthetic diamond producers, who would benchmark their stones’ prices against the prices paid for natural stones with similar quality characteristics. It instead chose to sell its goods at a fixed price of $800 per carat, irrespective of the color of the stone.
The De Beers strategy shook up the market, forcing many other producers to cut costs in order to compete, and expanding the price differential between natural and synthetic goods.
CVD diamond crystals, produced for use in the electronic industries.
THE TWO OPTIONS OF LABORATORY GROWN DIAMOND PRODUCERS
The changing economics of the industry have left laboratory-grown diamond producers with two options, noted the Bain report. The first is to produce gem-quality goods jewelry, and the second is to produce diamonds for high-tech applications.
The latter option is often the more attractive. Sensors, semiconductors and medical cutting tools are an emerging market with greater potential for long-term growth and profitability, and they have the added attraction of lower barriers of entry, the report notes.
Currently, the size of the market for gem-quality, laboratory-grown polished diamonds for jewelry is estimated by Bain to be at 2 million carats, the majority of which is melee, or goods under 0.18 carats in size per stone.
But, says the report, if the segment sustains its current growth rate of 15 percent to 20 percent annually, supported by consumer demand and reasonable economics, the market could grow to between 10 million and 17 million carats per annum.
This and consumer perception will decide the impact on the natural diamond market, and three scenarios exist, the report says. “Consumers could perceive lab-grown and natural diamonds as interchangeable, as two different products, or somewhere in between. Marketing could uphold the value of natural diamonds, especially if the prices of lab-grown diamonds continue to drop. It’s probable that consumers will view lab-grown diamonds as fashion jewelry but not luxury goods, limiting the effect on natural diamond demand,” it states.