Synthetic diamonds have firmly taken their place in the sector of raw materials for industrial use. But they have little or no chance to challenge natural diamonds in the jewelry sector: the current technologies are unable to provide a proper level of profit margin, not to mention that buyers are accustomed to take the diamond as a symbol of status and wealth and they are in no hurry to substitute a dummy for this gem. Such a conclusion is drawn by Bain & Company’s experts in their analytical review, “The global diamond industry: Lifting the veil of mystery.”
The synthesis of man-made diamonds started to be used on an ever expanding scale in the 1960s to meet the needs of the industry hungry for a cheap and affordable analogue of natural raw materials to maintain growing production of machinery and equipment. Several decades were needed to develop this technique, and now synthetic diamonds are ideal for industrial purposes: in the lab, you may specify the required characteristics of hardness, thermal conductivity and other parameters to suit your requirements.
Nowadays, diamonds have two main areas of application in the industry. In the first place, they are used in cutting, grinding and drilling equipment. The use of diamond powder or other diamond materials may greatly enhance the properties of a cutting surface. As a rule, synthetic diamonds up to 1 carat of any color and quality are used for these purposes.
Optics and high-tech production is another branch of industry, where high thermal conductivity of diamonds finds its application. So far, it is a small (about 5%), but very promising market - most modern engineering efforts in the field of synthetic diamonds are undertaken exactly along this line.
Consumption of diamonds in the industry is very large - about 5 billion carats, and lab-made stones account for 99.99% of the market. There are about a dozen synthetic diamond producers worth to mention and the largest of them is Element Six, a subsidiary of De Beers.
But in the gem-quality segment the situation is exactly the opposite. The share of synthetic diamonds in the market is about 0.01%, in other words negligibly small. And it seems that fears that lab diamonds may squeeze out natural gems in the market did not materialize.
Growing small stones for industrial purposes is easy enough and takes only a few days. But to grow a larger stone is a problem: it is difficult to maintain the integrity of the crystal. It is even more difficult to achieve the necessary criteria for color and clarity. The techniques of producing synthetic diamonds of gem quality are still new and therefore expensive. Production cost of 1 diamond carat at a diamond deposit is now standing at around $40-60, while growing a gem quality diamond in a laboratory is 50 times more expensive - about $2,500 per carat. However, as Bain experts state, synthetic diamonds should cost 50-55% less than natural diamonds to win demand in the market. Synthesized diamonds of jewelry quality generate very low profit margins - much lower compared with the synthesis of industrial rough diamonds.
It is noteworthy that the majority of customers are still not ready to buy synthetic diamonds, especially as a gift for engagement. Due to their cheapness synthetic stones are so far able to attract interest only from a small layer of budget-conscious consumers. In this case, both options require a rather aggressive marketing campaign that could shift the situation from a standstill, but so far there are no marketing efforts in this direction underway.
However, it cannot be taken for granted that synthetic diamonds will be more popular if their prices will go down further. The more so that this may undermine prices for natural diamonds. The market has a fresh example of synthetic sapphires used in jewelry manufacturing for more than a dozen years. Production of synthetic sapphires today is a hundred times greater than extraction of natural stones, but prices for natural sapphires continued to grow over the past 30 years. Currently, an artificial stone is worth about $0.2 per carat, while a natural one is priced at $11,000 per carat.
Alexandr Shaburkin, Rough&Polished, Moscow
