In June, De Beers abandoned their long-held dogma of not offering lab grown diamonds for the jewelry market. Their switch surprised the diamond industry and shows how obsessed the big name in diamond mining, which is producing 30 million carats a year, has become with a company like ours that is producing 100,000 carats a year.
There’s little precedent in business for a move like theirs. It’s a bit akin to the hotel industry launching a better AirBnB in order to convince people to lodge more often in hotels.
The main impact on producers of non-mined diamonds like ourselves is a very positive one: “Lab Diamonds Are Now Officially Mainstream,” writes the “Jewelry Industry Authority" JCK Online.
Lab diamonds are now legitimized and able to be purchased by every large diamond buyer in the global value chain of the industry. This is a big change from before when these large buyers had to be fearful and proceed cautiously. We can now communicate with these large buyers via their official emails rather than their hotmail accounts.
The flood gates have opened in many ways. The minimum monthly purchase quantities that these buyers are interested in often exceed our entire present production capacity. The first phone call we received the week after De Beers’ announcement was an offer to invest hundreds of millions of dollars in us.
Lab diamonds will become the certain choice for 100% of all non-bridal jewelry. Consumers buy jewelry and designs in this market, and as long as it is high-quality material, the non-mined origin does not truly matter to people in this market -- and likely only helps via the environmental credentials and guaranteed origin of lab diamonds.
De Beers is offering lab diamonds only in <1ct sizes and set as part of their jewelry. (Less than 7% of our production value is diamonds up to 1ct in size.) This limits the market reach of their new product because much of the buying demand out there is for loose diamonds, rough diamond, and larger sizes. Other suppliers now have the opportunity to fill that huge void while riding on the legitimization of the product category.
Growers whose technology can only grow smaller rough, yielding <1ct polished diamonds, will be impacted competitively. These are primarily the Chinese producers using fast-cycle high-pressure presses who are already dominating the melee market. However, these producers are already way ahead of the production that De Beers plans to achieve by 2020 including lower pricing. Note that the smallest, “melee” diamonds are already priced at even less per carat today. 500k carats from De Beers are not so large in an industry that shipped 180 million carats in one year. Most importantly though, De Beers is expanding the demand for the smaller diamonds by legitimizing the category.
De Beers is not competing in the most attractive market of “uniques”, that is, larger stones, which we are focused on. Perhaps their technology is not yet capable of producing larger diamonds. For fear they’d be polished into jewelry diamonds, De Beers’ tech unit was not allowed to grow diamonds thicker than 2mm for many years. Much of Diamond Foundry’s intellectual property is in how to grow >2mm thick diamonds for >1ct diamonds. De Beers has a lot of catching up to do technologically.
Growing large diamonds is technologically distinctly more difficult than producing small ones. Tools need very different designs to work on long-cycle production and at the much higher purity and quality demanded by larger diamonds. The majority of production defects — cracking, temperature control deviations, etc. — occur as one grows diamonds thicker than 2mm. De Beers has actually little experience with creating larger lab diamonds. Their technology stagnated years ago and has now been surpassed by innovators.
At Diamond Foundry, our proprietary technology is specifically designed for creating large, generally >10ct, even wafer sized rough diamond. There are no tools available commercially of the semiconductor grade capabilities that ours have. Our entire process control system is developed for very large diamonds.
As a result, we can address the market of “uniques” — large rough that is polished into >1ct polished diamonds that are individually certified. Ever more people desire these for engagement rings and other diamond jewelry.
We also offer smaller stones, which come effectively "for free" from the larger rough. But less than 7% of our production value is diamonds smaller than 1ct in size; and the pricing for these smaller diamonds has long been less than $200 per carat even for mined diamonds. The unique value has long been in large uniques.
De Beers falls short in two key ways with their new product:
- Failure to achieve eco-friendly status. De Beers’ production is scheduled to commence in 2020 with power predominantly coal fired, not sustainably sourced. De Beers recently killed 18,405 fish for Canadian diamonds when they drained an entire lake to access Canadian diamonds — at least it won’t be that bad for their lab diamonds. Still they are failing to achieve the full potential for lab diamonds in the way they choose to operate — eco-friendly status. That’s a big marketing differentiator.
- Failure to certify uniques. De Beers’ failure to certify each unique lab diamond will only limit the appeal of their diamonds. Everyone else will surely keep uniquely certifying their diamonds. It is a basic truth that each diamond created aboveground grows with unique inclusions and defects just like any diamond created inside Earth. In fact, each lab diamond is so easily determined as unique that one of the leading gemological institutes (GCAL) even certifies a unique “gemprint” code for theft protection and legal recovery. This means if you present a diamond to them, mined or grown, they recognize it based on its unique crystal growth and defects -- and can warrant the unique identity of a diamond to the authorities. So a thief may get jailed over the uniqueness of a lab diamond. He may then ponder for years in jail De Beers' claim that lab diamonds are not unique.
De Beers has a reputation for being good at marketing but that dates back decades. Their consumer brands are no winners, and they are even more out of touch with today’s generation. The mistake they clearly make today is to anchor big-dollar marketing campaigns into demonstrably disputable attributes like trying to claim ‘real’ or ‘unique’. No matter the marketing budget, questionable truths have never supported any great marketing, and in this day and age are a harder sell. than ever before
‘Real is Rare’ made that mistake by going for ‘real’ at a time when the jewelry industry's most respected editor Rob Bates editorializes "In Reality, Lab-Grown Diamonds Are Real Diamonds" and even the Gemological Institute of America's (GIA's) own director states “[created diamonds] are real diamonds”. The second attribute ‘rare’ is even more irritating given industrial miners produce 180 million carats a year versus less than a percent of that produced aboveground.
The new campaign seeking to deny that grown diamonds are each unique starts out on equally poor footing. It’s just not true.
As for the more aspirational attribute ‘forever’, it’s hard to see why one and the same material would be forever here but not there. Diamond forms in Earth within hours actually (violently during eruption) while aboveground production takes hundreds of hours. The atoms of aboveground diamonds are as old as the universe. So why is one forever but not the other? Even then, people know that nothing is forever. The percentage of couples who do not cringe at the notion of forever even when getting engaged is a niche of the 1950s mindset. We’re happy to serve the mainstream market of modern couples with our world-positive diamonds of guaranteed origin.
We do not disagree actually with aboveground diamonds being a distinct product than mined diamonds. In fact, we prefer it that way: Diamonds with better value and guaranteed origin that’s environmentally friendly. We expect educated consumers, as they already do today, to simply pick better quality and better value for the identical material.
The diamond industry has long managed to play on the typical first-time buyer in this market by confusing people with complicated offerings and pricing schemes. The future of the industry is clear.
We are looking forward to the next phase where diamonds produced aboveground are mainstream.