Relative percentage of lab-diamonds directly competing with natural diamonds declines while overall growth continues
The percentage of lab-grown diamonds (LGD) considered to be “competing” directly with natural diamonds, in terms of value sold, has fallen to approximately 60% from as high as almost 100% a decade ago, according to Paul Zimnisky estimates.
The implication being that approximately 40% of current man-made diamond sales are incremental to the larger diamond industry —and forecasted to amount to some $7 billion in 2024, i.e. these are diamond sales that would not exist if LGD did not exist.
This is based on the thesis that diamond demand is not a zero-sum game, or to say another way, a man-made diamond sold does not necessarily mean that a natural diamond sale was lost.
This trend is forecasted to continue through at least the end of the decade as clearer delineation between lab-diamonds and natural diamonds evolves, leading LGDs to generate Incremental demand for diamond jewelry that tops $10 billion by 2026 (see below figure).
Bifurcation between man-made and natural diamonds (as different products, or less substitutable products) has progressed since LGD jewelry first became mainstream some eight years ago, with price being the primary driver. As the relative price point between the two products continues to deviate, more and more of the industry, as well as consumers, are perceiving them as “different” jewelry categories.
For context, man-made diamonds are now available at retail for 70%, 80%, or even 90% less than an equivalent-quality natural diamonds —with the relative discount most acute with larger sized goods, e.g. 3-carat-plus. This compares to as low as 10% just eight years ago according to Paul Zimnisky data.
While the bulk of man-made diamond price declines are figured to have already been realized, it is expected that prices could still fall further as 1) leading producers build out additional capacity —and thus realize even greater economies of scale, and 2) as production technologies continue to advance.
Speaking to progression in production technology, more-evolved and specialized man-made diamond producers continue to generously invest in R&D to advance and deploy novel production technologies which is resulting in better production economics, i.e. lower-cost and higher-quality output.
This is primarily being driven by longer-term ambitions of breaking into the mainstream technology industries by supplying man-made diamond plates and anvils for use in computer processing, electric vehicle components, optic equipment and energy storage devises —all of which have the potential to be much larger sources of diamond demand than the jewelry industry.
This said, it is worth considering that top producer’s ever falling production cost profiles have the potential to effectively result in a “barrier of entry” for new producers —would could eventually lead to more pricing power in the industry (and subsequently support prices). Historically, this has been seen with China’s leading presence in manufactured diamond for abrasive industrial application, where a small handful of large corporate producers now provide upwards of 80-90% of global supply.
Paul Zimnisky
Aside from price, delineation between natural and lab diamonds will likely also continue to be supported by advancements in LGD jewelry assortments, such as novel colors and shapes not available (or affordable) in natural diamond.
As the LGD industry progresses from the “low hanging fruit” of selling generic solitaires simply marketed as “the same as” natural diamonds, the fashion jewelry space is poised to be the next area of growth for LGDs. Notably, it is in this area that lab-diamonds could take more share from diamond simulants (e.g. moissanite, created white sapphire and even cubic zirconia) than from natural diamonds.
Man-made diamond is a manufactured product and it is expected that it will eventually be more widely supplied and sold than natural diamonds on a volume basis, which is already the case with some diamond simulants.
Finally, it needs to be acknowledged that LGD jewelry has brought consumers to the diamond category that otherwise would have not considered a natural diamond based on historical perceptions of the industry and/or a bias towards mining in general —this, in effect, amounts to real incremental demand for the larger diamond jewelry industry.
Given the mass attention that man-made diamond jewelry has received in recent years —and given that production volume is estimated to have effectively doubled every two years since 2015— it may be surprising to some that LGD jewelry is still only estimated to represent approximately 20% of total global diamond jewelry demand by value.
This can partly be explained by the fact that LGD is still primarily a U.S.-centric product that has yet to really gain mainstream consumer acceptance in the diamond industry’s other major consumer markets.
But, as addressed above, it is imperative to acknowledge the incremental demand LGD has brought to the larger diamond jewelry industry. Accordingly, the denominator in the above equation (total diamond jewelry demand) has been enjoying material growth attributed to the availability of LGD. This has in effect “limited” LGD’s relative share of the market —which should be acknowledged as a good thing for the larger industry, i.e. the total pie is growing.
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In the above, “man-made diamond,” “lab-diamond,” lab-created diamond,” “lab-grown diamond,” “LGD,” “manufactured diamond” and “synthetic diamond” may be used synonymously. More information can be found here.
A press release that accompanied this report can be downloaded here.
Access more of Paul Zimnisky's man-made diamond content here:
Lab-Diamond Sales Grow as Prices Fall
What a Mature Lab-Grown Diamond Jewelry Market Could Look Like
PZDA Podcast with Guy Borenstein, senior gemologist Stuller
PZDA Podcast with Amish Shah, CEO ALTR Created Diamonds (Oct 2023)
Paul Zimnisky, CFA is a globally recognized independent diamond industry analyst and consultant based in the New York metro area. For regular in-depth analysis and forecasts of the diamond industry please consider subscribing to his State of the Diamond Market, a leading monthly industry report; an index of previous editions can be found here. Also, listen to the Paul Zimnisky Diamond Analytics Podcast on iTunes or Spotify for exclusive full-length conversations with special guests from the gem and jewelry industry. Paul is a graduate of the University of Maryland's Robert H. Smith School of Business with a B.S. in finance and he is a CFA charterholder. He can be reached at paul@paulzimnisky.com and followed on X @paulzimnisky.
Disclosure: At the time of writing Paul Zimnisky held a long equity position in Lucara Diamond Corp, Brilliant Earth Group, Star Diamond Corp, Signet Jewelers Ltd and Newmont Corp. Paul is an independent board member of Lipari Diamond Mines, a privately-held Canadian company with an operating kimberlite mine in Brazil and a development-stage asset in Angola. Please read full disclosure below.