What a Mature Lab-Grown Diamond Jewelry Market Could Look Like

Four primarily characteristics that could shape the man-made diamond jewelry industry: 1) limitless supply, 2) standard superior quality, 3) branding and proprietary design, 4) custom shapes and colors

After donning 2018 as “the year of the lab-created diamond,” demand for the man-made stones has since continued to steadily grow. At the time, lab-diamonds represented <5% of global diamond jewelry sales, this year the product is expected to breach 10% —and at this pace, 20% is certainly in sight by the end of the decade. (See "Lab-Grown Diamond Jewelry Market Forecast to Almost Double in Size by 2025")

The next phase of growth will likely bring upon a newfound level of maturity to the industry shaped by: 1) limitless supply, 2) standard superior quality, 3) branding and proprietary design, 4) and, custom shapes and colors.

Regarding the first item, China currently produces in excess of 10 billion carats of synthetic diamond a year for use in abrasive applications —which compares to a hundred-million carats of natural diamond. This shows the production scalability potential for man-made diamond for use in jewelry.

And, this is only accounting for the potential supply from High Pressure High Temperature (HPHT) production, i.e. the “legacy” method of synthetic diamond fabrication —which represents about half of global man-made diamond supply used in jewelry.

Chemical Vapor Deposition (CVD) diamond production, the other, newer, primary production method, is quickly growing, especially in India and (once again) China —this method is estimated to represent the other half of global supply.

Notably, in India, multiple legacy natural diamond manufacturers, including De Beers Sightholders, have expanded into vertically integrated man-made diamond producers. (See July 2022 episode of the Paul Zimnisky Diamond Analytics Podcast featuring George Prout of Craft Diamonds, Hari Krishna Export Pvt's lab-diamond subsidiary)

Regarding the second item, in addition to increases in the volume of output, as man-made diamond production technologies improve so will the quality of production —especially as many producers position to eventually supply diamond for use in high-tech industrial applications which typically require high-purity material.

Today, many lab-grown diamond producers are using "post-growth" treatments to improve the color and quality of their output —for example, CVD producers “treating” their stones with the HPHT method. While this process is typically stigmatized with natural stones, given that man-made diamonds are already a manufactured product, many in the industry are indifferent to the treatment of lab-diamonds.

Eventually, almost all man-made diamonds will likely be of a universal-high-quality —which could render diamond grading of lab-diamonds non-necessary. Importantly, cutting out the cost of grading would further reduce the price of lab-diamonds relative to natural diamonds downstream.

This brings us to the third item.

Despite, steadily increasing demand for man-made diamond jewelry over the last four years, relative prices have also steadily declined. This is presumably due to increases in supply (and the quality of supply) for the reasons provided above.

In mid-2018, a generic 1-carat VS1-clarity, G-color lab-diamond retailed for $3,625 while a natural equivalent retailed for $6,600. Today the same quality diamonds sell for $1,615 and $6,705, respectively. For context, De Beers’ lab-diamond company, Lightbox, has offered a similar quality 1-carat lab-diamond for $800 since launching in October 2018.

According to observations and anecdotes, the large majority of consumers that are choosing a lab-diamond in lieu of a natural are doing so because of the much lower price point. Consumers seem to be most interested in the affordability of larger stones in particular that man-made diamonds offer.

Today, with a $6,500 budget, a consumer shopping for a slightly-better-than-medium-quality diamond can choose approximately a 1-carat natural diamond or a 2.5-carat lab-created diamond.

If the consumer feels no apparent stigma towards the lab-created version and if they do not place value in the inherent rarity or natural source of a mined diamond, then the 150%-larger option seems like an obvious choice.

However, given that lab-diamonds are a manufactured product that have shown to progressively improve in size and quality over time, by the end of the decade, with that same $6,500 budget a consumer may be able to buy a 6- or even 7-carat lab-diamond (using Lightbox's $800-per-carat linear pricing structure).

At that point, the question becomes how big is too big —especially if we are talking about a solitaire engagement ring?

When it comes to lower-priced diamond simulants, whether it be lab-grown moissanite, white sapphire or cubic zirconia, the sub-4-carat size range is typically the most popular —as larger than that, the stone can begin to look conspicuously “fake.”

If a similar sentiment were to play out with lab-diamonds, primary consumer demand could be limited to 4-carat sizes and below —which would also limit the purchase price to, for example, ~$3,000 (again, using the $800-per-carat Lightbox price).

At that price, would the diamond have the same effect —especially in the case of a gifted diamond engagement ring? In that scenario, perhaps a would-be lab-diamond consumer would end up choosing a (much) smaller natural diamond based on the perception that it is more “special.”

In general, lab-diamonds possess all of the aesthetic and durability characteristics of natural diamonds; arguably, the only missing characteristic is the component of “luxury” —the intangible trait that comes with rarity and value (and price).

For many consumers, only natural diamonds will continue to provide that perception of “luxury.”

That said, there are likely jewelry brands positioned to pull off “luxurious” versions of lab-diamond jewelry via strategies tied to leveraging existing brand value.

A product does not necessarily need to be limited by nature for it to be a rare or luxurious. For example, Hermès’ Birkin bag is a manufactured product, but Hermès greatly limits the supply making it “rare” and much more valuable.

Theoretically, if Hermès came out with an exclusive, limited-edition lab-grown diamond ring, it would likely be perceived by consumers as a “Hermès ring” first and a lab-diamond ring second.

Longer term, it will likely be higher-priced lab-grown diamond jewelry that competes the most with natural diamonds.

As the lab-diamond market matures, a significant "bridge" category is also likely to emerge, i.e. a blend of "lower price point" with a "premium" brand.

The industry is already seeing this with Pandora, the largest fashion jewelry company in the world, which is aiming to “democratize diamonds” via its recently launched Pandora Brilliance lab-created diamond line.

Pandora has already proven this concept successful with its iconic line of charms, Pandora Moments.

However, from a volume perspective at least, the companies positioned to sell lab-diamonds this way are few and far between given the marketing budget constraints. In general, once the novelty wear off, most lab-diamonds will likely be positioned as lower-price point diamonds offered by retailers merchandizing them as such.

Which brings us to the final item.

From the standpoint of a higher-end retailer, stocking generic lab-diamonds is theoretically giving customers “permission” to buy a low-priced diamond.

However, from the standpoint of a low- to mid-tier retailer, offering low-priced lab-diamonds makes diamond jewelry available to the masses.

In this way, lab-diamonds have the potential to drive a significant amount of incremental demand for diamond jewelry that otherwise would not exist if only natural diamonds were available —which is becoming more pertinent as natural diamond prices rise to record levels. (See "Rough Diamond Prices Make New All Time High in February 2022")

But, again, without a brand or a proprietary design, a lab-diamond is arguably just a cheaper diamond, unless…

Importantly, given that lab-diamond is a manufactured product, the flexibility of crafting the material as well as the economics of working with the material are fundamentally different than that with natural diamonds.

Manufacturing an “all-diamond” ring is possible. A custom cut or shape is possible. A diamond color that does not exist in nature is possible.

Using lab-diamond material in a way that is not possible with natural diamond is likely to be another key driver of incremental demand for the larger diamond jewelry industry —especially as lab-diamond production processes mature.

Finally, all of this serves as a reminder that the diamond jewelry industry in totality (natural plus lab) is not necessarily a “zero-sum” game. Lab-diamonds are driving incremental demand for the larger industry —and that portion of demand is likely to expand as the lab-diamond product matures and develops its own identity.

--

A press release that accompanied this report can be downloaded here.

Read more of Paul Zimnisky's analysis on lab-grown diamonds here:

Lab-Grown Diamond Jewelry Market Forecast to Almost Double in Size by 2025

How the Largest Jewelers Are Marketing LGDs [Exclusive for GJEPC]

Retail Margins Could Be Boosting Man-made Diamond Sales

What We Call Man-made Diamonds Could Determine Their Success

2018: The Year of the Lab-created Diamond

Paul Zimnisky, CFA is a leading independent diamond industry analyst and consultant based in the New York metro area. His research and analysis on the diamond industry is used globally by financial institutions, management consulting firms, private and public corporations, governments, intergovernmental organizations and universities. More information can be found here. He can be reached at paul@paulzimnisky.com and followed on Twitter @paulzimnisky.

For more detailed analysis of the natural and lab-grown diamond industry, please inquire for information on consultation rates and custom research capabilities. For subscription information or to request a sample of Paul Zimnisky’s State of the Diamond Market, a leading monthly diamond industry report which includes data, trends and forecasts, please contact: subscriptions@paulzimnisky.com.

The Paul Zimnisky Diamond Analytics Podcast can be streamed for free here or on Apple Podcasts or Spotify. Recent guests include marketing legend Stephen Lussier, Arctic Canadian Diamond Company CEO Rory Moore and well-respected polished diamond wholesaler Mel Moss.

Disclosure: At the time of writing Paul Zimnisky held a long position in Lucara Diamond Corp, Star Diamond Corp, North Arrow Minerals Inc, Brilliant Earth Group and Barrick Gold Corp. Please read full disclosure below.