In recent years, the debate over natural vs. synthetic diamonds has raged, with concerns including:
Are synthetic diamonds considered real diamonds or not?
What is the price difference between natural and synthetic diamonds?
Are synthetic diamonds more environmentally friendly than natural diamonds?
The following section compares natural and synthetic diamonds in terms of definition, formation, appearance, price, sustainability and other dimensions. This section is based on the Gemological Institute of America's (GIA) official website on synthetic diamonds, and the data is based on Bain & Company's latest report for 2021.
--Definition
Synthetic diamonds, also known as lab-grown, lab-created, lab-made diamonds, are named after the fact that they are formed in laboratories or factories rather than in the natural environment of the earth.
Currently, many synthetic diamond laboratories are already applying cutting-edge technology to simulate the conditions required for natural diamonds to form beneath the earth's crust. Specifically, it takes hundreds of millions of years of high-pressure, high-temperature environments within the Earth to form these monolithic crystals of carbon. These conditions, as the "origin story" of natural diamonds, are the main difference between synthetic diamonds and natural diamonds, with the exception of their chemical, optical and physical properties and crystal structure, which are essentially the same.
Above, from left to right, are CVD diamonds, natural diamonds and HPHT diamonds.
--Formation
Synthetic diamonds are broadly categorized into two main types of production processes - "High Pressure High Temperature Diamonds" (HPHT diamonds) and "Chemical Vapor Deposition Diamonds" (CVD diamonds).
According to the official website of GIA, the research and development of synthetic diamonds can be traced back to the 1950s, and the HPHT method was the first to be applied - the carbon crystals were placed in a press with a metal solvent inside, and the metal was allowed to melt at a high temperature and high pressure of about 1,400 degrees Celsius, and the melted metal dissolved the carbon crystals, which then solidified into a diamond, whose products are usually used in communications and laser optics and in the manufacture of diamonds. The products are usually used in industrial fields such as communications and laser optics and abrasives. In the 21st century, the CVD method began to be used to produce diamonds for industrial use - a hydrocarbon gas mixture is attached layer by layer to the surface of the crystals, with the entire process taking place at 800°C, which requires lower pressure and temperature conditions than HPHT.
It was not until the mid-2010s that gem-quality synthetic diamonds were gradually brought to scale and put into commercial use.
-Appearance
To the naked eye, synthetic diamonds are identical to natural diamonds and can therefore only be identified by specialized gemological laboratory instruments. The instruments determine their identity by detecting minute differences in their trace elements and crystal growth.
It is important to note that synthetic diamonds have the same strict grading system as natural diamonds, and are certified by an official organization such as the GIA.
The synthetic diamond on the left above is almost identical to the natural diamond on the right when viewed with the naked eye.
--Price
According to Bain & Company's latest diamond report, Brilliant Under Pressure: The Global Diamond Industry 2020-21, continued technological advances are driving double-digit growth in synthetic diamond production from 2019 to 2020. double-digit growth while retail prices continue to fall. Currently, the price difference between natural and synthetic diamonds can be as much as a staggering 10 times.
For example, the price of a one-carat-G color-VS clarity synthetic diamond equivalent to an equivalent natural diamond has fallen from 65% in 2017, to 50% in 2018-2019, to 30% in 2020!
Take, for example, the selling price of diamonds from the US retail jewelry brand James Allen (launched in 2006 by Signet Jewelers, the largest diamond jewelry retailer in the US, which sells both natural and synthetic diamond products):
1.12 carat - G color - VS1 clarity round natural loose diamond for $7,470 USD
A 1.12 carat - G color - VS1 clarity round synthetic loose diamond sells for US$2,050
While retail prices for synthetic diamonds slipped in 2020, wholesale prices remained stable, which continued to shrink the profit margins of the traders and jewelry manufacturers involved. However, this is certainly good news for consumers. According to the Bain report, further reductions in the retail price of synthetic diamonds will allow more price-sensitive consumers to gradually reach out to this emerging segment of the fashion jewelry market.
In terms of current synthetic diamond retail market share, the US is the number one market, with China in second place.
--Sustainability
Bain reports that sustainability, transparency and social well-being are increasingly important to diamond consumers, investors and the value chain.
Natural diamonds are sourced from primary natural deposits and there are currently three main types of mining methods, open pit, underground and marine. All three of these mining methods undoubtedly cause considerable damage to the natural environment. The damage is mainly in the form of energy consumption, carbon emissions and pollution of the oceans. For example, on average, the mining of 1 carat of natural diamonds emits 160 kilograms of greenhouse gases.
However, synthetic diamonds are not as "green" as one might think. Under high temperature and pressure production conditions, the average production of one carat of synthetic diamonds emits 511 kilograms of greenhouse gases, which is more than three times the amount emitted by the mining of the same weight of natural diamonds.
Argyle Diamond Mine, Australia
Competition in the synthetic diamond market is heating up
Since 2021, the synthetic diamond market has seen a number of heavyweight funding rounds and IPOs, intensifying competition in this emerging market segment:
-- In April 2021, Diamond Foundry, a U.S. synthetic diamond brand founded in 2012, completed a new round of financing of $200 million, with a current valuation of up to $1.8 billion, and Hollywood actor Leonardo DiCaprio is also an investor in it.
-- In September 2021, Brilliant Earth, an American jewelry retailer founded in 2005, successfully raised $250 million in an IPO, with a market value of $1.1 billion. Notably, it specializes in the concept of "ethical diamonds," and synthetic diamonds make up a significant portion of its products.
-- In September 2021, China's synthetic diamond startup Power Diamond (301071.SZ) landed on the Shenzhen Stock Exchange's Growth Enterprise Board and rose more than 10 times on its first day, driving three domestic synthetic diamond listed companies, *ST Diamond (300064.SZ), Yellow River Hurricane (600172.SH), and Red Arrow (000519.SZ), to a record high. 000519.SZ) stock prices higher in October. As of Oct. 22, Power Diamond's latest market value was 18.2 billion yuan, with a price-to-earnings ratio of 117 times.
While startups are soaring, traditional diamond and jewelry giants are not willing to lag behind, and have entered synthetic diamonds, with some investing heavily in research and development and production, some launching new jewelry series or brands based on synthetic diamonds, and some even announcing that they are giving up natural diamonds and fully embracing synthetic diamonds:
In 2016, Austrian man-made crystal giant Swarovski launched its first synthetic diamond collection, Diama;
In 2017, Richline Group, a jewelry company owned by Warren Buffett's holding company Berkshire Hathaway, joined forces with Macy's to launch Growth with Love, a synthetic diamond brand;
In 2018, natural diamond giant De Beers launched Lightbox, a synthetic diamond brand;
In May 2021, Danish jewelry brand Pandora announced the use of all synthetic diamonds in place of natural diamonds.
In October 2021, Hong Kong, China-based jeweler Chow Tai Fook launched synthetic diamond brand CAMA
Lightbox synthetic diamond jewelry
Natural diamond market rebounds strongly after Epidemic
Since the Epidemic, the traditional natural diamond market has experienced a relatively significant downward and then upward movement.
Taking the sales data of the industry's most representative De Beers rough diamond viewing party as an example, after the outbreak of the epidemic in 2020, its sales experienced a short period of stagnation (as shown in the chart below for rounds 3-6 of the 2020 sales cycle) and then quickly resumed growth, even surpassing the pre-epidemic level. the cumulative sales of $4.03 billion for the eight sales cycles up to the present time in 2021 have been basically the same as the sales of the pre-epidemic period in 2019 sales of $4.04 billion for the full 10-round sales cycle for the year.
Changes in sales in De Beers' previous look-ahead sales cycles from 2020 to date
After a post-outbreak period in which midstream companies in the supply chain cleared and depleted their inventories of rough and finished diamonds, the market entered a state of oversupply.
In November 2020, Rio Tinto announced the closure of its Argyle diamond mine in Australia, the world's largest pink diamond mine, reducing the global supply of natural diamonds by an estimated one-fifth.
Over the past year, De Beers has initiated the largest price increase in nearly a decade, raising the price of rough diamonds for the fifth time in eight months from last December to July this year, far exceeding the pre-epidemic level.
The strong recovery of the traditional natural diamond market has also given established diamond dealers such as De Beers more incentive and confidence to respond to the challenges launched by synthetic diamonds.
How can natural diamonds respond to the challenge posed by synthetic diamonds?
In 1950, De Beers came up with the classic natural diamond advertising slogan "a diamond is forever". Now, more than 70 years later, with gem-quality synthetic diamonds making a strong presence in the jewelry market, how is the natural diamond industry responding to this unprecedented challenge with new strategies?
Judging from the industry's recent movements, this response is mainly reflected in four directions: marketing and promotion, diamond traceability, recycling and mastering pricing power:
-- Encouraging the promotion of natural diamond design and consumption
The Natural Diamond Council (hereafter referred to as NDC), comprising the world's seven largest diamond mining companies, has been promoting the concept of natural diamonds in recent years through different campaigns on the brand and consumer sides:
On the brand side, NDC launched an Emerging Designer Diamond Initiative this year with the goal of eliminating the "industry barriers" designers often face when sourcing raw natural diamonds. The program assists ethnically diverse emerging designers with a $1 million diamond line of credit, as well as professional education and other industry resources.
On the consumer side, in 2020 NDC launched "Only Natural Diamonds," an online natural diamond awareness platform, and appointed Hollywood actress Ana de Armas as its global ambassador. and only strategic retail partner of NDC in China.
(Note: The world's seven largest diamond mining companies include ALROSA, De Beers Group, Lucara Diamond Corp, RZ Murowa, Petra Diamonds, Rio Tinto and Arctic Canadian Diamond Company Ltd. (RZ Murowa, Petra Diamonds, Rio Tinto and Arctic Canadian Diamond Company Ltd., which together account for 75% of the world's total natural diamond production).
-- Industry-wide cooperation to deepen diamond traceability
In the "2020 China Luxury Consumption White Paper" published by Gorgeous Think Tank, it was noted that 31% of the respondents believed that it is easier for luxury brands to disclose information about their products (including raw materials, origins, carbon emissions, etc.) to enhance consumer goodwill.
The popularity of the concept of ethical diamonds is inspiring more consumers to pay attention to the traceability of diamonds from the mine to the finished product. The rise of synthetic diamonds has made it even more urgent for manufacturers and retailers of natural diamonds to prove their "natural" status.
De Beers (De Beers) first opened in 2018 based on blockchain technology Tracr platform pilot project to realize diamond traceability. In August this year, De Beers launched a pilot project based on the Code of Origin, which customizes a unique identity code for each diamond.
Alrosa (Alrosa PJSC) announced in July this year in the field of diamond traceability will be used in the new "nano mark (nano mark)" technology (non-invasive laser marking technology) in the diamond crystal internal realization of a special marking, only with a special scanner can be seen, and can not be destroyed.
Since October 2020, the American luxury jewelry brand Tiffany & Co. has been making public the complete production process ("Diamond Craft Traceability System") of its newly purchased individually registered diamonds (0.18 carats and above), including information on mining, cutting, polishing, grading, setting and other details.
Craftsmen cutting and polishing diamonds in the Tiffany Diamond Workshop in Mauritius.
-- Promoting the concept of "recycled diamonds
The focus on sustainability and the popularity of second-hand luxury goods also applies to diamonds. According to industry insiders, recycled diamonds are attracting the attention of more jewelers and consumers because they are both environmentally friendly and cost-effective. The rise of recycled diamonds also provides new ideas for the promotion of natural diamonds.
-- "Pricing power"
After announcing the launch of Lightbox, a synthetic diamond brand, on May 30, 2018, De Beers has been investing continuously in research and development, production and retail over the past three years or so.
On the R&D end, De Beers subsidiary Element Six has in recent years been expanding the use of CVD diamonds for other applications in quantum technology such as computers, sensors and magnetometry, to name a few.
On the production side, the first step is the $94 million four-year construction of a synthetic diamond mega-factory in Portland, Oregon, USA, which is expected to produce 200,000 carats per year this year, roughly triple its 2020 output. Production is expected to reach 500,000 carats per year by the time the plant is fully operational.
Lightbox's synthetic diamond factory in Oregon, USA
On the retail side, in October of this year, Lightbox expanded the sale of synthetic diamonds from finished jewelry to "loose" diamonds, including 1-carat, 1.5-carat, 1.75-carat and 2-carat sizes, all priced at $800 per carat.
In comparison, the James Allen 1.12 carat-G color-VS1 clarity round synthetic loose diamond from Signet Jewelers, the largest diamond jewelry retailer in the U.S. mentioned above, is priced at $2,050. Lightbox's offer for the loose diamond is less than half of the price of the James Allen's. However, Lightbox's offer is not as detailed as that of the James Allen!
However, instead of grading the clarity and color of the loose diamonds as meticulously as the James Allen, Lightbox states in general terms that the clarity is no less than VS and the color is near colorless (equivalent to a G grade).
Steve Coe, CEO of Lightbox, believes that offering diamonds for sale loose as solitaires not only further differentiates between lab-grown and natural diamonds, but also opens up more possibilities in the fashion jewelry category. I know that natural diamonds obviously hold a very special place for many consumers, being emotionally significant and often associated with important gift-giving occasions," he says. So we think for lab-grown diamonds it's an opportunity to take advantage of low prices."
It's clear that, with capacity expanding at a rapid pace, Lightbox will attempt to "price" synthetic diamonds in the same way that its parent company, De Beers, has done - partly to undercut competitors in order to dominate this emerging market; It will also seek to further widen the price gap between synthetic and natural diamonds, limiting synthetic diamonds to the realm of mass-market "fashion jewelry" and preventing them from encroaching on the supremacy of the natural diamonds that De Beers represents in the world of fine jewelry.
Bruce Cleaver, CEO of De Beers, said in 2019: "Synthetic diamonds are a very promising market, but they are fashion, not luxury."