Lab created diamonds are redefining the jewelry industry

  • Overview of the global diamond and diamond jewelry industry
  • Growing popularity of lab-grown gems in the diamond industry
  • Road ahead for the lab-created diamonds


Of all the jewels from the jewelry industry a diamond is the most well-known and the most sought-after gemstones. The global diamond industry has witnessed a period of high volatility over the past few years, and in 2019 also, the industry experienced some short-term challenges impacting the revenue of both the mining and midstream revenues, which shrank by 25% and 10% respectively. The rough diamond mining delivered a near record production (contributed mostly by the lower-quality mines though) in early 2019 but this was followed by lower than expected demand for diamonds during the same period. The major factors that contributed to the lower demand were the macroeconomic and geopolitical tensions across the world. Overall though the 2019 diamond production is expected to drop to 142 million carats in 2019 from a production volume of 147 million carats in 2018 because of the production decline at Argyle in Australia; with Venetia transition from an open pit mine to underground in South Africa and also with productions levels being lowered at Orapa in Botswana.

The global diamond jewelry market, which is estimated to have hit $80 billion as of 2019, is also experiencing a decline, estimated to be around 2% less than that of 2018 based on the retail performance of the first three quarters of 2019. The decline was driven mainly by the decline in three of the largest jewelry markets the US, China and India, where the jewelry sales are experiencing decline and is expected to register a decline by 2%, 5% and 1%, respectively by the end of 2019. Declining consumer confidence because of the uncertainties in the labor market, possible recession rumors, trade tension, and the 15% tariff on Chinese jewelry which went to effect in September 2019 have been the main attributes of the downturn in the US jewelry market. In China, depreciation in the yuan and the declining consumer confidence because of the trade tension between the US and China, and the significant decline in sales in Hong Kong amid the unrest have been the main reason for the decline. As for India, depreciation of the Indian rupee and the bankruptcy of one of the largest jewelry retailers- Gitanjali, has been the main reason for the slight decline in the Indian jewelry market.

While the diamond industry has been experiencing a decline in recent years, one of the latest developments in the industry which has grown steadily lately has been the gem-quality lab-created diamonds. In what was first introduced about 5 to 6 years back, the market for gem-quality lab-created diamond has seen massive progress in the different varieties of lab-created diamonds. Since then, the lab has produced diamonds from what was initially a +1-carat gem-quality lab-diamond to now +10 carat varieties, and at the same time developing diamonds with even better qualities and colors. As per studies by Analyst Paul Zimnisky, the production for gem-quality lab-created diamonds for use in jewelry has now exceeded 1.5 million carats annually.

With an estimated market size of approximately $1.9 billion dollars as of 2018, this lab-created diamond jewelry market is forecasted to reach to $5.2 billion by 2023, registering a growth rate of 22% between the period. Currently gem-quality, lab-created diamond capacity is estimated at around 2 million carats and is expected to grow to over 15 million carats by 2035, if the segment sustains its current expected growth rate. Though the lab-created diamonds only account for about 2% of the global diamond supply, it is expected to reach 5% by 2035 (as per estimated by expert Paul Zimnisky studies), while Citi analysts estimated that it could reach to 10% by 2030. The main driver for this growth will be the advancement in technology, which would improve the production economies and thus push the price down further, which in turn would move in to take the market share from both the natural diamond industry as well as the jewellery fashion industry.

As per multiple studies, the main customer for the lab-created diamonds are the millennials who are eco-conscious (as per experts, on an average, for a carat of diamond, approximately 250 tons of earth have to be dug up, 2,011 ounces of air pollution is released, and 143 pounds of carbon dioxide is emitted) and also look for affordability in their purchases. With the advancement of technology, the lab-created diamonds are becoming relatively less expensive than the natural diamonds, making them more price competitive. The price difference of gem-quality lab-created diamonds in comparison to the natural diamonds used in jewellery, which was 11%-20% lesser as of 2017 is now about 28%-40% lesser as per figures from 2018. However, the price of natural diamond during the same period has increased by an approximately 5%.

In a very short period of time, the lab-created diamonds have achieved the gem-quality standard, and with it, have proved to be a strong contender in the future of the overall diamond market. It has established itself as a sustainable and reliable source with the advancement of technology to supply high quality artificial gems even for the luxury industry. And with the positive response from the market, it seems lab-created diamonds are most likely here to stay. Even De Beers, known for controlling the world’s diamond market in all aspects, including its allure, scarcity and high cost is doing something they once said they would never do. As the market share of the lab-created diamond has increased over the years, De Beers has also jumped into the artificial diamond market space, with its own lab-grown diamond company called Lightbox Jewelry. This move by De Beers is focused on changing the consumer’s perception between lab-grown and natural diamond, while educating them that lab diamonds are less valuable than mined diamonds. If this gamble pays off for De Beers, the rewards will be great across both categories for the diamond giant. The company has even invested $94 million in a facility for lab-created diamonds in Portland, Oregon, United States, which is expected to produce 500,000 synthetic carats a year by the end of 2020.

Natural diamond currently represents approximately 95% of the global diamond jewelry market and forecast for the supply of natural diamond is set to decline in the years to come and there is no past trend which states that this declining trend is set to reverse anytime, not even in the long term as well. Of course, there may be some undiscovered highly economic deposits, but overall the global gem-quality diamond deposits continue to decline. So, in the long run the lab-created diamond industry is in a favorable position to fill in the supply gap of natural diamonds. Quite naturally, a lot for the popularity and how much the consumers embrace the lab-created diamonds will depend on how these lab-created producers’ market and influence the consumer perception. Going forward millennials, who are extremely aware of consumers inflicting harm by buying products with unethical origins (such as blood diamonds), will represent the new generation of potential diamond buyers.

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