Lab grown diamonds are created by a technological process that takes place in a laboratory, in contrast to natural diamonds that are created through a geological process that takes place deep within the earth. Diamonds produced in a laboratory can be cut into gemstones suitable for the jewelry market. Just like natural diamonds, most lab grown diamonds are cut and polished in India. Two methods are used to produce lab grown diamonds.
The high-pressure, high-temperature (HPHT) method is the older approach. HPHT replicates the natural geologic process. Small seed diamonds are placed into a machine, covered with a mixture of catalyst metal and graphite powders and subjected to temperatures up to 2,500 degrees centigrade and pressure up to 60,000 atmospheres. A downside of HPHT is that most of the diamonds emerge in shades of yellow and brown because of the presence of nitrogen in the manufacturing process. Manufacturers can produce diamonds of other colors as well by introducing various gasses into the reactor chamber.
Chemical vapor deposition (CVD), manufacturers create diamond crystals in a low-pressure environment using carbon-bearing gasses. The process involves depositing a carbon vapor onto a substrate to grow the stones. Using the CVD method manufacturers can produce colorless gem-quality diamonds more economically than with the HPHT method.
It is expected that lab grown diamonds will grow to 5% to 15% of the market in value by 2030. Lab grown diamond prices have been falling, which may lead to further differentiation between natural and lab grown diamonds. As mines deplete, lab grown diamonds could offset a portion of the reduction in supply of natural diamonds.
The value chain of lab grown diamonds is very similar to natural diamonds. Most lab grown diamonds are polished in India and sold through the same channels. Many jewelry stores sell both natural as well as lab grown diamonds, with only very few companies focusing on one product category. However, there is often differentiation in branding to clearly distinguish between the two product categories.
The diamond value chain becomes more and more fragmented the further you go downstream. Five mining companies produce the majority of the world’s rough supply and rough trading is centralized in a few hubs around the world. Cutting and Polishing also referred to as manufacturing, happens mostly in the Indian city of Surat, where thousands of different companies operate. Jewelry retail is even more fragmented, with family owned businesses forming the majority of outlets.
Sorting
Diamonds serve two main functions: jewelry and industrial use. A little more than 50 percent of the volume of diamonds mined become gemstones, yet they make up over 95 percent of the total value. Today, the majority of diamonds used for industrial purposes are lab grown diamonds. Once mined, rough natural diamonds are separated into industrial quality diamonds and gem quality diamonds.
Gem quality diamonds are either sold straight to diamond polishers referred to as Sight Holders or auctioned off. London, Moscow and Antwerp are the main centers for the purchase and trade of rough diamonds.
Cutting & Polishing
Transforming rough stones into finished gems, comprises four steps: determining the optimal cut, cleaving or sawing to break the rough diamond into pieces, bruiting to give the diamond the desired shape and polishing the facets. Although cutting takes place in many countries across the world, circa 90% of all diamonds in terms of value are currently polished in India, mostly in the city of Surat.
After stones have been cut, they are often certified by independent laboratories of which the Gemological Institute of America is the most well known institute.
Polished-Diamond Sales
Polished diamonds get sold to manufacturers of jewelry, jewelry retailers or diamond dealers. Many jewelry retailers, especially those selling engagement rings, buy polished diamonds directly using their own or third party “setters” to set diamonds in manufactured jewelry. Antwerp, New York and Shanghai are important polished diamond sales centers and many major diamond players maintain a presence in these cities. But recently the site of sale is shifting closer to manufacturers in India as many Indian suppliers invested in their own sales and distribution channels.
Retailing
Retail in the diamond industry is dominated by private, often family-owned businesses. Larger players such as Tiffany & Co, Cartier, Signet and Chow Tai Fook, make up around 30% of the Industry. Most retailers are integrated into different steps of the value chain, all the way from rough-diamond sales to jewelry design and manufacturing. Online jewelry makes up circa 5-10% of total jewelry sales, with the percentage of diamond jewelry expected to be slightly higher than that. Online sales represent the highest growth category in the industry.