Editor’s Note
This article highlights Henan province’s dominant role in China’s lab-grown diamond industry, which itself accounts for the vast majority of global production. The data underscores a significant industrial shift, positioning synthetic diamonds as a key regional specialty.
Data from the Superhard Materials Branch of the China Machine Tool & Tool Builders’ Association shows that China’s lab-grown diamond production accounts for 95% of the global total, with Henan province alone contributing 80% of the national output. Lab-grown diamonds have become a “new specialty” of Henan.
According to incomplete statistics, Henan produces approximately 12 billion carats of industrial-grade lab-grown diamonds and over 6 million carats of diamond rough annually. A significant portion of this is exported to countries like India for cutting and processing before being shipped to regions such as Europe and North America.
It can be said that lab-grown diamonds are Henan’s “new specialty.” At the policy level, Henan has designated diamond as a flagship of its manufacturing sector in its local 14th Five-Year Plan. Provincial departments are coordinating to concentrate superior resources, lead the industry’s expansion and strengthening, and form a strong industrial cluster effect. Currently, Henan supplies 90% of China’s industrial diamonds and lab-grown diamonds.
It is understood that several upstream rough diamond manufacturers in China have already ventured into retail brands. Listed companies such as Zhongbing Hongjian (000519.SZ) and Sinomach Precision Industry (002046.SZ) are examples. Liliang Diamond (301071.SZ) previously announced that while continuing to strengthen its production and supply capabilities, it is also planning to launch its own lab-grown diamond retail brand, with its first global store set to open in Hangzhou.
According to data from a global jewelry industry analysis firm, the market share of lab-grown diamonds has been continuously increasing since 2021. As of July 2023, the market share had reached 49.9%, very close to the 50% threshold.
The Financial Investment News learned from the Luoyang Municipal Culture and Tourism Bureau that Luoyang is the first city to initiate a diamond giveaway campaign. The diamond brand given away is called “Tanwei,” which is also the only lab-grown diamond brand in Luoyang.
Following the guidance of the Culture and Tourism Bureau staff, the reporter contacted the manufacturer participating in the giveaway: Henan Tanwei Guanzhi New Material Technology Co., Ltd. Staff told the Financial Investment News that during their cooperation with the Luoyang Culture and Tourism Bureau, they gave away approximately 200 diamonds, mostly 0.1-carat and 0.2-carat loose diamonds, with the largest being a 1-carat loose diamond, of which there was only one.
Regarding prices, according to the staff, there is currently a promotion at their store. If purchased in person at the offline store, a 0.1-carat loose diamond costs only 199 yuan (original price 399 yuan), and a 0.3-carat loose diamond is priced at 499 yuan (original price 999 yuan).
Qichacha information shows that Henan Tanwei Guanzhi New Material Technology Co., Ltd. was established in August 2022 with a registered capital of 10 million yuan. According to staff, they have their own diamond cultivation base, and all diamonds in the store are artificially cultivated by themselves.
The Financial Investment News learned that although Luoyang was the first to give away diamonds, the base of Henan’s lab-grown diamond industry is not actually located there. Over the past few decades, cities in Henan such as Zhengzhou, Xuchang, Nanyang, and Shangqiu have formed a research, production, and sales integrated industrial cluster for lab-grown diamonds, giving rise to a number of well-known diamond production enterprises like Zhongbing Hongjian, Huanghe Whirlwind, Liliang Diamond, and Yujingangshi. The local industry chain is complete and well-supported, offering clear regional advantages.
With Luoyang’s diamond giveaway gaining popularity, there are now voices in the market suggesting that other cities might follow suit and launch similar diamond giveaway activities. Furthermore, cities like Zhengzhou and Xuchang have more lab-grown diamond companies and established industrial clusters, potentially leading to even lower costs compared to Luoyang. If they cooperate with their respective culture and tourism bureaus, the promotional offers could be even more substantial.
While the government gives away diamonds and tourists are delighted, business is not easy for lab-grown diamond companies.
Huanghe Whirlwind (600172.SH), one of the “big three” upstream rough diamond manufacturers, recently released its 2023 annual report forecast, indicating an expected loss of 645 million yuan for 2023. The company stated that the price of its important segmented product, lab-grown diamonds, dropped significantly in 2023 compared to the same period last year due to changes in market supply and demand, leading to a substantial decline in the company’s main business profit.
According to Zhongbing Hongjian’s semi-annual report, in the first half of 2023, the company achieved operating revenue of 1.914 billion yuan, a year-on-year decrease of 40.25%; net profit attributable to shareholders was 105 million yuan, a year-on-year decrease of 84.99%; and net profit after deducting non-recurring gains and losses was 87.9739 million yuan, a year-on-year decrease of 87.04%.
The company attributed the dual decline in revenue and net profit to weakened demand for some industrial applications of superhard material products, supply shocks from both domestic and international sources affecting lab-grown diamonds, and a decline in sales profits.
Data released by the international diamond trading platform IDEX shows that since the beginning of this year, natural diamond prices have entered a downward trend, with the price index in August alone falling 20.1% year-on-year. Additionally, diamond sales volume has also declined significantly, with moissanite and lab-grown diamonds experiencing the highest drops, up to 80%.
The decline in market demand may have directly led to a drop in diamond selling prices. According to the Shanghai Diamond Price Index (SDPI) disclosed on the Shanghai Diamond Exchange website, the price indices for diamonds across multiple weight segments have shown a declining trend since reaching a阶段性高点 in early 2022. The Shanghai Diamond Price Index uses July 1, 2021, as the base point of 100. However, as of the time of writing, the indices for all weight segments have fallen below 100 points.
However, in the view of industry insiders, lab-grown diamonds still have a promising future.
Wanlian Securities released a research report stating that in the medium to long term, with the gradual recovery of the macroeconomy and the further popularization of the “self-pleasure” consumption concept, downstream consumer demand for diamonds is expected to gradually recover. As lab-grown diamonds have the same composition and structure as natural diamonds and offer significant price advantages, coupled with consumer education efforts by media and brand owners in recent years, the penetration rate of lab-grown diamonds is expected to further increase in the future.
A Bain & Company report predicts that the global lab-grown diamond market size will reach 36.8 billion yuan by 2025, with China’s market size reaching 29.5 billion yuan by then.
The slogan “travel and get diamonds” generated an immediate response. By giving away 200 lab-grown diamonds, how much popularity and added value can Luoyang, Henan, attract?
According to the diamond merchant cooperating with the Luoyang Culture and Tourism Bureau, most of the diamonds given away were 0.1-carat lab-grown diamonds. With the current discount, buying one in the store costs 199 yuan. Based on the profit margins of listed lab-grown diamond companies, the retail profit margin for lab-grown diamonds is roughly around 60%. This means that a 0.1-carat lab-grown diamond sold for 199 yuan might have a cost of less than 80 yuan. Excluding the store’s own discount, the cost of a 0.1-carat loose diamond might be around 100 yuan.
With a diamond cost of 100 yuan and a total of 200 diamonds given away, the total cost of all gifted diamonds is just over 20,000 yuan. Consider that a family of four from another province traveling to Henan could spend that amount on round-trip airfare, food, and accommodation for a week. However, Luoyang’s culture and tourism initiative not only established a “generous” image for Henan with 20,000 yuan but also promoted its local industry. Tourists gained diamonds while gaining a deeper understanding of lab-grown diamonds. Learning more and seeing how developed Henan’s lab-grown diamond industry is undoubtedly benefits the long-term development of Henan’s lab-grown diamond industry chain.
Moreover, for tourists, such free gifts not only attract their attention but also stimulate their curiosity and desire to explore, encouraging them to learn more about Luoyang’s culture and tourism resources. Diamonds are not just a material gift but also an emotional satisfaction. This experience makes tourists feel valued and respected, making them more willing to share this unique experience. This word-of-mouth传播 is invaluable for Luoyang’s tourism industry, as it can attract more visitors to come and experience it.
Hiring attractive models to stand for a day would cost at least 1,000 yuan per person per day, and the culture and tourism bureau would also bear the blame for being perceived as lacking culture—how uneconomical is that? Henan’s “new specialty,” lab-grown diamonds, is different. Years later, when recalling this journey, the faces of the handsome men and beautiful women may have blurred, but the diamond will still be shining brightly, not only illuminating Luoyang’s night sky but also leaving an eternal glow in the hearts of tourists.
