Editor’s Note
This article explores a surprising shift in the diamond market, driven by technological advances. Once considered a bastion of stable value, the traditional dynamics are being challenged, offering a compelling look at how innovation can reshape even the most established industries.
Recently, there is a field where the market landscape is changing dramatically due to significant advancements in technology. While many might think of high-tech industries like semiconductors or artificial intelligence (AI), the field introduced today is a bit different. Today, we examine the changes in the market for ‘diamonds,’ considered the world’s most expensive gem.
Diamonds, symbolizing eternity, have been gems whose prices rarely fell, as they were highly valued by people worldwide. Being universally recognized as the top gem, discount sales were also rare.
However, the price of natural diamonds has plummeted by about 40% over the past year. According to the American economic magazine Fortune, De Beers, the world’s leading diamond company, significantly reduced the price of ‘select makeable’ diamonds, the rough stones primarily used for engagement rings, in July. The price, which was $1,400 per carat (1.85 million won) just a year ago, dropped to $850 (about 1.12 million won).
The company explained the reason for the lower diamond prices as “naturally reduced demand due to the pandemic aftermath,” but many experts analyze that there is a separate reason for the sharp decline in diamond prices.
The international diamond price index, which reflects changes in natural rough stone prices, has been on a downward trend since hitting an all-time high of over 158 in March last year. As of the 14th, it fell to 111.
The decisive factor pointed to for the decline in natural diamond prices is the popularity of synthetic diamonds. Lab-grown diamonds, called ‘lab-grown diamonds’ because they are made in a laboratory, are so popular that fewer people are seeking natural diamonds. The reason lab-grown diamonds are gaining attention is, of course, their affordable price.
Synthetic diamonds made in laboratories are changing the landscape of the global market. Natural diamonds are rare minerals formed over millions of years under high temperature and pressure on carbon masses inside the Earth. Lab-grown diamonds refer to diamonds created by replicating this natural process in a laboratory within just a few weeks.
The reason ‘grown’ is attached is that the method of growing a very small diamond is widely used. It is said that when carbon powder is synthesized with metal catalysts like iron and nickel under high temperature and pressure, a very small diamond called a ‘seed’ gradually grows larger.
Diamonds made in laboratories have been produced for industrial use since the 1950s. Then, as technology advanced, by the 2010s, they began to produce rough stones suitable for gem use in earnest, and the quality has continued to improve since. The surprising fact is that diamonds made this way are essentially the same substance as natural diamonds mined from mines.
Although man-made, synthetic diamonds are said to be 100% identical to natural diamonds in terms of physical, chemical, and optical standards. Experts say that natural and synthetic products cannot be distinguished with the naked eye or a magnifying glass, and special testing equipment is barely able to tell them apart.
The price of synthetic diamonds is only about 10-20% of that of natural diamonds. The price, which was only about 10% cheaper than natural diamonds in 2016, has continued to decline. Unlike natural ones, there is a strong possibility that prices will fall further with advancements in manufacturing technology. Being essentially the same substance but at a ‘kind price’ of about one-tenth, it’s no wonder they are popular among many people seeking rational consumption.
The popularity of synthetic diamonds is fundamentally due to their affordable price, but there are additional reasons for the attention beyond the ‘kind price.’ It’s the point that one doesn’t have to worry about the ethical issues that can arise in the production process of natural diamonds.
Natural diamonds cause environmental pollution during the mining process and have long faced controversies over labor exploitation. Particularly in some conflict regions in Africa, like Sierra Leone, illegal diamond trading has been used as a source of military funding, leading to frequent exploitation of citizens, including children, in mines. The metaphorical term ‘blood diamond,’ implying the blood of the exploited is on these diamonds, is widely known.
Since such problems do not occur when making diamonds in a laboratory, synthetic diamonds can be a good choice for those who avoided diamond consumption for ethical reasons.
Originally, the global diamond market was structured with a few large companies holding most of the share. However, as lab-grown diamonds, which any company with technological capability can produce, gained attention, the market landscape began to change.
Currently, there are eight countries capable of producing diamonds in laboratories: the United States, India, China, Japan, Singapore, Germany, Israel, and South Korea. China produces the largest quantity, closely followed by India. South Korea succeeded in production for the first time this year. There are about 30 competing companies. Because it is such a promising market, even existing companies dealing in natural diamonds have jumped into synthetic diamond production.
In India’s case, lab-grown diamonds are considered an important industry at the national level. During his visit to the US last June, Indian Prime Minister Narendra Modi gifted a 7.5-carat Indian lab-grown diamond to US President Joe Biden and his wife. The Indian government added that it was “made eco-friendly using solar and wind energy.”
Looking at the recent situation, the synthetic diamond craze is completely changing the market atmosphere. The share of synthetic diamond sales value compared to natural diamonds was only 2.4% in 2020 but has grown to 9.3% this year. Considering the price difference, the sales volume alone is estimated to already reach 25-35%.
Jewelry companies sensing this trend are actively moving to handle synthetic diamonds. Many companies like Swarovski are increasing their sales share, and the Danish jewelry manufacturer Pandora declared the year before last that “it will no longer use natural diamonds.”
Even luxury brands that previously avoided using synthetic diamonds are increasingly launching products incorporating them. Swiss watch brands Tag Heuer and Breitling are representative. LVMH (Louis Vuitton Moët Hennessy), the world’s largest luxury company, invested $90 million (about 120 billion won) in an Israeli synthetic diamond startup last July.
Diamonds, loved as the ‘most expensive gem’ and a ‘symbol of eternity,’ are now shaking up the global gem market as they can be made in laboratories. Will diamonds made in laboratories also receive people’s love for a long, long time to come? Since they can be mass-produced, it’s worth watching whether their value will eventually diminish.