- Positive consumer outlook for grown diamonds, but challenging supply side factors restrain their market potential
SINGAPORE, March 27, 2014 /PRNewswire/ -- Demand for colorless diamonds in value and volume terms is higher than any other color of diamond in the Gems and Jewellery Industry. One of the key factors that prevented the adoption of grown diamonds in the Gems and Jewellery Industry over the last two decades was the inability to grow colorless diamonds. With the recent technological advancements, this has changed dramatically, and colorless diamonds which are identical to mined diamonds, are being grown in many countries.
New analysis from Frost & Sullivan, The Diamond Growing Greenhouses (http://www.industrialautomation.frost.com), based on a survey covering six large diamond buying countries, indicates high propensity of consumers to purchase grown diamonds. However, there are several unrecognized supply side factors that will affect the growth of grown-diamonds as a category. Taking these demand and supply side factors into account, Frost & Sullivan's latest research estimates the global sales revenue from grown polished diamonds by 2018.
Frost & Sullivan's survey in six countries indicates that changes in consumer preferences tending towards environmentally and socially responsible products is a key driver for the acceptance of grown diamonds by consumers. Along with this, education will play an important role in making the customer understand the similarities between grown and mined diamonds, and the differences between grown diamonds and diamond look-alikes.
While industry participants are enthusiastic about the increasing consumer awareness, they are equally circumspect about restraints such as the slow increase in capacity in the diamond production facilities that have come up in Russia, China, Malaysia, Singapore, India, the USA and the Netherlands.
High operational cost is a key factor hampering the grown diamond industry. "We are all still in the infancy of grown diamond, that there are many, many ways we find every day to reduce costs. We must think like manufacturers and get out of the R&D environment," said Mr. Michael McMahon, CEO of SCIO Diamond Technology Corporation, a leading grown-diamond producer.
Large capital required for raw material production and lack of knowledge in terms of equipment build, design, and application specific processes further affects production capacities. Mr. McMahon states that "technology is held close to the vest and it is not an easy science to apply. It takes years of development, then the ability for your technology to mass produce at the highest levels."
IIa Technologies Singapore, a leading grown-diamond producer, adds on this point that "even with all the body of knowledge that has been created over decades of work done on diamond growth, every time we face a challenge it's as though we are starting from scratch. The enormity of the challenge sometimes can take months to years to find a solution. And it doesn't stop there. Once you grow the diamond you have to get the application running, this increases the testing period from a research point of view and gestation period from a financial point of view."
High cost of equipment has also been identified as a major restraint to growth. "The cost of a chemical vapor deposition machine is definitely an entry barrier," noted Mr. Richard Garard, CEO of a leading grown diamond machine manufacturer, Microwave Enterprises. "Although some companies try to put together their own equipment, efficacy concerns remain."
Potential growth in the industry is dependent on thrusts from both the demand and supply side. From a consumer perspective, complete disclosure of origin and comparable certifications between grown diamonds and mined diamonds or diamond look-alikes are necessary to instill confidence in the consumer. At the same time, removal of descriptors such as 'synthetic' will help consumers understand the difference between grown diamonds and simulants.
From a supply perspective, a common voice from grown diamond producers will improve the image of their budding industry and facilitate their assimilation in a positive manner into the existing gems and jewellery industry.
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