Are lab-grown diamonds forever too?

The gems and jewellery industry in India contributes 7% to the GDP and employs over five million workers. It represents about 15.71% of total merchandise exports, making it the third largest commodity. For the 2024-25 fiscal year (up to July 2024), exports are expected to reach US$ 8.58 billion, an 11.01% decline from 2023-24.

India exports a wide range of gems and jewelry, including cut diamonds, lab-grown diamonds, colored gemstones, and various types of jewelry made from gold, silver, and platinum. The Western Region is crucial to this industry, accounting for nearly 74.66% of total exports in 2022–23. Surat, a city in Gujarat, is home to over 450 jewelry manufacturers and exporters, establishing it as a global jewelry manufacturing hub.

India's top export destinations for LGDs are the US, Hong Kong, UAE, Israel, and Belgium. At the IIJS Premiere in August 2023, the GJEPC announced that it is looking to boost exports of Indian diamonds in markets such as Cambodia, Vietnam, and Sri Lanka. In March 2022, the Indian Government signed a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE).

Let us begin by defining lab-grown diamonds and explaining why this will be the next big trend in India. Lab-grown diamonds (LGDs) are synthetic diamonds created in controlled environments using methods like High-Pressure High-Temperature (HPHT) or Chemical Vapor Deposition (CVD). These diamonds are chemically, physically, and optically identical to mined diamonds. 

The LGD industry is regarded as a "sunrise industry," particularly significant for countries like India, which has a robust diamond industry supporting millions of livelihoods and generating substantial foreign exchange​.

Process of Growing LGD's 

Raw Material Sourcing:

Input:

• Diamond Seeds: The starting point for growing diamonds.
  
  • Imported or locally produced. India recently abolished a 5% import duty to support local LGD seed production.
• Carbon Sources: High-purity carbon is used in HPHT or CVD methods.
• Energy: High energy requirements, particularly for HPHT methods.

Challenges:

• Availability of quality diamond seeds.
• High energy consumption, especially in HPHT.

Manufacturing:

Two primary processes dominate this stage:

1. High-Pressure High-Temperature (HPHT):
   
   • Carbon is crystallized into diamond under intense heat and pressure.
   • Typically produces diamonds with yellow or brown hues due to nitrogen.
   • Higher energy and equipment costs.
2. Chemical Vapor Deposition (CVD):
   
   • Carbon-rich gases like methane and hydrogen are ionized to deposit pure carbon onto a diamond seed.
   • Produces high-purity diamonds with minimal discoloration.
   • More cost-effective than HPHT.

Key Hubs:

• Gujarat, India (Surat is a global leader with advanced facilities).
• China and the USA also have significant manufacturing capabilities.

Processing

Once manufactured, the rough LGDs undergo processing to achieve the desired shape, size, and finish:

1. Cutting: Advanced laser-cutting machines are used for precision.
2. Polishing: The diamonds are polished to achieve brilliance and clarity.

LGD Manufacturing Segment and Key Players:

India's top lab-grown diamond manufacturers include Greenlab Diamonds, Limelight Lab Grown Diamonds, and Cupid Diamonds. Greenlab, one of the largest, operates over 1,000 reactors using CVD (Chemical Vapor Deposition) technology, while Real Illusion has about 80 reactors in Jaipur.

Currently, India has 2,200 to 2,800 lab-grown diamond machines, with projections to reach 5,000 in 2 years, according to the Lab Grown Diamond & Jewellery Promotion Council. About 90% of production uses the CVD method, although some manufacturers are exploring the High-Pressure, High-Temperature (HPHT) method.

Many essential components for CVD reactors, like microwave generators and diamond seeds, are imported. To reduce this import dependence, the government is offering research grants to develop domestic technology and components for diamond production.

Certification and Quality Assurance:

Purpose: Ensure diamonds meet stringent quality and ethical standards.

Certifications:

• Gemological certifications (e.g., IGI, GIA) assess clarity, cut, carat, and color.
• Emphasis on verifying that diamonds are lab-grown and conflict-free.

Distribution and Marketing:

1. Wholesale Distribution:
   
   • LGDs are sold to jewelry manufacturers and retailers in bulk.
   • Major trading hubs include Surat Diamond Bourse and DREAM City in India.
2. Marketing Strategies:
   
   • Highlight sustainability and ethical production.
   • Emphasize cost-effectiveness and quality comparable to natural diamonds.

Jewelry Manufacturing:

1. Design:
   
   • LGDs are crafted into various jewelry pieces, including rings, earrings, and necklaces.
2. Customization:
   
   • Increasing demand for personalized designs caters to modern consumer preferences.

Key Markets: India, USA, China, and Europe dominate LGD-based jewelry production and consumption.

Retail Sales:

Channels:

1. Traditional Retailers: LGD jewelry is available in high-end stores alongside natural diamonds.
2. E-commerce Platforms: Online sales are growing due to competitive pricing and ease of purchase.

Target Audience: Millennials and Gen Z, who value sustainability and innovation.

Recycling and Resale:

• Unlike mined diamonds, LGDs are not yet widely recognized in resale markets.
• Recycling involves reclaiming materials from discarded jewelry or defective LGDs.

Key Support and Enablers in the Value Chain:

1. Government Initiatives:
   
   • Zero customs duty on LGD seeds in India.
   • Financial support for indigenous manufacturing of LGD machinery.
2. Infrastructure:
   
   • Surat Diamond Bourse and DREAM City provide state-of-the-art facilities.
3. Research and Development:
   
   • Focused on improving manufacturing processes and reducing costs.

Challenges Across the Value Chain:

• High energy costs for production.
• Need for consumer education to overcome cultural biases.
• Competition from mined diamonds and synthetic alternatives.

Market Potential:

• Global Market:
  
  • Valued at $23.9 billion in 2022, it is projected to grow at a CAGR of 8.64% to $39.3 billion by 2028.
  • Asia-Pacific, led by China and India, dominates production.
• Indian Market:
  
  • India produced 15% of global LGD output in 2022.
  • LGD jewellery sales are expected to grow at a CAGR of 14.8%, reaching $1.19 billion by 2033.
  • Major production hubs include Surat and Mumbai, contributing over 98% of India's LGD production

Growth Drivers:

1. Sustainability and Ethics: LGDs are marketed as eco-friendly and conflict-free alternatives to mined diamonds.
2. Rising Disposable Incomes: Growing affluence encourages the adoption of premium products like LGDs.
3. Changing Consumer Preferences: Younger demographics favor customizable, innovative designs offered by LGDs.
4. Cost Competitiveness: Lower production costs make LGDs affordable and attractive.
5. Government Support: Indian initiatives include zero customs duty on diamond seeds and research grants for Indigenous technology.

Market Volume of Lab-Grown Diamonds Worldwide (in million carats):

The top five nations in the world that will produce lab-grown diamonds in 2020 are China, India, the United States, Singapore, Europe, the Middle East, and Russia.

The size of the worldwide market for lab-grown diamonds was estimated at US $ 23,898.6 million in 2022 and is anticipated to grow at a compound annual growth rate (CAGR) of 8.64% during the forecast period, reaching US 39,301.2 million by 2028.

One of the world's biggest producers of lab-grown diamonds, Asia Pacific accounted for the majority of the market in 2021. This growth is owing to improvements in living standards and a rise in disposable income, thereby leading customers to adopt a lavish lifestyle, which is also driving the demand for jewellery in the region. 

According to a commerce ministry report, India was making 15% of all lab-grown diamonds in the world as of May 2022. India is the world’s leading cutting and polishing center.

The India lab-grown diamond jewelry market was valued at US$264 million in 2022. Over the next ten years, lab-grown diamond jewelry sales will rise at 14.8% CAGR. The total market size is set to increase from US $ 299.9 million in 2023 to 1,192.3 million by 2033.

India was the second largest producer of lab-grown diamonds with 1.5 million carats in 2020 Surat and Mumbai are the major LGD hubs producing over 80-90% of the LGD. 

India holds a prominent value share in the South Asia lab-grown diamond jewellery market due to the fast-moving lifestyle of the resident population. Lifestyle changes and growing spending on premium, high-cost ornamental products are spurring growth in the Indian market. 

Here are the Emerging Retail brands in India and globally: 

Every time technology changes, there is room for quick new competitors who are prepared to adjust and take advantage of market openings (Adapt, change, or face obsolescence). Nevertheless, none of the well-known conventional jewelry sellers have dabbled in lab-grown diamonds. 

In India, well-known traditional jewelers follow buyback regulations for natural diamonds, which could be problematic if they were to launch a comparable product at a significantly lower price. 

Their revenue may be greatly impacted if lab-grown diamonds are introduced, as this could potentially cannibalize their natural diamond business. India's lab-grown diamond market is still in its infancy; scalability is being tested, and significant awareness-raising is needed, in contrast to the United States, where lab-grown diamonds are already widely accepted.

LGD Manufacturing Ecosystem in Gujarat:

• Gujarat is the leading state in India in the gems and jewellery sector, as it contributes to about 72 of the total exports of India.
• Lab-grown diamonds, or LGDs, have been identified as a major growth area by the Government of India in the latest Union Budget 2023-24.
• As per the Industrial Policy 2020 for Gujarat, the gems and jewellery sector has been identified as one of the 15 thrust sectors in line with the Atmanirbhar Bharat Mission.
• Gujarat has a well-established diamond industry. Diamond processing and trading units are spread across the State in cities such as Surat, Ahmedabad, Palanpur, Bhavnagar, Valsad and Navsari.
• Gujarat accounts for about 80% of diamonds processed and 95% of diamonds exported from India.
• Surat, in Gujarat, is a major hub for diamond manufacturing and is known as the diamond cutting and polishing capital of the world.
• Approximately 90% of the world's diamonds are cut and polished in Surat, with around half of the 10,000 diamond processing units in Gujarat making use of laser-cutting machines.
• Some of the major LGD manufacturers in Gujarat are Green Lab Diamonds, Cupid Diamonds, Finegrown Diamonds, Rahi Impex, Eco Labgrown Diamonds.

Competitive Advantage of Gujarat:

• Gujarat is the global hub for diamond cutting and polishing, processing 80% of diamonds and exporting 95% of India's output.
• Surat is the world's diamond capital, housing the Surat Diamond Bourse and the DREAM City initiative, which aims to create a global diamond trading hub​.
• Other major players in Gujarat include Green Lab Diamonds, Cupid Diamonds, and Finegrown Diamonds.

Challenges:

1. Production Costs: High equipment and energy costs can impact profitability.
2. Consumer Perception: Overcoming cultural attachments to natural diamonds remains a hurdle.
3. Technical Challenges: Ensuring consistent quality and adherence to industry standards.
4. Competition: The industry faces increasing rivalry from established and emerging players​.

Let's dive into what future growth will truly look like!

While lab-grown diamond prices are initially linked to naturally mined counterparts, the markets are expected to diverge as they find ways to coexist and serve distinct segments. With sanctions on Russian diamonds, natural diamond prices are projected to rise, potentially benefiting the lab-grown diamond sector. 

Although demand in the U.S. jewelry industry is slowing, the reopening of Chinese markets offers new opportunities for Indian lab-grown diamond manufacturers.

In the coming years, demand for diamonds will extend beyond jewelry into sectors like semiconductors, electronics, and defense, with lab-grown diamonds positioned as an alternative to silicon. As consumer awareness grows—especially among Millennials and Gen Z—there is a heightened focus on environmentally friendly products. Gen Z and millennials prefer brands that minimize carbon emissions, Lab-grown diamonds are already more sustainable and adapt well to fast-moving trends.Many manufacturers are working toward 100% renewable energy sources to eliminate carbon emissions entirely.

1. Environmental Appeal: With the natural diamond supply projected to decline drastically by 2050, LGDs are seen as a sustainable alternative.
2. Technological advancements: Innovations in production methods will likely improve quality and efficiency.
3. Global Adoption: Increased awareness and acceptance among consumers and industry stakeholders will drive demand.

Conclusion:

Lab-grown diamonds (LGDs) represent a perfect blend of technology and sustainability, marking a significant shift in the global diamond industry. With Gujarat leading as a global hub for cutting, polishing, and production, India's LGD ecosystem is set for rapid growth, supported by government initiatives and innovation.

The environmental benefits, cost efficiency, and ethical considerations of LGDs attract consumers worldwide, paving the way for a bright future. As the industry continues to flourish, LGDs are not just the diamonds of tomorrow—they are the gems that reflect today's evolving values and lifestyles.

We’d love to hear your thoughts! Share your views in the comment section below, and let’s chat about whether you think this could be the next big trend!

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