Current growth rate of LGD over 15% pa
LGD
market could grow between
10
to 17 mn cts by 2030
Lab-grown
diamonds (LGD) have existed for more than 60 years, with limited effect on the
natural gem-quality market. But advancements in technology have pushed the
lab-grown market into a more competitive position. Most notably, new chemical
vapor deposition (CVD) technology deeply cut the cost to produce larger,
higher-quality diamonds. Today, it costs $300 to $500 per carat to produce a
CVD lab-grown diamond, compared with $4,000 per carat in 2008.
As
production costs have dropped, retail prices have followed. The retail price of
gem-quality lab-grown diamonds have nearly halved in the past two years, while
wholesale prices dropped threefold. Prices are expected to decrease even
further as production efficiencies increase, new competitors enter the market
and the segment commoditizes.
Lab-grown
diamond producers have two options:1: to pursue gem-quality production for
retail jewelry sales or to produce diamonds for high-tech applications, 2: The
latter option has the greatest potential for long-term growth and
profitability, as well as low barriers to entry. Sensors, semiconductors and
medical cutting tools, for example, present an emerging market for CVD-produced
diamonds.
The
current gem-quality, lab-grown polished diamond capacity is estimated at 2
million carats majority of which is melee (diamonds size less than 0.18
carats). By 2030, the market could grow to between 10 million and 17 million
carats, if the segment can sustain its current growth rate of 15% to 20%
annually supported by consumer demand and attractive economics. But we believe
manufacturing capacity will be a major limiting factor in the short to medium
term.
Ultimately, marketing
and consumer perception will determine the effect of lab-grown diamonds on the
natural diamond market. Three scenarios exist: Consumers could perceive
lab-grown and natural diamonds as interchangeable, as two different products,
or somewhere in between. Marketing could uphold the value of natural diamonds,
especially if the prices of lab-grown diamonds continue to drop. It’s probable that
consumers will view lab-grown diamonds as fashion jewelry but not luxury goods,
limiting the effect on natural diamond demand.
This
is said in the report; The Global Diamond Industry 2018, A resilient industry
shines through, prepared by Bain & Company and AWDC.
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