When we talk about diamonds, their allure often eclipses the actual business behind them. The global diamond market, encompassing both natural and lab-grown diamonds, isn’t as large as one might think. In 2023, the total retail market for diamond jewelry was estimated to be between $70 billion and $90 billion, with lab-grown diamond sales contributing approximately $2 billion to $4 billion. However, it’s important to note that these figures reflect the end-market size, which includes brand premiums.
According to data from the Kimberley Process, the global diamond production market is valued at around $14 billion, which might be closer to $20 billion if we round up. But even then, it’s not a massive market, especially when considering that the production costs of lab-grown diamonds are significantly lower. As the proportion of lab-grown diamonds increases, this market value may actually decrease.
Moreover, the diamond consumer market is not growing; in fact, it seems to be on a decline. De Beers’ recent move to divest is a telling sign of this trend. The demand for diamonds is relatively fixed, primarily driven by weddings and romantic occasions. While the market for everyday diamond jewelry hasn’t historically shown explosive growth, there’s still a need to observe whether the emergence of lab-grown diamonds could expand the consumer base. If lab-grown diamonds manage to attract customers who were previously uninterested in diamonds, there could be significant potential. However, this remains to be seen.
If we assume that the overall diamond market isn’t growing or is growing at a very slow pace, the only real growth opportunity for lab-grown diamonds will come from eating into the natural diamond market. The key question, then, is what the final penetration rate of lab-grown diamonds will be.
At the current growth rate, it’s foreseeable that lab-grown diamonds could reach a penetration rate of 15% to 20% within five years, which translates to over 20 million carats of rough diamonds. However, predicting long-term trends is more challenging. In the United States, a 50% penetration rate for lab-grown diamonds might be achievable, but anything beyond that is uncertain. Natural diamonds still hold their ground in certain scenarios, particularly where "status" and "prestige" are involved.
With this baseline in mind, we can begin to forecast changes in the competitive landscape of the lab-grown diamond production sector.
Currently, the lab-grown diamond production industry is experiencing an oversupply, leading to a significant drop in margins. In 2024, the gross margin for lab-grown diamonds has plummeted to a level that was previously unimaginable. However, the high margins of the past few years led to an explosion in production capacity. As a result, inventories have grown.
According to disclosures from a publicly listed company, as of December 31, 2023, there were approximately 8,000 six-sided presses (HPHT machines) in the industry used for producing both single-crystal diamonds and lab-grown diamonds. The market estimate for those specifically used for lab-grown diamonds is between 4,000 and 5,000 machines, but the actual number is likely higher. So, the future of the global diamond market remains uncertain, and speculation alone won’t provide answers.
The next few years will be critical in determining the balance between supply and demand, the potential market share for lab-grown diamonds, and the overall direction of the industry. As the market matures, the question remains whether the industry can sustain its allure or if the business itself will struggle under the weight of its own success.