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Colorless synthetics: A growing market?

2012-10-15

Scio Diamond Technology uses the chemical vapor deposition process to grow white and pink diamonds. Pictured here are the diamond seeds after about 20 hours of growth.

New York--At next year’s trade shows, Chatham Created Gems & Diamonds says it will become the latest entity to offer sizable lab-grown white diamonds for sale when it debuts a line of engagement rings set with stones up to a carat in size.

CEO Tom Chatham, who spoke with National Jeweler just after returning from China to view the final designs for the line, says the company--which unofficially tacked on “Diamonds” to its name about 10 years ago--is growing white (also referred to as colorless) diamonds using both the chemical vapor deposition (CVD) and high-pressure, high-temperature (HPHT) processes at undisclosed locations around the globe.

Set to debut at the January Continental Buying Group show in Dallas and the American Gem Trade Association’s GemFair the following month in Tucson, the line of engagement rings will be set with center stones between ½ and 1 carat. While the pricing hasn’t been “nailed down” just yet, Chatham says he expects the stones to be at least 25 percent less than comparable mined diamonds.

Chatham is just the latest in a line of companies making announcements about their growing ability to create colorless diamonds in a lab and bring them to market.

There is no doubt that diamond-growing technology has improved in recent years, allowing producers to emerge with larger sizes in colorless goods. In May 2010, the Gemological Institute of America graded a 1.05-carat pear-shaped CVD-grown diamond, the first synthetic of that size graded by the GIA.

Still, there has been a lot of what one might term crying wolf when it comes to the progression of lab-grown diamonds in the industry: announcements or predictions that were made that never came to fruition. And, questions remain about the demand for the stones among consumers in the United States, even as more and more companies strive to create lab-grown colorless diamonds that reach a carat in size.

Newspaper reports from as far back as the 1950s warned the industry about the advent of “Man-Made Diamonds!” Fast-forward a few decades and the headlines remain the same. In September 2003, Wired magazine heralded the beginning of “The New Diamond Age,” stating that two startups (Apollo Diamond and Gemesis) were “launching an assault on the De Beers cartel,” with one Antwerp diamond dealer quoted as stating that if undetected, lab-grown diamonds would “bankrupt the industry.”

For retailer Cathy Calhoun, former American Gem Society president and owner of Calhoun Jewelers in Royersford, Pa., her first recollection of lab-grown diamond warnings falls somewhere in between the post-World War II report and the tech-excitement of the early aughts. 

She remembers viewing Sumitomo diamonds, heralded as the “first synthetic diamonds,” with fellow gemologists in the 1980s.

“In the early 80s it made us nervous. I remember thinking, ‘Uh-oh, things are going to change,’” she said. “Here it is 2012 and I still don’t find it a threat. I haven’t had one person come in and ask for a synthetic diamond as of yet.”

Today’s players
Prior to Chatham’s announcement, the latest entity to enter the field of colorless synthetics was Washington Diamonds, which announced in September that it will be growing diamonds using the CVD process in an 11,000-square-foot facility located somewhere outside Washington, D.C.

In an interview conducted last month, CEO Uzi Breier and President and founder Clive Hill said the company can grow larger white diamonds than other CVD producers because they are using technology licensed from The Carnegie Institute of Washington, a private nonprofit that focuses on research and education in the earth sciences.

The bulk of the company’s production will be synthetic diamonds that are one carat or slightly larger in size, G to J color and VS to SI clarity. The stones will be sold online direct to consumers via distributors and partners beginning in December or January, Washington Diamonds said, and will cost about 25 percent less than comparable mined diamonds.

The company predicts it will be able to pump out 150 one-carat synthetic stones a month from the start, for a yearly production run of more than 2,200 diamonds.

With this announcement, Washington Diamonds joins an expanding field of lab-grown diamond companies operating on some level in the United States. D.NEA (pronounced Dih-nay-uh) has been selling lab-grown diamonds online direct to consumers since 2005 and in November 2011, opened a retail boutique in Greenville, S.C. 

Scio Diamond Technology purchased the assets of Boston-based Apollo Diamonds in September 2011 and began manufacturing pink and white diamonds this past June. Both D.NEA and Scio are based in Greenville.

Then there’s Gemesis. After a number of years selling wholesale, Gemesis launched a website that sells direct to consumers earlier this year.

While more companies are entering the synthetic diamond market, they are not exactly pumping out white diamonds at a high rate --at least not yet. But Chatham says that day is coming, between production ramping up at already existing companies and other entities that are quietly growing diamonds. “There more people working on this than you think,” he says.

D.NEA, which previously operated as Adia, grows yellow, blue and colorless diamonds in facilities in Europe using the HPHT process.



D.NEA grew this diamond, which is G color, VVS1 clarity.

Eric Franklin, an owner of the company, says the diamonds grown by D.NEA range in size between ¼ and 1 carat. Where they get tripped up is not with size--which has been a problematic for those using the CVD process--but in creating diamonds with gem-quality color and clarity. (HPHT-grown diamonds cannot feasibly be treated post-growth to improve their color.)

This, however, has changed as of late.

Franklin says that D.NEA has produced more gem-quality white diamonds this year than any other year. “We’ve made a lot of progress and right now the majority of our production is coming out F, G, H color,” he says.

He declines, though, to share many specifics about the company’s annual production, stating it is a “fair amount higher” than 600 diamonds a year, or its sales. He did say that 2012 has been D.NEA’s best year to date and, when asked if the company is profitable he says, “It is.”

He said they have been self-sustaining for more than six years, making enough to maintain current production and keep money invested in research and development.

Scio also grows colorless diamonds, as well as pinks, but uses the CVD process. 

In its 2003 article on the synthetics industry, Wired said Apollo had “perfected” the process of growing near-flawless CVD diamonds that, together with Gemesis’ HPHT production, were going to “transform the $7 billion (diamond) industry.”

Today, though, Scio President and CEO Joe Lancia allows that the bulk of the company’s production, about 85 percent, is in industrial diamond used for commercial and medical purposes. He said it is unclear at this time to forecast future demand for synthetics in the jewelry industry.

“Whether or not it penetrates the jewelry industry is not as important, no offense to the jewelry industry, as the changes it will have to the commercial industrial world,” he says, noting that industrial diamonds have the ability to make a big difference in the world of computers and medicine, among other fields. “I don’t know what it’s going to do in the jewelry industry.”


Scio Diamond Technology grows diamonds at a facility in Greenville, S.C., which is pictured here, using the chemical vapor deposition process. The company will not disclose how many reactors it has.

Lancia says that growing gem-quality white diamonds is more challenging than producing their industrial counterparts. “Because it’s a natural process, it’s not as predictable as you might think,” he says. In other words: just because the diamond is being made in laboratory doesn’t mean they can crank out gems assembly-line style, with the same size, color and clarity emerging every time.

Like D.NEA, Scio is relatively tight-lipped about revealing too many specifics about its production levels. A recent news release from the company stated that the company’s production was 3,300 carats through its first 16 weeks, and the level of output has been ramping up steadily month-over-month, with September’s production up 29 percent from August. It should be noted, though, that the 85-15 ratio of industrial to gem-quality diamonds applies there.

On the financial side, Scio’s latest 10-Q filed with the Securities and Exchange Commission showed an accumulated loss of $3.9 million. As of June 30, the company stated that it “had generated only very limited revenue from the sale of diamond or diamond materials and did not have firm orders placed by potential customers.”

Lancia is quick to point out that the company didn’t begin production until June, so the 10-Q filed later that month includes less than 30 days of manufacturing. The company’s next 10-Q, which will be filed some time around Nov. 10, will incorporate a full quarter of manufacturing and may tell a different tale.

He says the company will be able to break even or even turn a profit “very soon.”

Gemesis is widely regarded as the world’s largest producer of synthetic diamonds, though the company has been guilty of being among those who have cried wolf, so to speak, over their production in the past.

The company’s e-commerce website originally was said to be launching in early 2011 but didn’t go live until March 2012. And, back when the company was still strictly wholesale, it held an event at the 2008 Las Vegas shows heralding the addition of pink to its color palette, with blue lab-grown diamonds to follow. Neither color, however, ever hit the market en masse.

The company declined a request to be interviewed for this story, instead issuing this statement: “Gemesis doesn’t have new news to share at this time as far as development in lab created. We did see the note on Washington Diamonds’ announcement, and don’t really know much about them. That said, we are not surprised as there are probably several more that remain in the background or underground with Gemesis having no knowledge of any of them; however, Gemesis is quite proud of being the leader and being in full disclosure mode.”

Shortly before this story was published, news broke that the company’s four remaining officers and most of its shareholders had been compelled to sell their shares a newly created company, Gemesis Acquisition Corporation. According to the report, if it goes through, the deal will make Gemesis’ 50.1 percent shareholders, the Jatin Mehta family and associated partners, the world’s dominant producer of synthetic diamonds.

‘They have their place’
Jewelers, for the most part, agree on two main points when it comes to synthetic stones: even though reports of production of colorless diamonds are on the rise, it’s still not at a point where it represents a challenge to consumers’ desire for the real thing. Very few, if any, customers ask about them.

Retailers also agree that lab-grown stones have a place in the industry, though some think place isn’t necessarily in their store.

Murphy’s Jewelers, in Magnolia, Ark., is a 73-year-old, high-end Rolex store that does not sell drilled or clarity-enhanced diamonds and has no interest in stocking synthetic diamonds either, said partner Mark Williams. They would seek one out, though, if a customer insisted they wanted a lab-grown stone.

“That’s just not for us,” he said. “We would not be in the market for offering our customers lab-created diamonds. It’s just not us.

“Lab-grown diamonds, I think they have their place in the world: (at the) end of a drill bit on a saw blade.”

Calhoun, of Calhoun Jewelers in Pennsylvania, and Jeff Corey, owner of New England chain Day’s Jewelers, also don’t foresee mixing synthetic diamonds in with their stock.

Calhoun says she doesn’t carry any synthetic gemstones because of her personal passion for the mined product, a passion that transfers to her customers. Corey says his stores carry a myriad of lab-grown gemstones, including alexandrite, ruby and sapphire.

He can’t picture adding diamond to that list, though, because of the symbolism behind the stone: the hardest substance on Earth that lasts for eternity and is exchanged to mark the beginning of a lifelong relationship. In other words: A diamond is forever.

“We don’t sell them (lab-grown diamonds) and we won’t because we are afraid to undermine the real reason why customers buy a diamond,” he says. “Diamond is sacred. You can create rubies and sapphires and everything else but not diamonds.”

Diane Christensen, president of Christensen and Rafferty Fine Jewelry in San Mateo, Calif., has a bit of a different take on synthetics.

A number of years back, her San Francisco-area store carried lab-grown yellow diamonds from Eloquence Corp. but, in the end, they just weren’t in high demand. Customers with an interest in synthetics actually were looking for larger white lab-grown diamonds, which did not exist at the time.

Today, Christensen says the store receives one or two calls a year inquiring about lab-grown stones. She said she wouldn’t mind stocking them if there was enough publicity to make people want them and a steady, reliable stream of production.

“It’s all supply and demand,” she says. “I think it’s going to need a lot more publicity than a few articles online.”

For his part, Chatham, who helms the company founded by his father in the late 1930s, acknowledges that synthetics face a huge hurdle when it comes to the emotional aspect attached to bridal jewelry. After all, if there’s anything jewelers will say when asked about lab-grown diamonds, it’s that they don’t believe many consumers will want a synthetic as the center stone on their engagement ring. They might accept a lab-grown diamond in fashion jewelry, but there is no substitute for a mined diamond in what is undoubtedly the most emotionally charged piece of jewelry they’ll ever own.

He also says his company won’t be guilty of not being able to produce if their line of lab-grown diamond bridal jewelry turns out to be a hit at the jewelry shows next year. If there is demand, they’ll be ready to meet it. The question that looms is: Will consumers want lab-grown white diamonds in their engagement rings? 

 “That is the big question,” he says. “We think it will work.”