News flow out of the diamond industry in 2018 has been dominated by the progression of lab-created diamond production, distribution and pricing dynamics. Numerous new players have entered the space, production capabilities have improved and supply has been scaled. This year alone, the price differential of a generic 1-carat lab-created diamond has fallen by almost 50% relative to the price a comparable natural diamond (the discount in late-November of 42% has risen from 29% in January).
In late-May, industry bellwether De Beers1 crossed the Rubicon, announcing the company would be entering the lab-created diamond jewelry space through a subsidiary called Lightbox. The move implies a nuanced strategy with a general aim at differentiating consumer perception of lab-created and natural diamonds. In late September the product became available to consumers exclusively through the company’s website with the notable item a 1-carat solitaire pendant offered for $800 plus a nominal setting fee. At the time of launch an equivalent-quality 1-carat generic lab-created diamond was selling for around $3,700.
Within the first week, almost all of the Lightbox 1-carat solitaire pieces sold out according to the company’s website. Skeptics of De Beers assumed this was confirmation that Lightbox was purely a predatory pricing strategy to lower the market-price of lab-created diamonds and De Beers did not have real inventory backing what was just a facade.
According to a Lightbox representative in October, initial demand for the 1-carat solitaire pieces exceeded expectations, resulting in a temporary sellout (of note, a significant amount of the initial demand came from curious industry participants). Further, it was noted that the items would be restocked in relatively short order given that production of Lightbox diamonds is an ongoing process through De Beers’ synthetic diamond production subsidiary Element 6 in the U.K.
The process of growing a 2.5-carat rough lab-created diamond (the approximate size that yields a 1-carat polished) typically takes 3-4 weeks, plus additional time to cut the diamond and manufacture the jewelry. As of early-November, out of 43 Lightbox items offered, 5 were still sold out. There was only one 1-carat solitaire item available, a white princess-cut pendant offered at $900 ($800 for the diamond plus $100 for the sterling silver setting and chain).
In the company’s initial Lightbox press release, De Beers noted that a new $100 million Element 6 facility in the U.S. is being built to cater to Lightbox diamond production. Prior to this year, Element 6 facilities in the U.K have been exclusively dedicated to synthetic diamond R&D and production for industrial application.
1. De Beers is 85% owned by Anglo American plc (LSE: AAL) and 15% owned by the Government of the Republic of Botswana.
2. A loose 2-carat, G-color, VS1-clarity lab-created diamond is currently offered for $10,100 on Brilliant Earth; a 2-carat “Grown with Love” lab-created diamond set in a white gold ring is currently offered for $11,950 at Macy’s.