The Problem With Lab-Grown Diamonds

The selling proposition for man-made diamonds was once memorably summarized by Carter Clarke, founder of lab-grown gem producer Gemesis:

“If you give a woman a choice between a 2-carat stone and a 1-carat stone and everything else is the same, including the price, what’s she gonna choose? ….Does she care if it’s synthetic or not? Is anybody at a party going to walk up to her and ask, ‘Is that synthetic?’ There’s no way in hell. So I’ll bite your ass if she chooses the smaller one.”

Put that way, lab-grown diamonds sound like they would sell themselves. And Gemesis would be a natural company to invest in.

But as Israeli journalist Chaim Even-Zohar documents with typical thoroughness here—and I can confirm—shareholders of Gemesis have had a rocky ride of it, and are now being completely bought out by Indian diamond magnate Jatin Mehta, the owner of Winsome Diamonds (formerly Su-Raj). “We’ve gotten creamed,” one shareholder told me last week. Another said he wouldn’t bother selling back his shares, since they were worth so little anyway. (Gemesis declined comment on its ownership or latest restructuring.)

But this is about more than some investments-gone-wrong. In many ways, the story of Gemesis’ shareholders has become a metaphor for the entire lab-grown diamond industry, which has shown enormous potential that it has consistently failed to live up to. 

I have lost count of how many times lab-grown companies made grand pronouncements about starting mass production, and then failed to deliver, or took longer than expected. When I spoke to the latest entrant, Washington Diamond Co., about how it differed from other companies in the field, its president said, “We actually have the goods.” That was a shot at its competitors. And yet that company also hasn’t started mass production yet, and I have had sources doubt them as well. At some point, it becomes a little dizzying. 

As Michelle Graff of National Jeweler writes today, more companies want to  produce colorless (“white”) diamonds, following the lead of Gemesis. The problem is that producing colorless diamonds—particularly larger sizes­—isn’t easy, especially when producing CVDs, which tend to grow flat. Moreover, the diamonds aren’t cheap to produce. As veteran gem grower Tom Chatham, who sells created diamonds, told me: “It’s just [a] very expensive [business] to be in. We have sold millions of dollars of product, but it’s cost us millions as well.”

Then there’s marketing. As appealing as some might find the idea of lab-grown diamonds, in reality they don’t sell themselves. Nothing does. And as a former Gemesis insider put it, when the company did have good marketing—including big write-ups in Wired and elsewhere—it didn’t have production. And when it did finally begin production, it no longer had money for marketing. (If any companies benefited from all that Wired publicity, it’s sellers of simulants.) 

Now, I know it’s not fair to lump all these companies together. Some have been more circumspect than others. But for the lab-grown sector to live up to its considerable promise, it needs to deliver more than just promises. As it is, the synthetic sector has a long way to go to prove it’s for real. 

JCK News Director