The Rise or Fall of Lab Growns
August 22, 24
The lab grown bubble has burst, prices have hit rock bottom and natural diamonds are making a comeback.
That's one way of looking at things.
Lab growns will, within a decade, represent "the vast majority" of all diamonds sold. That's another.
Take your pick, or wait for history to decide.
In recent days Israeli tech company Lusix has been forced to seek court protection from creditors, blaming its demise on a 90 per cent slump in lab grown prices.
Meanwhile the CEO of Pandora, the world's largest jewelry brand with 6,700 points of sale, has been forecasting a bright future for lab grown jewelry, saying buyers only worry about two things - price and design.
So are lab growns rising or falling?
Lusix, founded eight years ago by billionaire Benny Landa, turned a profit for the first time in 2020, after it attracted $150m of investment - that includes a $90m funding round led by LVMH.
It operates a solar-powered production plant in Modi'in, central Israel, and has been planning to build a second facility.
But it has been badly hit by what it describes as the "collapse in laboratory diamond prices", combined with the impact of the Gaza war on raw material costs and transport delays.
In its request for court protection, Lusix said it had received warning letters from various creditors threatening to cut off its electricity supply and take legal action as a result of its cash flow distress.
The company has made an urgent appeal to shareholders for $22m to allow it to continue operating.
Lusix isn't the first major lab grown company to find itself in trouble. Late last year the "race to the bottom" claimed WD Lab Grown Diamonds as a casualty.
The US pioneer developed patented CVD technology and had become the country's second biggest manufacturer.
Then it collapsed with debts of almost $45m. A long and expensive legal battle over its intellectual property didn't help matters, but in the end it probably lost out to cheaper labor and overheads in China and India, where three quarters of all lab growns (by volume) are currently produced.
Lusix may yet overcome its current difficulties. Landa, the company's chairman, appears resilient and upbeat. But fierce competition will likely see the off other lab grown companies in the coming months and years.
Having said all that, Alexander Lacik, Pandora's CEO, paints a very different picture of the lab grown future. The consumer only wants to know "is there a design that appeals to me, and does it fit my wallet," he says. Whether it's natural or lab grown simply isn't a concern.
In a Bloomberg TV interview last week he said: "Customers that come in have already read up on the topic of lab grown versus mined, so this is actually not a big debate in the store.
"It becomes more of a traditional way of selling a piece of jewelry - is it beautiful, do I like the design, does it speak to me in terms of the value I'm looking for and is the price right."
And here's how he sees the future: "Ten years on, my prediction is the vast majority of diamonds being sold are going to be lab grown. So I think we're in front of a big, big transformation here, based on a technological revolution that's happened."
These are just two snapshots of today's lab grown world. Taken together they provide some small insight into the complexities of the market.
Another observation: In March, Sarine, the diamond tech company, blamed its 2023 loss in part, on increasing disruption from lab growns. Earlier this month it noted that recurring revenues from the lab grown market had helped push it back into profit.
Here we have lab growns pushing in one direction and pulling in another.
There are, as the businessman, investor and author Ben Horowitz says repeatedly in his 2014 book, no easy answers (The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers).
Have a fabulous weekend.