The Bloomberg article that Karlmarx shared is rather telling, but of course everyone's interpretation might be different.
Quote:The company announced today that it will start selling man-made diamond jewelry at a fraction of the price of mined gems, marking a historic shift for the world’s biggest diamond miner, which vowed for years that it wouldn’t sell stones created in laboratories.
De Beers will target younger spenders with its new diamond brand and try to capture customers that have been resistant to splurging on expensive jewelry. The company is betting that it can split the market -- with mined gems in luxury settings and engagement rings at the top, and lab-made fashion jewelry aimed at millennials at the bottom.
This is De Beers' recognition of the change in consumer spending preferences.
Diamonds has historically been marketed to the mass market. If the masses were to change their spending habits, especially with the millennials, the overall diamond industry sales and ASP would face a headwind in the years to come.
Just ask yourself or your friends this question.
Would you rather spend discretionary budget on diamonds (which your gf/wife will wear occasionally/seldom), or spend it on the latest handphone/tablet, or on a holiday trip.
Quote:“Lab grown are not special, they’re not real, they’re not unique. You can make exactly the same one again and again,” Bruce Cleaver, chief executive officer of De Beers, said in an interview Tuesday.
“We’re not grading our lab-grown diamonds because we don’t think they deserve to be graded,” Cleaver said. “They’re all the same.”
Those who think lab diamonds is going to provide a breather from the declining demand for mined diamond, might want to think again about the uncertainties.
The key is: All lab-grown diamonds are the same.
While I am unsure whether lab-grown diamonds require cutting, each lab-grown diamond is exactly the same as mentioned by De Beers.
This will eliminate the need for several of Sarine's products in the lab-grown diamond line, possibly, planning, imaging, trade and scanning. These processes are required because each mined diamond are "different" and value can be extracted by using Sarine's products. While I am unaware of Sarine's sales for each product line, it will nonetheless affect Sarine sales.
Next, I am making an assumption that margins for lab-grown diamonds will be narrower, due to its lower ASP and the lack of scarcity. Given the commodity nature of lab-grown diamonds, I think there is a higher possibility that margins will be lower than that of mined diamonds. If the margin is lower, most likely it will squeeze other suppliers in the value chain as well. The hope would be the industry participants will be content with market share, and brand differentiation for lab-grown diamonds.
The hope for investors in the diamond industry would be, once again, consumer spending preference.
That consumers will once again view diamond as timeless treasure, or the price of lab-grown diamonds will be lower enough to entice consumers to purchase a larger quantity.
Just my 2 cents worth.