GIA Dunks on Lab Diamonds

[Texas Leaguer]

GIA Dunks on Lab Grown Diamonds

In a move that might be described as “shocking but not surprising” GIA has just announced that it will cease doing traditional 4C’s grading on laboratory grown diamonds later this year. It is shocking because the news will send shock waves through the diamond industry, but not surprising because at some point in the evolution of synthetic diamonds this was bound to happen. And the fallout will be massive!

https://www.gia.edu/gia-news-press/new-descriptive-terminology-for-laboratory-grown-diamonds

As a rapidly advancing technology product with worldwide competition, lab grown diamonds have become bigger, better, and significantly less expensive over time. Thus, the supply of high quality material has exploded in the past few years while production cost has plummeted. With most of the current production being in the elite color and clarity ranges, and with prices in freefall, there are far fewer dollars riding on the specific grade today. How long before nobody really cares?

More to the point, in natural diamonds the upper grades, especially clarity, are essentially rarity grades (FL, IF, VVS1, VVS2 are microscopically clean). The more rare the stone, the more valuable it can be. The same calculus does not hold true for a manufactured product that can be dialed up and cranked out in virtually unlimited quantities. With this recognition GIA will cease providing specific color and clarity grades on lab grown diamonds, and instead apply general quality descriptors such as “standard” and “premium”. Essentially a pass/fail designation rather than a grade!

To be honest, it was only a matter of time before GIA was going to pull the plug on LGD grading, and steer the diamond world in a different direction. With their global reach and reputation, when GIA makes a move, a big portion of the market moves with them. In the short term other labs like IGI stand to gain market share. But will other major labs still be doing traditional 4C’s grading on synthetics by this time next year?

GIA’s about-face on LGDs continues to serve the goal of consumer protection by focusing primarily on identification – this is what consumers still need today. But it sends an unmistakable signal to the consumer market that synthetic diamonds are a different product than natural mined diamonds.

Will the market get the message? Will there be blowback?

 

[Karl_K]

It sounds like the last gasp of a 800lb gorilla to destroy a market in which they are getting kicked to the curb by the competition.
Consumers have decided they like grading and see them as acceptable replacements for natural diamonds in many cases.
That some in the industry are trying to bully consumers again is no surprise.
De Beers already tried and failed, now its GIAs turn to fail.

I already avoid looking at lab stones with GIA reports online because they almost always have transparency issues.
This will just make me avoid them entirely.

 

[Texas Leaguer]

It sounds like the last gasp of a 800lb gorilla to destroy a market in which they are getting kicked to the curb by the competition.
Consumers have decided they like grading and see them as acceptable replacements for natural diamonds in many cases.
That some in the industry are trying to bully consumers again is no surprise.
De Beers already tried and failed, now its GIAs turn to fail.

I already avoid looking at lab stones with GIA reports online because they almost always have transparency issues.
This will just make me avoid them entirely.

If GIA "fails" , then it's a boon to labs like IGI and GCAL. And if the market continues to demand 4C's grading on LGDs they will continue to prosper by providing it.

But will the market do that? Or is the product evolving to the point where it will become unnecessary and cost prohibitive to require that service?

 

[MissGotRocks]

If GIA "fails" , then it's a boon to labs like IGI and GCAL. And if the market continues to demand 4C's grading on LGDs they will continue to prosper by providing it.

But will the market do that? Or is the product evolving to the point where it will become unnecessary and cost prohibitive to require that service?

I think the second comment here is more likely. Anything that can be mass produced and whose cost continually deflates, will not need to be heavily scrutinized and graded. Would rather see info on cut quality rather than color which is generally pretty high.

 

[Dreamer_D]

What market blowback would you anticipate?

 

[diverg]

Who determines which labs grade diamonds whether they be mined or lab? In the case of LGD is the producer the one that determiner which lab to use?

 

[Texas Leaguer]

Who determines which labs grade diamonds whether they be mined or lab? In the case of LGD is the producer the one that determiner which lab to use?

Whether natural or LGD it is the manufacturer (cutting house) who submits the stone to the lab in the majority of cases. So they determine which lab and which report gives their clients the highest sell-through. They know their customers (re-sellers) and the particular market for the goods they produce.

If they detect demand for a different lab for whatever reason, they will adjust. For example, if an LGD manufacturer selling precision cut HPHT goods is hitting a higher end market that prefers GIA reports, but those customers demand 4C's grading, they may shift to IGI or GCAL for those reports.

 

[Texas Leaguer]

What market blowback would you anticipate?

I personally don't expect anything of an enduring nature. GIA will take a PR hit in some quarters, and there will be a lot of grousing. But the move is in step with the overall evolution of the product. So I think any furor will subside in time.

GIA knows their move will benefit their competitors in the short term and they are ok with that because they are playing the long game.

 

[diverg]

I personally don't expect anything of an enduring nature. GIA will take a PR hit in some quarters, and there will be a lot of grousing. But the move is in step with the overall evolution of the product. So I think any furor will subside in time.

GIA knows their move will benefit their competitors in the short term and they are ok with that because they are playing the long game.

This shouldn't make a difference for WF, as from what I seen most if not all of your Precision Lab Diamonds are graded by IGI, and WF grades to a much higher standard.

Makes me wonder if I should get my ring now or wait till my original time line of Late November or early December.

 

[oncrutchesrightnow]

Hard to say what will happen without knowing how much it costs to get a diamond graded versus how much a grading report affects the price consumers are willing to pay. IGI may have increased its credibility by grading LGD and might increase its credibility even more by continuing to do so. Nothing against GIA; just thinking as a consumer.

Assuming the high availability and low price of LGD makes LGD less “special” than natural diamonds (which I don’t agree with, but for argument’s sake), the result might not be a return to natural diamonds but rather increased spending on a different aspect of the e-ring or other diamond jewelry. Name brand, metal, design, level of craftsmanship, etc.

It is just really, really hard to imagine consumers going back to smaller, lower quality diamonds that cost more. If consumers feel the need for exclusivity, they will find a way to spend their money but probably not on a stone that is visibly inferior to their friends’ pretty jewelry, just for the sake of saying their diamond is natural..

 

[Tonks]

I just….did no one think to do research or projections to figure out what was likely to happen to the mined diamond market when they threw labs into the marketplace? Thinking of DeBeers shutting down Lightbox and now this.

The horses have left the barn.

 

[Tonks]

OR….

Did they do research and decide it was worth the risk to split the market and eventually align themselves with mined diamonds as a more profitable good they could position as luxury? Luxury goods tend to have larger profit margins…..

I swear I am not trying to sound like a conspiracy theorist. It just doesn’t track that no one could have foreseen the impact of labs.

 

[LilAlex]

I confess that seeing this development -- and it was not on this site but maybe on the GIA IG account -- made me smile a little. I think the lab grades mattered when labs were new and the various technologies were new and folks needed some leveling of the playing field. "Are they as good as they are supposed to be?!" But now that labs are dominating and they are (almost) uniformly colorless and clean, the need no longer exists.

To me, and I will raise some blood pressures here, it's like rating and ranking fake Rolexes. You can make an infinite number and they may get close to being indistinguishable from a real Rolex and you can grade them but so what? One could eventually make a "chemically identical" fake Rolex with real gold and all the right metals and parts.

Is GIA shooting themselves in the foot? Maybe. Go on Reddit and you will see just thousands of posts about "Who is still dumb enough to buy mined diamonds?" Among the most-often cited reasons for going lab is their ethical nature. What marketing genius! Energy-wise, they are about as ethical as crypto-mining, right? And there are plenty of ethically mined diamonds, and no one seems to care much about colored-gem provenance. Plus, labs are sold side-by-side with their "blood" brethren, and often by the same vendors. So, ethically, it's like "Ew, Tesla...but sign me up for Starlink!"

Maybe the next prestige wave will be small, perfect 1-ct mined diamonds that virtue-signal quality and not quantity. This is the Kashmir sapphire and Burma ruby model. It works for colored gems because you can then surround them with a monster diamond halo and thereby scream that there is something really amazing in the center! So maybe a natural diamond surrounded by a halo of...I don't know, lab diamonds?

 

[oncrutchesrightnow]

OR….

Did they do research and decide it was worth the risk to split the market and eventually align themselves with mined diamonds as a more profitable good they could position as luxury? Luxury goods tend to have larger profit margins…..

I swear I am not trying to sound like a conspiracy theorist. It just doesn’t track that no one could have foreseen the impact of labs.

I wouldn’t rule out complex marketing strategy but the effects of LGD on the market can be explained much more simply…

1. Diamond dealers thought buyers and wearers would value exclusivity over beauty.

2. Wearers value beauty over exclusivity.

3. Wearers have their own money these days and even if wearers like it when buyers buy them gifts, wearers’ ability to buy their own diamonds makes buyers more likely to prioritize beauty, too.

 

[lulu_ma]

I had an interesting chat with a jeweler today. He carries a smattering of lab grown pieces. He said that lab diamond hit rock bottom recently and bounced back up a bit-which I found interesting.

I just pains me to hear about people buying $500 3 ct lab diamonds and then spending $4500 on the setting. But that's just me-maybe I'm an old fogey.

 

[Tonks]

I wouldn’t rule out complex marketing strategy but the effects of LGD on the market can be explained much more simply…

1. Diamond dealers thought buyers and wearers would value exclusivity over beauty.

2. Wearers value beauty over exclusivity.

3. Wearers have their own money these days and even if wearers like it when buyers buy them gifts, wearers’ ability to buy their own diamonds makes buyers more likely to prioritize beauty, too.

These are great points.

There were also other wild cards like that Leonardo DiCaprio film Blood Diamond. I didn’t see it. I don’t actually know many people who did see it, but good grief everyone can tell you about blood diamonds and many MANY people think the worst of the mined diamond industry and that it’s all an ethical quagmire.

Not sure where the “labs are better for the environment” thing got started but it’s a hell of a way to market to younger people.

Combine those two (concern over blood diamonds and the environment) and that is a massive impact on the market segment who are in a position to be engagement ring shopping.

 

[maryjane04]

I had an interesting chat with a jeweler today. He carries a smattering of lab grown pieces. He said that lab diamond hit rock bottom recently and bounced back up a bit-which I found interesting.

I just pains me to hear about people buying $500 3 ct lab diamonds and then spending $4500 on the setting. But that's just me-maybe I'm an old fogey.

I think sometimes that allows for more elaborate/ornate pieces of art. Although I wouldn't spend that much on a standard solitaire setting. Maybe jewellers can advertise their mounts and throw in the lab diamond for free. It'll be great marketing for a "deal".

 

[Garry H (Cut Nut)]

Given that around 60-70% of the lab diamonds with grading reports are better than F and better than VS1 - this means the GIA will make money with no grading effort.
Not that there is much work anymore since Color is graded digitally, Clarity with IBM AI and Cut using Helium or Sarine scanners.
I guess until they instal robots people have to put the stones on the scanners and photography setups.
My next invention will be the single device: Scanner, Camera, Color Scales!

 

[MissGotRocks]

OR….

Did they do research and decide it was worth the risk to split the market and eventually align themselves with mined diamonds as a more profitable good they could position as luxury? Luxury goods tend to have larger profit margins…..

I swear I am not trying to sound like a conspiracy theorist. It just doesn’t track that no one could have foreseen the impact of labs.

I think it is a push for the natural diamond market. Follow the money. . . .

 

[Garry H (Cut Nut)]

I think Tonks and MGR are correct.
Major lab certs can cost a few bucks only from in company grading for firms that pass audits.
Indian companies are often better graders than labs.
The GIA can not compete with entrepreneurs.

 

[Karl_K]

The target for growers is high color, high clarity d/vvs with good enough transparency it doesn't get sent back.
If the other labs follow suit the target becomes the lowest quality that gets the grade.

Instead of bring out a transparency grade for both natural and lab diamonds which would best serve consumers they stuck a knife in consumers back by rewarding inferior goods and not fixing a huge problem in diamond grading.

 

[Texas Leaguer]

So many astute observations and interesting comments. This is why Pricescope Rocks!

 

[Texas Leaguer]

The target for growers is high color, high clarity d/vvs with good enough transparency it doesn't get sent back.
If the other labs follow suit the target becomes the lowest quality that gets the grade.

Instead of bring out a transparency grade for both natural and lab diamonds which would best serve consumers they stuck a knife in consumers back by rewarding inferior goods and not fixing a huge problem in diamond grading.

@Karl_K ,
I share your point about a transparency measure and have been advocating for it for years. I might be wrong but in this scientific age of sending spaceships into interstellar space and controlling them over billions of miles, it seems like a transparency grade for diamonds could be developed.

Regarding the point about other labs following GIA's lead and causing low quality to be rewarded, it's logical. But why would IGI, GCAL, et al do that if there is an ongoing demand in the market for the current grading practice?

 

[Texas Leaguer]

This shouldn't make a difference for WF, as from what I seen most if not all of your Precision Lab Diamonds are graded by IGI, and WF grades to a much higher standard.

Makes me wonder if I should get my ring now or wait till my original time line of Late November or early December.

It does impact us as we do have GIA graded stones in our precision lab brand. On the search page you can use the advanced filters to select the laboratory.

 

[Texas Leaguer]

Given that around 60-70% of the lab diamonds with grading reports are better than F and better than VS1 - this means the GIA will make money with no grading effort.
Not that there is much work anymore since Color is graded digitally, Clarity with IBM AI and Cut using Helium or Sarine scanners.
I guess until they instal robots people have to put the stones on the scanners and photography setups.
My next invention will be the single device: Scanner, Camera, Color Scales!

@Garry H (Cut Nut) ,
Regarding my bold above, don't you think this change will result in their LGD report business basically going away?

In my view it's not about easy money. Just the opposite - it's abandoning that piece of the business to other labs.

GIA dossier reports on lab diamonds, the most common GIA report in the LGD market, have been roundly criticized for providing less information that other reports. This has accrued to the benefit of IGI and helped them establish a very strong position in the lab diamond grading space. Now GIA will be providing considerably less information. Seems like their service would exist only serve the market for ID purposes, which obviously the others do as well and at lower cost.

 

[Texas Leaguer]

Hard to say what will happen without knowing how much it costs to get a diamond graded versus how much a grading report affects the price consumers are willing to pay. IGI may have increased its credibility by grading LGD and might increase its credibility even more by continuing to do so. Nothing against GIA; just thinking as a consumer.

Assuming the high availability and low price of LGD makes LGD less “special” than natural diamonds (which I don’t agree with, but for argument’s sake), the result might not be a return to natural diamonds but rather increased spending on a different aspect of the e-ring or other diamond jewelry. Name brand, metal, design, level of craftsmanship, etc.

It is just really, really hard to imagine consumers going back to smaller, lower quality diamonds that cost more. If consumers feel the need for exclusivity, they will find a way to spend their money but probably not on a stone that is visibly inferior to their friends’ pretty jewelry, just for the sake of saying their diamond is natural..

Good points.

With regard to IGI, lab diamonds most definitely raised their profile and they managed explosive growth very well. One of pricescope's own, John Pollard, gets some credit! It will be interesting to see if they can leverage that big reputational bump to make further inroads in the natural diamond grading space.

We do see the market gravitating back towards natural diamonds, and that will likely pick up steam. But it is true that lab diamonds have firmly established themselves in the competitive landscape and there will be no returning to pre-LGD norms.

 

[Texas Leaguer]

I just….did no one think to do research or projections to figure out what was likely to happen to the mined diamond market when they threw labs into the marketplace? Thinking of DeBeers shutting down Lightbox and now this.

The horses have left the barn.

The market research was significantly hampered by some major unpredictable events that happened concurrent to the rise of LGDs. Namely, a world wide pandemic and then a Russian invasion resulting in sanctions affecting a significant portion of rough supply. These events and the economic anxiety that followed had massive impacts on both supply chains and demand for natural diamonds.

The timing for LGD producers could not have been better, and it was a "perfect storm" for the natural business.

 

[Rockdiamond]

I swear I am not trying to sound like a conspiracy theorist. It just doesn’t track that no one could have foreseen the impact of labs.

Some really great points made, including this one.....
From my perspective, the diamond industry is like a bunch of headless chickens roaming around... while India took over the market lock, stock, and barrel.
Even today, there's no general industry agreement on lab diamonds, their effect, or long term planning.
GIA is STILL using the "fact" that natural diamonds are an investment tool.
WHAT A CROCK!!!

I already avoid looking at lab stones with GIA reports online because they almost always have transparency issues.

This one made me scratch my head....
For one thing, I've not experienced this...there's very few GIA graded labs on the market, but the ones I've seen were fine.
For another...one strategy I admired was lab companies that featured GIA graded labs. They did seem to have tighter standards and some better stones.

It seemed to me that they were exhibiting a desire to sell something "better"

 

[Karl_K]

Regarding the point about other labs following GIA's lead and causing low quality to be rewarded, it's logical. But why would IGI, GCAL, et al do that if there is an ongoing demand in the market for the current grading practice?

I think what bugs me the most is once again GIA instead of giving consumers what they want is trying to tell consumers what they should want.
GIA wants to be the gold standard yet they try and dictate what consumers want instead of serving them.
There is no reason for the other labs to follow at this time.

 

[DejaWiz]

GIA is failing their mission statement, thus they are failing us public consumers:

https://www.gia.edu/gia-about-mission-governance-esg