The New Diamond AgeArmed with inexpensive, mass-produced gems, two startups are launching an assault on the De Beers cartel. Next up: the computing industry.
By Joshua Davis
Aron Weingarten brings the yellow diamond up to the stainless steel jeweler's loupe he holds against his eye. We are in Antwerp, Belgium, in Weingarten's marbled and gilded living room on the edge of the city's gem district, the center of the diamond universe. Nearly 80 percent of the world's rough and polished diamonds move through the hands of Belgian gem traders like Weingarten, a dealer who wears the thick beard and black suit of the Hasidim.
Yellow diamonds manufactured by Gemesis, the first company to market gem-quality synthetic stones. The largest grow to 3 carats.
"This is very rare stone," he says, almost to himself, in thickly accented English. "Yellow diamonds of this color are very hard to find. It is probably worth 10, maybe 15 thousand dollars."
"I have two more exactly like it in my pocket," I tell him.
He puts the diamond down and looks at me seriously for the first time. I place the other two stones on the table. They are all the same color and size. To find three nearly identical yellow diamonds is like flipping a coin 10,000 times and never seeing tails.
"These are cubic zirconium?" Weingarten says without much hope.
"No, they're real," I tell him. "But they were made by a machine in Florida for less than a hundred dollars."
A microwave plasma tool at the Naval Research Lab, used to create diamonds for high-temperature semiconductor experiments.
Weingarten shifts uncomfortably in his chair and stares at the glittering gems on his dining room table. "Unless they can be detected," he says, "these stones will bankrupt the industry."
Put pure carbon under enough heat and pressure - say, 2,200 degrees Fahrenheit and 50,000 atmospheres - and it will crystallize into the hardest material known. Those were the conditions that first forged diamonds deep in Earth's mantle 3.3 billion years ago. Replicating that environment in a lab isn't easy, but that hasn't kept dreamers from trying. Since the mid-19th century, dozens of these modern alchemists have been injured in accidents and explosions while attempting to manufacture diamonds.
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Gemesis
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Diamonds: Made in the U.S.A.
Excerpt:
“If you took the same quality of diamond as I have here, and if that were a natural diamond, that would be terrifically expensive,” says Clarke. “A natural diamond of that size and that color and that cut and that quality would be somewhere in the neighborhood of $16,000 to $20,000. We will be selling that somewhere in the neighborhood of $3,500 to $4,000.
Until recently, Clarke knew nothing about diamonds. A retired brigadier general and entrepreneur, Clarke was looking for business opportunities in Russia, when scientists showed him blueprints for something they had developed for the Soviet space program.
It was a diamond-making machine. Clarke bought one, and now, eight years later, he has 23 of them."
Dimonz-The Diamond Market Excerpt:
DeBeers
"It is important to dispel a popular misconception. Some diamond retailers suggest that they buy their diamonds directly from diamond mines and that this results in significant cost savings to you, the consumer. In the first place, most of the retailers who make this claim are not diamond cutters. They do not have the capacity to manufacture finished diamonds from rough stones produced in the mines.
Also, for the most part, the distribution of rough diamonds is strictly controlled. An international monopoly known as the DeBeers Corporation buys and distributes approximately 60% of the world's uncut, rough diamonds and controls the prices of the remaining diamond rough indirectly. DeBeers Corporation's "single-channel" marketing of diamonds determines the price of rough diamonds and makes it almost impossible for diamond manufacturers or others to "beat the system" by purchasing rough diamonds at prices significantly below DeBeers' established prices.
How does DeBeers operate? DeBeers Corporation is an international cartel that has controlled the price of diamonds since the mid 1930s. Anglo-American Corporation owns 45% of DeBeers; 40% is owned by the Oppenheimer family, which established DeBeers monopolistic, single-channel approach to rough diamond distribution; and 15% is owned by the government of Botswana.
DeBeers buys most of the world's rough diamonds from diamond producing nations: e.g., South Africa, Botswana, Namibia, Zaire, et al. In addition to purchasing diamonds from major diamond producing nations, in order to maintain control of rough diamond prices, DeBeers purchases a large percentage of the remaining rough diamonds throughout the world from sources outside of the recognized DeBeers network of diamond producing nations.
DeBeers sells these rough diamonds to approximately 80 "sightholders" (generally, major diamond cutting firms) which are the only companies authorized to buy rough diamonds directly from DeBeers. The sightholders are invited to attend a "sight" held at DeBeers Central Selling Organization in London, England approximately ten times a year (acceptance of the invitation is mandatory). Each sightholder is given a box of diamonds.
The price of the diamonds is fixed by DeBeers and is not subject to negotiation. Even rough diamonds marketed outside of DeBeers are priced in accordance with the price structure established by DeBeers' Central Selling Organization.
From 2002 through the beginning of 2005, DeBeers has reduced the number of sightholders from approximately 120 to 80, as a part of it's "Supplier of Choice" program. Under this program, DeBeers will try to consolidate the diamond market from rough production through retail, eliminating many of the current participants in diamond production and sales.
The impact on the diamond cutting industry and jewelry retailers (among others involved in the diamond trade) could be enormous. Does this mean that the price of diamonds will come down? Not on your life! It means that DeBeers and it's sightholders will probably make a greater percentage of the total take from the diamond market than it currently does. "
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