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Produced by Huxiu Business Consumption Group

Author: Zhou Yueming

Editor: Miao Zhengqing

Title image｜Visual China

In a factory in Nanyang, Henan, 35-year-old Wang Lin is still working overtime. He is concentrating on polishing the dazzling diamonds in his hands. With the coming of Chinese Valentine's Day, the stones in his hands will usher in another wave of sales.

However, he does not process natural diamonds, but cultured diamonds that have become increasingly popular in recent years. Since the US Federal Trade Commission revised the definition of diamonds in 2018, cultured diamonds have developed rapidly and begun to impact the natural diamond industry.

In 2023, the production of cultured diamonds reached 9.86 million carats, sales reached 7.65 million carats, and sales revenue reached 1.96 billion yuan. De Beers, the world's largest monopoly diamond dealer, declared that "2023 is the most difficult year", while several natural diamond manufacturers chose to stop mining to maintain diamond prices.

In addition to the battle between natural diamonds and cultured diamonds, another battle is also quietly taking place.

Competition in the diamond cutting chain is becoming increasingly fierce.

"There is a huge shortage of diamond cutters in my country. According to industry statistics, there are only about 2,000 diamond cutters," Chen Geng, a veteran in the diamond cutting and polishing industry and general manager of Shenzhen Yicai Fangyuan Technology Co., Ltd., told Huxiu. India has about 800,000 diamond cutters, who have long controlled the diamond cutting industry chain and snatched the right to speak in the development of the diamond industry.

"In the cultured diamond industry, China accounts for 90% of the rough diamond production market, India accounts for 90% of the cutting and polishing market, and Europe and the United States account for 90% of the finished product market," said Wang Qinsheng, honorary president of the Cultured Diamond Branch of the China Jewelry and Jade Jewelry Association.

However, due to the lack of capacity in the middle and upper reaches of the industrial chain, the domestic cultured diamond industry is in a passive position. Forced price cuts and factory closures are plaguing the domestic cultured diamond market. A revolution to supplement the industrial chain is urgently needed.

Stuck on Diamond Cutting Technology

Before diamond craftsmen became so scarce, China also had a large number of diamond industry workers.

In the early 21st century, China was an important diamond-cutting center.

At that time, China was in the honeymoon period of trade with European and American countries. In 2001, China joined the WTO, and the Shanghai Diamond Exchange was established in the previous year (2000).

European and American companies that control the raw materials of natural diamonds also supplied a large amount of raw materials to China. China's natural diamond processing industry began to rise. According to industry insiders who told Huxiu, during its heyday, there were nearly 200,000 to 300,000 employees.

However, with the gradual reduction of natural diamond mines and factors such as the Sino-US trade war, the giants that control the raw materials of natural diamonds began to cut their supply to China. Due to the lack of raw materials, the domestic diamond cutting industry began to gradually decline more than a decade ago, a large number of industrial workers changed jobs, and technology was interrupted.

European and American companies that control the diamond industry have turned to supporting India and Israel. India, in particular, is now the world's most important diamond cutting center.

India's diamond cutting industry has a long history of more than 50 years. After years of development, India's gemstone processing technology has become more mature.

"Their processing efficiency is higher. For example, for one carat, we produce 30% of the material, but they can produce 35%, or even 40%. All the scraps can be utilized." An industry insider told Huxiu.

After Modi came to power, he promoted this industry to a national pillar industry of India. During his term of office, he implemented a series of policies to further increase the advantages of India's diamond cutting industry.

In May 2020, Modi formally proposed the "Atmanirbhar Bharat" initiative, aimed at promoting economic recovery and revitalizing local manufacturing.

In December 2023, Modi presided over the opening ceremony of the Surat Diamond Exchange, which cost 32 billion rupees and is the world's largest building complex, about 660,000 square meters, even larger than the Pentagon in the United States. Modi hopes to create 150,000 new jobs for India through this trading center.

Surat is known as the world's "Diamond City". It is said that 11 out of every 12 diamonds in jewelry in the world are processed in India, most of which are concentrated in Surat.

This city, which cuts and polishes about 90% of the world's rough diamonds, gathers about 800,000 diamond cutters, 70% of whom come from Gujarat on the west coast of India. In the rural areas of Gujarat, many families and even nearly two generations have been engaged in the diamond processing industry.

Chen Geng has visited Surat many times.

"The environment of the diamond cutting factory there is very simple," he told Huxiu. According to his description, there are only small fans in the factory with thousands of people, and the workers wear vests and continue to work in the high temperature of India. Most of the craftsmen here are men, without social security, and they will bring their work home after get off work, and the whole family will work together. Some children start working as a worker at the age of 12, which is not uncommon in Surat.

"Companies there claim that labor costs are 2,000 yuan per month, but in reality they may be lower," said Chen Geng.

There, except for the top dozens of companies with industrial production scale, the rest of the processing units are mostly unorganized private workshops or even self-employed individuals. It is difficult for them to provide social security for the workers in Surat, but they require extremely high production intensity and production standards.

Although India's diamond cutting industry has many drawbacks, its low labor costs and positive support from India have made it stronger. For China, this industry is declining, and the severe shortage of cutting workers has become an important factor restricting the development of the diamond industry in the future.

In 2018, as cultured diamonds were recognized by the World Diamond Council, the cultured diamond industry entered a stage of rapid development. China has also gradually occupied an important position in the global cultured diamond market due to technological breakthroughs.

According to data, the annual output of cultured diamonds nationwide is about 15 million to 20 million carats, accounting for about 50% of the global market share. In 2023, China produced and exported more than 15,000 carats of gem-quality cultured diamonds, accounting for 17% of the global market share.

However, since China mainly produces rough diamonds and lacks the ability to process finished products, a large amount of rough diamonds produced domestically have to be sold to India for further cutting.

This put the domestic cultured diamond industry in a passive position for a while. According to industry insiders, India often puts down the price of rough diamonds from China, causing the market price to become lower and lower. The current market price has dropped rapidly from the high point of US$300 per carat in 2021 to around US$15.

A large number of small and medium-sized cultured diamond production factories have closed down, and the previous craze has begun to cool down. If you want to control the discourse power of this industry, it is urgent to train your own cutting workers.

A shortage of 300,000 craftsmen

However, the gap is too big.

"According to industry statistics, there are only about 2,000 diamond cutters in my country, most of whom are in their 40s," said Chen Geng. And according to the current domestic production capacity, at least a large number of advanced equipment and at least 300,000 cutting workers are needed.

"Machinery and equipment can replace India's low-end processing links." Industry insiders told Huxiu. Machine processing is suitable for standard parts or products with low added value. In the eyes of industry insiders, with China's advanced manufacturing capabilities, it is not difficult to promote a batch of advanced machinery and equipment within two years.

The difficult part is training people.

"This industry is relatively unpopular, and there are not many young people who know about it," said Chen Geng. According to his description, it takes about 3 to 6 months to train a junior cutting worker with basic qualifications, while it takes two to three years to train a mature and experienced professional.

In order to train cutting workers, he opened diamond cutting training courses together with some universities and institutions. Each training course enrolls about 20-30 students. However, due to the unpopularity of the industry, most of the applicants are from upstream rough processing factories, and there are not many young people entering the industry.

"Young people can't sit still very well. Most of the employees who perform well in our factory are in their 30s," said Chen Geng.

If you are willing to get into this industry, there is at least no shortage of jobs. The trainees trained by Chen Geng's training class have been absorbed by his own factory before they have entered the market. Even so, there is still a gap of about 500 people. In Shenzhen, the monthly salary of diamond cutting craftsmen is about 8,000-10,000 yuan. Many factories provide food and accommodation. If you have good skills and high efficiency, the monthly salary can reach 20,000 to 30,000 yuan. (The monthly salary in Henan is about 6,000 yuan).

Of course, if one wants to further gain control of the diamond industry, it is far from enough to train one's own cutting craftsmen. Improving brand building capabilities is also a crucial step.

However, there are still many challenges in cultivating a cultivated diamond brand in China.

But for domestic cultivated diamonds, first of all, few brands are willing to be pioneers. The cost of market education is too high and no one wants to be a martyr.

For example, Guo Sheng, the founder of one of the earliest cultured diamond brands in China, Kailixi, once admitted that he entered the industry too early and helped the industry to do some pioneering work, but he paid a price. He said that at the beginning, they were the first Chinese cultured diamond exhibitors at various jewelry exhibitions and were strongly excluded at the beginning.

In addition, some natural diamond giants have begun to cultivate the diamond brand market with lower pricing.

For example, natural diamond giant De Beers launched the cultured diamond brand Lightbox. It found that the momentum of cultured diamonds could not be stopped, so it changed from resistance to rapid entry. Lightbox is priced very low, at US$800 per carat, which is only more than 5,000 yuan per carat in RMB. According to reports, the current retail price of cultured diamonds in the domestic market is about 30,000 yuan per carat. Even if it is directly purchased from manufacturers in Henan, the finished product is close to 20,000 yuan per carat.

In the view of industry insiders, De Beers' move is intended to disrupt the cultured diamond market. They want to guide the development direction of the industry with ultra-low pricing and low-end positioning of fashion accessories, and further squeeze the living space of other cultured diamond brands.

However, as the country pays more and more attention to the cultured diamond industry, the environment is changing.

Some leading companies have begun to launch diamond cultivation brands and assume some of the costs of the education market.

For example, Zhongnan Diamond, a leader in cultured diamonds, launched ZND Jewelry, and Yuyuan Jewelry Fashion Group recently established a cultured diamond brand called "Lusant".

Natural diamond mines are in the hands of Europeans and Americans, but now cultured diamonds have given China an opportunity. Seizing the right to speak in the industry in the next three to five years is a big drama that is being staged in the domestic cultured diamond industry.