Why lab-grown diamond prices collapsed: the economics explained

Why it happened: commodity economics applied to diamonds

The lab-grown diamond price collapse follows a textbook commodity economics pattern. When a product that was previously scarce becomes manufacturable, its price tends towards the marginal cost of production rather than the scarcity premium that defined its prior value. This is what happened to lab-grown diamonds.

Before CVD technology became commercially viable for gem-quality diamonds (approximately 2015–2018), lab-grown diamond supply was limited by manufacturing constraints. HPHT technology could produce gem-quality stones but was capital-intensive and difficult to scale rapidly. CVD technology changed this: the reactors are relatively modular, the process is more controllable, and the equipment can be replicated efficiently. A manufacturer with the capital to buy reactor equipment and access to electricity and feedstock gas can enter the market and scale production (GIA Gems & Gemology research on CVD production; industry manufacturing analyses).

Between 2018 and 2023, global CVD diamond manufacturing capacity expanded dramatically, primarily in China and India (Gujarat). India, already the world's largest diamond cutting nation with the infrastructure to polish large volumes of rough, became a major CVD rough producer in addition to its cutting role. This supply expansion created the market conditions for the price collapse (IDEX Online market analysis; GJEPC monthly export data showing lab-grown volume growth, gjepc.org; Rapaport Magazine market analysis 2020–2026).

CVD manufacturing scale: the efficiency improvement

The cost of producing a 1-carat CVD diamond rough stone fell from approximately USD 300–500 in 2015–2016 to approximately USD 60–100 in 2023–2024 (industry production cost analyses as documented in Rapaport Magazine and IDEX trade commentary 2020–2024). This cost reduction came from multiple sources:

Reactor efficiency: Early CVD reactors produced small stones slowly. Improved microwave plasma CVD technology allows larger stones, faster growth rates, and better yield per reactor run. The productivity per reactor has increased several fold over a decade of technology development.

Electricity cost management: CVD is energy-intensive, microwave plasma generation requires significant electrical power. Manufacturers who co-located with cheap electricity (solar in Gujarat, hydro in certain regions, cheap grid electricity in China) achieved lower per-carat energy costs than pioneers who paid market electricity prices.

Scale economies: A facility running 50 reactors has lower overhead per carat than one running 5. As the industry scaled, the per-unit cost of management, maintenance, and quality control fell.

Process optimisation: Seven to eight years of CVD production experience has produced process optimisation, better control of growth parameters, fewer growth failures, better stone quality yields, that reduces waste and rework costs.

Why there is no scarcity floor: the fundamental difference from natural

Natural diamond prices have a geological scarcity floor. The supply of new natural diamonds from operating mines is limited by what the earth contains in economically accessible deposits. Mine operators cannot simply produce more by buying more equipment, they are constrained by the ore body. This geological scarcity means that as natural diamond prices fall, high-cost mines become uneconomical, reducing supply and putting a floor under price declines (De Beers Group Annual Reports; Rapaport natural diamond supply analysis).

Lab-grown diamonds have no such scarcity floor. If CVD diamond prices fall to a level that makes a manufacturer's operation unprofitable, that manufacturer exits or reduces production, but others with lower costs remain. The price floor is the marginal cost of the most efficient producer, not a geological constraint. As technology improves and the most efficient producers' costs fall, the price floor falls with them.

This is the fundamental economic reason why lab-grown diamond prices cannot be expected to recover to their 2019–2021 levels and why they may continue to fall towards the marginal cost of the most efficient CVD production, which continues to decline. Natural diamond prices have a geological floor that lab-grown prices simply do not (Rapaport Magazine analysis, "The Lab-Grown Commodity Market," various 2022–2026 issues).

Impact on India's diamond industry

The lab-grown price collapse has had a complex impact on India's diamond industry. The Surat-based cutting industry, which processes virtually all lab-grown rough, has seen significant volume growth in lab-grown goods even as natural diamond cutting has faced margin pressure from falling natural prices (GJEPC Monthly Export Data showing lab-grown volume trends, gjepc.org, 2022–2026).

For India's diamond cutting workforce, the lab-grown transition has required adaptation: the same polishing skills that apply to natural diamond cutting apply to lab-grown, so the craft knowledge transfers. But lab-grown rough prices are much lower, which means the absolute value per stone is much lower, which compresses the margins available throughout the supply chain. A workforce that generated significant value from high-priced natural goods has had to adapt to a higher-volume, lower-margin model for lab-grown (industry analyses; GJEPC commentary on market transition, 2023–2026).

What the price collapse means for buyers today

For anyone buying a lab-grown diamond in early 2026, the price collapse means:

The price you pay today may be lower than the price six months ago: Lab-grown prices have been declining steadily. A buyer who purchased a 1-carat lab-grown in early 2024 for ₹80,000 may find the same specification available for ₹50,000 in early 2026. This price trajectory means that buying lab-grown earlier is not necessarily better, you may pay more than someone who waits.

The resale value is essentially zero above scrap: A lab-grown diamond purchased at ₹60,000 today will be worth ₹10,000 to ₹20,000 or less in the secondary market, if any buyer can be found at all. This is not a reflection of the diamond's physical quality but of the economics: the same specification can be purchased new for ₹60,000 or, in a year, possibly less. There is no incentive for a secondary buyer to pay more than the current new production price.

Buy for wearing, not for storing value: The economics of lab-grown diamonds make them excellent value for jewellery purchased primarily for wearing and enjoyment. They are not appropriate as a store of value, a financial investment, or a meaningful gift of monetary substance. The ₹60,000 is spent; the beauty is real; the monetary value is gone. If those terms are acceptable, and for many buyers they are entirely reasonable, lab-grown is a rational and attractive choice.

Primary sources cited here

Frequently asked questions

Are lab-grown diamond prices at the bottom?

There is no definitive answer to this. The price decline has slowed from the steep rates of 2021–2023, suggesting that production efficiency improvements may be decelerating and that the market is approaching a more stable equilibrium. However, there is no strong economic argument for a sustained price recovery, natural scarcity dynamics do not apply, and production capacity continues to grow globally. Some manufacturers have exited the market, which reduces supply pressure, but new producers continue to enter. As of early 2026, the consensus among market analysts (Rapaport Magazine; IDEX commentary) is that lab-grown prices are at historically low levels but may continue to fall modestly as the most efficient producers further reduce costs.