From Tickers to Carats: Is LGD the Quartz of jewellery?
An unconventional take on why natural diamonds won’t die — they’ll just become more like Rolex
A question many jewellery enthusiasts and jewellers themselves try to answer is how natural diamond will be positioned against LGD in the future. Many have tried take a dig at it, my guess is this will be similar to how quartz revolution was to mechanical watches.
Before we deep dive on the similarities, what is a mechanical watch?
A mechanical watch is a timepiece that uses gears and springs to keep time, powered by a wound spring. It is essentially potential energy being converted into kinetic energy.
So, what is a Quartz movement/watch? A Quartz watch is a timepiece that uses a battery to power a quartz crystal oscillator which regulates the timepiece.
Most of you reading this would not have witnessed the Quartz revolution (neither has your boy), so here is a small recap for all of you.
Before Seiko launched first Quartz model in 1969 mechanical watches were the norm with Switzerland dominating the industry having ~80% market share. Watches while being a highly utilitarian accessory were also a very expensive affair. Quartz watches were very expensive (like every technological revolution) when they were first introduced. However, it quickly became extremely affordable with production spread across Hongkong and Japan. Also, unlike mechanical watches, Quartz had standardized process with very little degree of process variations. This also helped with the economies of scale.
At the same time manufacturing mechanical watches is a very labor intensive, highly decentralized affair. For a lot of Swiss watch manufacturers this was a doomsday scenario with many of them pivoting to Quartz. However, brands like Blancpain very thoughtfully and purposely moved towards positioning themselves as old school craftsman, focusing on brand lifestyle and the romance of mechanical complexity. Rolex (which continues to be held by a foundation since 1945) weathered the storm and copied Blancpain. Fast forward to today, while Switzerland manufactures just 2% of global volume of watches, they capture 45% of global revenue (including smart watches). The mechanical watch industry has significantly shrunk in volume; it continues to be a piece of engineering and artistic affair.
Thank you for this Ashutosh but where are you heading with it?
You see LGD already constitutes 40% market share in the US. India market share of LGD is a meagre ~5%. Similar to Quartz watches, LGD is extremely cheap to manufacture at INR 15-18k/carat (vs INR 45-48k for natural diamond) and you can have consistent grade throughout the year. While I don’t have the exact breakup of COGS for LGD (seed, power, factory O/Hs, reactor depreciation and margins) few large-scale players have setup multi thousand reactor ecosystems running entirely on solar.
What is your point Ashutosh?
Like a mechanical watch which could be afforded selectively and is an expensive affair, natural diamonds continue to be an urban phenomenon with limited penetration beyond top 8 cities. Some indulgences here and there but mostly purchased by SEC A/A+ households. As more players continue to setup these reactors and market continues to witness a supply glut, prices might continue to fall further. My guess is that LGD adoption will become mainstream like Quartz with penetration as high as smartphones and TV. From being a jewellery, LGD might transition towards a fashion accessory where it is not paired only with gold but something like a non-fine jewellery bracelet.
So, is this the end of natural diamonds?
Most definitely no. For natural diamonds however, there will continue to be niche set of audience which will cling onto it for the nostalgia, flex or the feel of it. These UHNI/HNIs will not like to identify with the masses who wear LGD and the society very well knows who can afford a 3-carat natural diamond solitaire. The number of retailers which offer natural diamond will proportionately shrink and brands that continue to offer a very artistry designs will be the only ones to flourish. For brands like Titan, Mia might transition to LGD, Tanishq will cease to have diamond and Zoya might become a Rolex/Patek Philip equivalent of natural diamonds.