Lab Grown Diamond Price Decline: Cause and Effects

Years of Growth - and Excess

Between 2020 and 2023, production efficiency improved sharply, particularly in China and India, leading to several-fold increases in lab-grown rough output. Encouraged by early success, numerous jewellery startups entered the market, alongside established retailers who were in it only to enjoy the unusually high margins.

Younger consumers were drawn by messaging around sustainability, traceability, and accessibility. For many, previously unattainable diamond jewellery suddenly became affordable. For many young couples, proposal ring purchases were influenced more by perceived value rather than driven by sentiment. The rapid pace of declining prices undermined confidence. Consumers began noticing that diamonds purchased - or viewed in retailer’s windows - just weeks earlier were being marked down.

What initially looked like a retail windfall evolved into intense price competition. With little product differentiation, price became the primary lever. Predictably, the market entered a race to the bottom or what is better known in trade terms as 'margin squeeze'.

Impact on Natural Diamonds

During this period, natural diamonds experienced price declines of up to 30–40% in certain categories from their 2022 peaks, unsettling long-standing consumer assumptions around value retention and legacy.

This had broader implications for the entire jewellery ecosystem. Even staunch advocates of lab-grown diamonds recognised that their product’s appeal was closely tied to the historical prestige, rarity, and emotional weight of natural diamonds. As lab-grown prices fell rapidly, that effect recoiled back onto the entire brand, raising uncomfortable questions about its permanence and value.

Consumers increasingly realised that lab-grown diamonds offer little to no resale value, behaving more like depreciating consumer goods than enduring luxury items. This realisation affected purchasing decisions, particularly for emotionally symbolic items such as engagement rings.

Intensifying Competition

The growing number of growers, polishers, and online retailers - particularly in India and China - has intensified competition. With limited scope for branding or quality differentiation, price has become the dominant competitive tool.

Process refinement and capital availability has lowered production costs, but innovation in creating consumer demand has lagged behind. As a result, retail prices continue drifting downward, squeezing margins and challenging the viability of startup business models.

Production and Grading Dynamics

Several structural factors continue to exert downward pressure on prices:

• Supply scalability: Lab-grown diamond production has increased rapidly, leading to persistent oversupply relative to jewellery demand. Besides, polishing LGD rough is a simple, highly repetitive process requiring lower skilled labour as compared to cutting natural diamond rough.
• Uniform quality: Advances in post-growth treatment have resulted in an abundance of high-grade stones, creating a narrow and monotonous quality range. This results in a predictable and increasingly uniform polished product – narrowing the appeal base.
• Grading changes: The GIA’s decision to replace traditional 4Cs grading for lab-grown diamonds with just two broad categories of Premium and Standard has further reduced differentiation.
• Laboratory consolidation: With HRD from Belgium discontinuing grading lab-grown diamonds as from January 2026, only one major international lab will continue issuing detailed reports, reinforcing commoditisation.

Implications for the Jewellery Industry

Natural diamonds have historically occupied a distinct position defined by rarity, provenance, and long-term value perception. The emergence of lab-grown diamonds has blurred that distinction, creating confusion rather than clear category separation.

At the same time, lab-grown diamonds are finding relevance in fashion-forward, entry-level, and design-driven jewellery, where size, novelty, and affordability matter more than rarity or long-term value. This has opened creative possibilities for young designers, particularly in non-traditional diamond cuts and jewellery styles.

Affordability can be the prime attraction at the point of first purchase but never by itself defines value. Buyer expectations around desirability, rarity and price stability must also align with changing market conditions. In this race of the hare and the turtle, the turtle appears to be outlasting the hare - a familiar pattern in luxury markets shaped by scarcity and supply discipline 

Near-Term Outlook: Stabilisation and Divergence

• Recent data suggests a gradual stabilisation of natural diamond prices. After earlier declines, a base is forming, with larger sizes and rarer stones showing greater resilience. Past downturns have taught us that prices do ultimately recover, sometimes the recovery is quick and sharp, sometimes slow and laboured. At this time, the recovery is yet in the stabilisation phase.

• Lab-grown diamonds are losing their early status as a “premium alternative” status and settling into a cost-plus, mass-market pricing model. This transition clearly indicates commoditisation rather than product maturity.
• What is unfolding is not the triumph of one category over another, but a clear market-led separation of roles (which continues to widen) between scarcity-driven luxury and volume-driven consumer products.
• Industry estimates for 2025 suggest a retail price of well under USD 1,000 for a one-carat lab-grown diamond, versus USD 5,000–5,200 for a comparable natural stone.

• Traditional retailers are beginning to differentiate beyond the diamond itself - through design, service, and storytelling - a necessary and welcome evolution for this jewellery sector.

Key Takeaways

• Price divergence is structural: Lab-grown diamonds are moving toward commodity pricing, while natural diamonds are reasserting their position as scarce, value-retaining luxury goods.
• Lab-grown diamonds have a role: They are not disappearing. Being well suited for volume-driven, entry level and fashion jewellery, they are settling into a clear newly minted niche category we can label as ‘commercial grade jewellery.’
• Consumer perception is evolving: As transparency increases, unusually high retail margins on lab-grown diamonds will continue to narrow.

• Rather than substitution - the market is increasingly defining separate roles and value propositions for the two products. A desirable and positive outcome for both categories.
• Long-term value differs: Lab-grown diamonds are heading in the same direction as the first generation of synthetic gemstones - attractive, convincing, but rapidly depreciating to inconsequential levels. Secondary market liquidity is no longer a matter for discussion.
• Applications in Technology are expected to skyrocket as the production costs and refinements set in for bespoke creation of lab grown material. For example, in ultra-high performance semiconductors, quantum processors for data centres, medical implants and biosensors in healthcare, coated electrodes in environmental and industrial applications and the list is endless.
  Use in jewellery was the first and obvious low hanging fruit that starry-eyed entrepreneurs jumped into. These early evangelists would do well to adapt to the changing landscape.