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25 february 2020

ekaterina_nogovitsyna_xx.pngSynthesis Technology is a leading diamond producer in Russia. The company produces carbon single crystals - lab-grown diamonds and single-crystal wafers. The diamonds completely identical to natural ones are ‘grown’ at the laboratory using advanced HPHT technologies reproducing the natural process of creating natural diamonds.

Ekaterina Nagovitsyna, Director General of Synthesis Technology, answered the questions of R&P.

Ekaterina Nagovitsyna is a graduate of the St. Petersburg State Institute of Psychology and Social Work. She is a professional psychologist and worked at the Central Research Institute of Materials (the development of special materials and technologies). She has practical leadership experience in various companies and industries, including as a Director General (Rusmodernizatsiya).

In recent years, diamond growing technologies are used on an industrial scale. How and when was your company set up?

Our shareholders were always engaged in high-tech industries. They always carefully monitored new technologies to solve complex, state-level tasks. Lab-grown diamonds are the material of the 21st century that has the widest possible use - from the jewellery industry, medicine and microelectronics to controlled thermonuclear fusion.

Your background is psychology - how did you come into this business?

Nevertheless, I began my career at a research institute ... And since then, I was always interested in new technologies. First of all, I am a manager. Psychology is one of the key factors in management. I constantly keep on studying and improving my knowledge and skills.

Do you agree that the natural diamond reserves will be depleted by the mid-century and the production of synthetic diamonds will assume greater importance? What consumers is your product designed for?

The question is rather not in the depletion of natural diamond reserves but in the ever-increasing costs of the diamond mining industry for the diamond development and mining. Also, in the changing market conditions - when the buyers and their perception of the product change.

There are several variables here giving advantages to the lab-grown diamond industry over the mined diamond industry. The main factor is the diamond growing technology development. This technology allows creating large top-gem-quality diamonds in contrast to natural diamonds. On the contrary, over 80% of all mined rough diamonds are less than 0.5 carats or their quality is unsatisfactory, while the costs for their development and production increase.

At the same time, another factor should be noted - the market and consumers are ready to accept such diamonds. The main diamond mining industry market practically does not cover the millennials, they are not their target consumers, and they simply are not embraced by the marketing strategies of most companies. At the same time, lab-grown diamonds are a product for the younger consumers that has undeniable advantages over the mined ones. The buyer now, among other things, has such priorities as a concern for the environment and a low level of environmental impact, and the lab-grown diamonds, unlike the mined natural ones, resonate well with the priorities of millennials as consumers and meet their environmental, social and ethical requirements.

At present, the market is becoming more competitive, and we can now see that lab-grown diamonds compare favourably with mined ones given the reduction in production costs with time (compared with an increase in mining costs), especially in the segment of the top quality large colorless diamonds and colored diamonds that are extremely rare in nature.

According to Business Insider India, the global synthetic diamond market will be $ 28.26 bn by 2024 as a result of its growing demand for cutting, polishing and drilling operations. What volume of grown diamonds are you producing now and are going to produce in the future?

It is difficult to tell now the market size of lab-grown diamonds in the future since with the exponential growth of this industry, we can also see the marketing component - the increase in volumes should be systematic in order to avoid a price collapse in the entire diamond market.

As for our volumes, by the end of 2023, we plan to reach 90,000 carats per year, despite the fact that we are talking about large (1-20 carats) colorless gem-quality diamonds and large fancy color diamonds, this figure is quite significant.

What technologies do you use - how do they differ from Chinese ones, for example, or from those used by your counterparts, say, New Diamond Technology? Do you have any of your own, original know-how?

let's be clear: the production of lab diamonds is not just the purchase of equipment: your equipment is good if its operation is effective. Although HPHT (High Pressure, High Temperature) and CVD (Chemical Vapor Deposition) technologies have been around for quite some time, the most important task is to find the right formula that can allow the production of large-sized and flawless diamonds in large quantities, in which we succeeded.

So far, the Chinese lab-grown diamond market offers primarily small single crystals for the abrasive industry. Although they are made using the same equipment and the HPHT method, the growth technologies differ much. Our market, for example, like New Diamond Technology or De Beers Lightbox, offers large single crystals. Of course, we have our own know-how that allows us to obtain large and high-quality diamonds of various colors. As our technology has been mastered and tested at our R&D center, this allows us to produce large volumes of predictable quality, exceptional purity, and color, which sufficiently meets the needs of jewellery retailers.

What problems (or challenges) - scientific, technological or marketing ones - are you currently working on and which of them do you consider to be the main ones?

The first challenge is marketing. Increased production capacity to be able to produce a series of identical single crystals steadily. In a technological product and engineering industry, as well as in a jewellery industry, no one is interested in buying 1-2-3 stones, you need to provide at least 100 carats per month of certain sizes and characteristics. Therefore, we have attracted investments and are starting to build a plant in the Moglino SEZ in the Pskov region.

The second challenge is, as you call it, a ‘scientific and technological’ one. Nowadays, our engineers are working on refining the technology for controlled single crystal growth. This will significantly increase both the yield of a quality product and the size of single crystals that we can get using our presses.

The third challenge is the problem of disclosure, classification, and standardization. We, like other companies in the lab-grown diamond market, are for providing true information about the production technologies and bringing this information to consumers. The lack of industry standards and a marketing communication structure is a significant problem in the market and does not allow consolidating the efforts of all players. The work on these problems will ultimately result in consumer confidence in lab-grown diamonds, as it will provide reliable information to consumers. To do this, we have our own jewellery brand - Glow Diamond; working in the high jewellery art market and using this brand, we plan to influence the marketing strategy of lab-diamond manufacturers and their perception by end consumers.

Companies mining natural diamonds, initially frightened by competition, are now gradually changing their attitude towards synthetic diamonds. What is your take on the problem of natural diamonds and lab-grown ones? How do these two individual, yet connected markets interact and interinfluence?

These two markets directly affect each other. The lab-grown diamond market is a threat to the mined diamond market, and in our opinion, in the future, there will be a complete or partial replacement of the mined diamonds with the lab-grown ones due to many factors - such as the economic component of both mining and the technology development, and more vulnerable consumers. It is the balance between economic factors and the situation with the end consumers (both retailers and suppliers that can easily replace mined diamonds with lab ones, due to their physical identity) that will affect the speed of the redistribution of the entire diamond industry market and its replacement with lab-grown diamonds, and it is only a matter of time.

Where do you stand on the De Beers’ last year announcement about the construction of the largest lab-grown diamond plant and their Lightbox entering the market?

This is a carefully weighed decision and a very forward-looking solution from the point of view of the mining business diversification - as well as where the whole diamond industry is moving to. This shows the vector of the market development in the direction of lab-grown diamonds since De Beers is still the largest player in the diamond mining market. This is also a big advantage for the entire lab-grown diamond industry, as De Beers has great marketing resources to expand the market and gradually bring the entire lab diamond industry to common standards and definitions, which is not the case now.

If your diamonds are different - what is the difference?

Our diamonds are distinguished by their quality - we have our own technology we mastered that allows us not only to obtain diamonds of exceptional gem quality but also to scale up our production to obtain sufficiently large volumes of diamonds. We are also one of the few companies that are capable of producing large-sized fancy diamonds - red, green, pink, blue and yellow stones.

Since the beginning of 2016, there has been an International Grown Diamond Association (IGDA). Is Synthesis Technology its member? Do you find it effective to work together to properly represent and promote the lab-grown rough and polished diamonds?

At the moment, we are already negotiating our joining the International Grown Diamond Association. We consider it very important to establish coordination between lab diamond manufacturers and retailers. The lack of coordination between the lab diamond manufacturers and retailers provides end-users with diverse and sometimes confusing information. Some decide to focus on the externally attractive environmental/social benefits of not having to build a mine, while others emphasize price advantages. There is also a classification problem arising from a lack of coordination. There are many terms for grown diamonds on the market, such as ‘laboratory’ and ‘synthetic’ (the latter, for example, is a vivid example of a derogatory term and distortion of the product information - since a lab-grown diamond is neither synthetic nor artificial, as it is identical to a mined one in all physical-chemical and optical characteristics).

The lab-grown crystals are now used for the mass-production of lenses, diamond anvils, and other products or devices. Tell us about this line - the production of diamonds for technical purposes. Is it true that the requirements for the technical characteristics of diamond crystals for industrial applications are more stringent than for the manufacture of polished diamonds?

Really, the market for industrial diamonds, in our opinion, is divided into several categories. First, this is the niche of finely dispersed diamonds used as an abrasive material, for diamond coating, etc., this niche is almost completely occupied by the Chinese. This is a fairly mass product.

Second, these are large enough single crystals used in the areas where the strength characteristics of diamonds are required - diamond anvils, dies for wire drawing and so on. In this segment, the crystal should be relatively large in size and have no internal defects to provide strength.

Third, it is the most high-tech application. This includes diamond optical lenses, wafers with predetermined defects and impurities for the production of microelectronics and optics, or detector-quality wafers. This direction is the most promising for developing the industries using diamonds, but the requirements imposed on crystals are highly stringent. On the contrary, in polished diamonds, defects sometimes create some unique features. Well, the added value of defective jewellery could be lower, but this is also a jewellery item. For microelectronics, any deviation from the parameters specified in the technical requirements for production is unacceptable, and the defective diamonds are rejected.

That is why we see the transition to a high-tech market to be of higher priority and promising since our technologies allow us to achieve the necessary characteristics and occupy dominant positions in this market.

Recently, the media reported that Synthesis Technology intended to set up their production of carbon single crystals - synthetic diamonds and single-crystal wafers in the Pskov region. Please tell us about this project.

This is our large project to scale up our production. We received a positive decision and funding approval by the Expert Council of the RF Industry Development Fund for this project. Since the end of 2019, we have been residents of the Moglino special economic zone, and since January 10, 2020, we have been renting a 1,700 sq. m area located in the Moglino SEZ. This gives us a great advantage in terms of tax preferences and expansion of our export opportunities, as well as the development of cross-border cooperation. Our project includes several stages, and if we reach the figure of 7,000 carats per year by the end of 2020, we will plan to expand to 90,000 carats per year by 2023.

Galina Semyonova for Rough&Polished