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WD Lab Grown Diamonds, the second-largest US producer of man-made diamonds, has filed for bankruptcy, becoming the sector’s first big casualty of a burgeoning glut of fabricated gemstones.
The Washington-based company, which filed for Chapter 7 protection on Wednesday in a Delaware bankruptcy court, said it had total liabilities of $44mn with assets totalling $3mn and between 100 and 199 creditors.
Lab-grown gems are posing a significant threat to the natural diamond sector, as consumers — particularly in the US — choose to buy jewellery that uses stones that are created in a foundry but are almost chemically identical to counterparts dug out of the ground.
Diamond miners, including industry leader De Beers, have long warned that the lab-grown sector would self-implode as overproduction pushed the industry into losses and prices for manufactured diamonds collapsed.
Lab-grown diamond prices for a single carat have crashed more than threefold in seven years, as manufacturers continue to flood the market.
Founded in 2008, WD Lab Grown Diamonds was a frontrunner in an industry that shook up the global diamond sector, making $33mn in revenue last year.
Paul Zimnisky, an independent diamond analyst, said that WD Lab Grown Diamonds had been a “proxy” for the industry and its collapse showed that “it’s getting very difficult for anyone to compete with the Chinese and Indian producers”.
The collapse of a large lab-grown diamond manufacturer will come as a relief to the mining companies. They have been under pressure from the weakness in prices driven by the global pinch on consumer spending that hit at the same time as man-made stones were taking market share.
De Beers has launched its own lab-grown diamond range under the brand Lightbox but last month reversed a shortlived decision to sell fabricated diamond engagement rings.
WD Lab Grown Diamonds uses a technique called chemical vapour deposition that sprays a vaporised material on to a surface to create gemstones that consumers cannot tell apart from mined diamonds.
In 2020, the company sued other lab-grown producers, accusing them of violating its patents to produce lab-grown diamonds.
The other large US lab-grown producer, Diamond Foundry, has been looking outside the jewellery sector for future growth. Chief executive Martin Roscheisen told the Financial Times in August that it was seeking to supply diamond substrate wafers for the semiconductor industry as the costs of production keep dropping.
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