by Ryan Fitzwater, Investment U Research
Thursday, December 1, 2011
For the last century, De Beers has amazingly held a worldwide monopoly on natural diamonds.
But what’s truly captivating is that De Beers is now positioning itself to become the leading maker of synthetic diamonds.
This transition to synthetic diamonds is especially intriguing considering that, in the past, the company was petrified that synthetics would lead to its downfall.
Back in 2003, we reached a point where an experienced gem dealer couldn’t distinguish lab-grown yellow diamonds (which are extremely rare in nature) from natural ones.
And in 2007, the mounting availability of synthetic diamonds of almost any size led to the acceptance of lab-grown diamond grading by the Gemological Institute of America.
Something of this magnitude lead industry leaders to conclude that, unless synthetic diamonds could be detected, they could bankrupt the industry.
So why would De Beers want to get into synthetic production, which could essentially bankrupt it?
The answer is simple… change, or become obsolete.
A Bright and Shiny Future
The twenty-first century for diamonds will be a totally different future compared to the past:
Since real and synthetic diamonds are chemically indistinguishable, the world supply of diamonds will no loner be determined by the amount we can pull from the earth’s crust, but by the size of the market for synthetic diamonds.
De Beers isn’t going to sit by idly and watch the empire they created fall. Instead, the company has already hit the ground running.
Element Six is a De Beers subsidiary that focuses on manufacturing synthetic diamonds. It recently dropped tens of millions of dollars to open a new venture capital office in Silicon Valley, which has invested in a portfolio of seven companies.
The new firm looks to invest in other technology companies of various sizes that use synthetic diamonds. And in the next few months, Element Six will develop a production site in Silicon Valley for synthetic diamond manufacturing. The purpose: diamond microchips, which are likely to be 20 times faster than our most advanced silicon chips.
A Synthetic Supermaterial
Synthetic diamonds’ properties make them perfect for advanced applications. Their properties include:
- The world’s highest known thermal conductor
- A wide electronic band gap (carries a low current even under high voltage)
- Low thermal expansion
- The world’s highest resistance to shock
- High electrical carrier mobility
- The broadest electromagnetic transmission spectrum in the world
Today synthetic diamonds are already used in oil and gas drilling. No other material on the planet can deal with the tremendous conditions involved in drilling like diamonds. They’re not only exceedingly hard, but can be shaped to ultra-fine edges for excellent precision.
And synthetic diamonds have a wide range of uses in laser optic functions, and are already being used in automotive cutting applications.
But what we’re most interested in is the implications of synthetic diamonds for use in the multi-billion-dollar industry of computer chips.
You saw in the list above that diamonds are the world’s best thermal conductor, four times higher than copper. This means they’re the ideal material for thermal management applications.
Diamond microchips could handle high power signals that run ultra hot, without requiring conventional power-hungry cooling systems.
And since synthetic diamonds could be created at a fraction of the cost of natural diamonds, this becomes a very viable product for technology companies.
Now you can understand why De Beers is pushing to develop its synthetic diamond business – a microchip that can process information faster and eat up less power could bring it billions in revenue.