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Would You Buy a 'Man-Made' Diamond?

Tuesday, 16 Apr 2013 | 8:50 PM ET
James Worrell | Stone | Getty Images

With their polished sales pitch and discrete security, it looks like just another high-end diamond show room in a well-heeled Asian capital.

The stones were probably mined in South Africa; cut, polished and finished in India and shipped to the luxury-hungry markets of Singapore, Hong Kong and Shanghai.

But the source of these precious stones is way closer than you think.

Just yards from the display cases in an unassuming industrial park in northern Singapore is the city's first 'above-ground' diamond mine owned and operated by privately-held Type IIa Technologies.

But there's not a grim-faced mine worker in sight.

(Read More: Why Are Indians Suddenly Buying Diamonds?)

That's because the company claims it can produce - or grow - the purest and rarest grade of rough diamonds (Type IIa) in a laboratory process called Microwave Plasma Chemical Vapor Deposition. Put simply, carbon atoms are layered on top of an initial diamond 'seed,' fast-tracking a natural process lasting many millennia to a matter of months.

And because these stones are lab-made, they're good for the environment and are free of the 'blood diamonds' stigma that's so tainted their traditionally-mined counterparts.

Breakthrough?

According to the company, competitors around the world have been trying to develop the purest Type IIa diamonds, but here, in Singapore, is where the breakthrough has happened.

Technical director DS Misra says eight years of R&D gave them the edge.

"That eight years was enough time for us to understand each and every bit of the technology in the process, to be able to achieve the success, which others have found very hard," Misra told CNBC.

We couldn't film the process as the developers said it was commercially-sensitive. But Managing Director Vishal Mehta says there's increasingly strong demand for its lab-grown diamonds from high-tech industries like semi-conductor makers to heavy industry.

"We are really excited to say that the overwhelming response from customers has been absolutely fantastic," Mehta said. "We bring the ability to use diamonds in many, many different applications beyond the traditional usage of diamonds."

(Read More: Diamonds Trump Gold as Investor's Best Friend: Pro )

The World Jewelry Confederation defines synthetic diamonds as: "A man-made reproduction of a diamond that has essentially the same chemical composition, crystal structure and physical properties as its natural counterpart."

Prestigious

Steve Benson, communications director at the Confederation says there is nothing illegal about a synthetic diamond, as long as the consumer is expressly informed that this is what he or she is buying.

"If the diamond is not qualified as 'synthetic' then the consumer has not been provided with what is necessary in order to make an informed purchasing decision, and he or can claim to have been deceived," Benson said.

But do lab-grown diamonds command the same recognition, premium and prestige as their traditionally-mined counterparts?

Yes, they do - depending on the market segment - according to the International Diamond Council's Ya'akov Almor.

Man-made diamonds have a critical and growing role to play in industrial applications such as mining, construction and electronics.

"Synthetics have a place in the market and it's completely legitimate market. There is a need for flawless, clean, synthetic diamonds especially for the semi-conductor industry,"Almor said.

(Read More: Conflict Minerals in Your Mobile—Why Congo's War Matters)

In fact, synthetics have a decades-old history in the industrial market.

Diamonds Are Forever in Singapore
CNBC's Sri Jegarajah visits Singapore's first above ground diamond mine, where the company has made a breakthrough in developing synthetic diamonds. He asks whether man-made diamonds will be as well received as the conventional variety.

History

Starting in the 1950s, research scientists at GE began developing near-gemstone quality synthetic diamonds for industrial purposes using an ultra-high pressure system called the 'diamond press.' In 1982, Sumitomo Electric synthesized a 1.2 -carat single crystal diamond, one of the world's largest man-made stones at the time.

And for over 50 years, Element 6 - part of the De Beers group - has been designing, developing and creating what it calls synthetic diamond super-materials. And De Beers sees "very exciting potential" for synthetics in industrial applications, spokesperson Lynette Gould told CNBC.

Naturally, problems arise when synthetic diamonds are mixed in with natural stones. "That's the last thing that jewelers want," remarked the International Diamond Council's Almor.

Such adulteration happened two years ago with the appearance in 2011 of a large batch of synthetic diamonds believed by their dealer to be natural.

(Watch: $50 Million in Diamonds Stolen in Less Than 5 Minutes)

"An analysis by a grading lab revealed that the entire batch was synthetic,"

according to a 2012 report on the global diamond industry by Bain & Co. and the Antwerp World Diamond Center.

"The event was unsettling, raising concerns that high-quality counterfeit diamonds had slipped into the market. The batch in question was created through a process known as chemical vapor deposition (CVD), which produces stones that a diamond dealer cannot distinguish from natural diamonds without special equipment," the report said.

The event highlighted the importance of diamond certificates to ensure the authenticity of purchased stones.

Distinction

De Beers' Lynette Gould is also swift to stress the distinction.

"Diamonds are a natural mineral, created in the earth billions of years ago," she says. "Synthetics aren't the same thing, and to call them diamonds is misleading. Diamonds have captured peoples' hearts and imaginations for centuries and as such have always held their value, both financially and emotionally."

Veterans of the diamond industry are crystal clear on one further matter. Consumers of high-end diamond jewelry want the real deal and are willing to pay up.

"The majority of consumers have told us during extensive independent research that they want the real thing and aren't prepared to settle for anything less," De Beers' Gould said.

IDC's Almor is equally emphatic. "Synthetic diamonds take the emotion out of the equation and put the price point in the center and that's not always what the customer wants."

Shlomo Tidhar, CEO of Singapore Diamond Exchange has the last word.

"I believe that it will be very hard for me as a man to buy a woman I love a synthetic diamond," said Tidhar. "That's going to be difficult for me to do, I'm not sure if she will accept it and me myself would be reluctant to do it."