Analysis-China’s lab-grown diamond makers target AI, chip sectors for next wave of growth

In Zhengzhou, China, on October 27, Feng Canjun, a synthetic diamond factory owner, expressed his vision for the industry's future. Currently, around 70% of the 2 million carats annual lab-grown diamonds produced at his factory are utilized in jewelry creation. However, Feng aims to shift this share to functional materials, targeting over 50% by 2030, while limiting jewelry usage to a maximum of 30%.

This strategic pivot could significantly bolster China's lab-grown diamond industry's strategic importance in the ongoing US-China technology rivalry.

Lab-grown diamonds, which make up half of the global supply, are diversifying beyond gemstones as the market becomes more competitive and prices face pressure. The shift could position China's production as a potential supply-chain vulnerability for the US, particularly with the increasing demand from sectors such as semiconductors, AI servers, thermal management, and quantum technology.

Analysts predict that demand from these sectors could become the industry's next major growth engine, given diamonds' superior properties for enhancing the performance of advanced electronics and computing systems. The rise of AI is driving a surge in data centre electricity consumption, with the International Energy Agency projecting a more than doubling of consumption by 2030, largely due to AI.

Thermal management is viewed as a nearer-term opportunity, while the use of diamonds as semiconductor materials remains further away from widespread commercial adoption. However, interest from top technology companies like Huawei and TSMC, as well as Lenovo's recent laptop featuring a diamond-copper cooling material, suggests the potential for chip applications to become a significant new source of demand as AI computing generates increasing amounts of heat.

Intel CEO Lip-Bu Tan personally invested in Diamond Foundry, a company developing chip-grade diamond wafers.

Some Chinese producers are already investing in anticipation of demand. Henan Liliang Diamond plans to redirect funds from its original gem-grade diamond expansion project to a new functional diamond initiative. Chinese researchers have also developed diamond-copper cooling modules that improved heat transfer from chip modules by 80% and raised chip performance by 10%.

The industry is not limited to China. In June, De Beers' synthetic-diamond and advanced-materials business, Element Six, and Japan's Orbray reported the production of 3-inch single-crystal diamond wafers, with 2-inch wafers in production in Oregon. The Spanish government is investing €753 million in a Diamond Foundry plant in Trujillo, which would be Europe's first large-scale producer of synthetic diamond wafers.

If successful, synthetic diamonds could increasingly become part of the strategic conversation surrounding semiconductors, rare earths, and advanced manufacturing.