Sarine Technologies

[bardsmanship]

Can't remember the details but their marginal growth is coming from smaller stones. New product lines are much cheaper and it's akin to having to sell more machines in order to achieve the same growth levels. Same for the retail grading.

Core products are either at 70 or 80% of market, which means they are grow only by market growth. Market share wins are going to be minimal now.

Some think product infringement rights is a testament to their R&D competency but how long does their IP last? Once that expires, you have another set of competition coming in.

Yes, the Meteorite and Meteor systems are for scanning smaller stones. But that's for the inclusion mapping business. I don't see how the diamond grading business is analogous - Sarine is far behind the GIA, AGS and IGI etc when it comes to market share.

[bardsmanship]

I understand what they are doing but I dont understand the logic. Imagine Porsche respond to EV disruptive Tech by producing a Porsche EV at Picanto price.

Segmentation at its worst. At least Merc came out with a viable 180 segment.

I reckon De Beers felt that they had to do something, to take their future into their own hands. Doing nothing and waiting around for other lab diamond makers to potentially disrupt their core business was not an option.

You can tell from Lightbox's website that they've tried hard to differentiate their mined diamonds from their lab-grown ones. There are no diamond rings, for instance, only necklaces and earrings. The largest size is 1 carat. And there is more focus on colored stones, compared to the colourless diamonds usually found on engagement rings.

Still, it's a risky move, even if it's the best one they could have made. For one thing, I imagine many millennials who would have wondered whether a 30% discount to natural was enough to make getting a lab diamond worthwhile will now find it much easier to buy a ring with a lab diamond and use the substantial savings to splurge on the honeymoon experience.

[holymage]

The Bloomberg article that Karlmarx shared is rather telling, but of course everyone's interpretation might be different.

The company announced today that it will start selling man-made diamond jewelry at a fraction of the price of mined gems, marking a historic shift for the world’s biggest diamond miner, which vowed for years that it wouldn’t sell stones created in laboratories.

De Beers will target younger spenders with its new diamond brand and try to capture customers that have been resistant to splurging on expensive jewelry. The company is betting that it can split the market -- with mined gems in luxury settings and engagement rings at the top, and lab-made fashion jewelry aimed at millennials at the bottom.

This is De Beers' recognition of the change in consumer spending preferences.
Diamonds has historically been marketed to the mass market. If the masses were to change their spending habits, especially with the millennials, the overall diamond industry sales and ASP would face a headwind in the years to come.

Just ask yourself or your friends this question.
Would you rather spend discretionary budget on diamonds (which your gf/wife will wear occasionally/seldom), or spend it on the latest handphone/tablet, or on a holiday trip.

“Lab grown are not special, they’re not real, they’re not unique. You can make exactly the same one again and again,” Bruce Cleaver, chief executive officer of De Beers, said in an interview Tuesday.

“We’re not grading our lab-grown diamonds because we don’t think they deserve to be graded,” Cleaver said. “They’re all the same.”

Those who think lab diamonds is going to provide a breather from the declining demand for mined diamond, might want to think again about the uncertainties. 

The key is: All lab-grown diamonds are the same. 
While I am unsure whether lab-grown diamonds require cutting, each lab-grown diamond is exactly the same as mentioned by De Beers.

This will eliminate the need for several of Sarine's products in the lab-grown diamond line, possibly, planning, imaging, trade and scanning. These processes are required because each mined diamond are "different" and value can be extracted by using Sarine's products. While I am unaware of Sarine's sales for each product line, it will nonetheless affect Sarine sales.

Next, I am making an assumption that margins for lab-grown diamonds will be narrower, due to its lower ASP and the lack of scarcity. Given the commodity nature of lab-grown diamonds, I think there is a higher possibility that margins will be lower than that of mined diamonds. If the margin is lower, most likely it will squeeze other suppliers in the value chain as well. The hope would be the industry participants will be content with market share, and brand differentiation for lab-grown diamonds.



The hope for investors in the diamond industry would be, once again, consumer spending preference. 
That consumers will once again view diamond as timeless treasure, or the price of lab-grown diamonds will be lower enough to entice consumers to purchase a larger quantity.

Just my 2 cents worth.

[Clement]

The Bloomberg article that Karlmarx shared is rather telling, but of course everyone's interpretation might be different.

The company announced today that it will start selling man-made diamond jewelry at a fraction of the price of mined gems, marking a historic shift for the world’s biggest diamond miner, which vowed for years that it wouldn’t sell stones created in laboratories.

De Beers will target younger spenders with its new diamond brand and try to capture customers that have been resistant to splurging on expensive jewelry. The company is betting that it can split the market -- with mined gems in luxury settings and engagement rings at the top, and lab-made fashion jewelry aimed at millennials at the bottom.

This is De Beers' recognition of the change in consumer spending preferences.
Diamonds has historically been marketed to the mass market. If the masses were to change their spending habits, especially with the millennials, the overall diamond industry sales and ASP would face a headwind in the years to come.

Just ask yourself or your friends this question.
Would you rather spend discretionary budget on diamonds (which your gf/wife will wear occasionally/seldom), or spend it on the latest handphone/tablet, or on a holiday trip.

“Lab grown are not special, they’re not real, they’re not unique. You can make exactly the same one again and again,” Bruce Cleaver, chief executive officer of De Beers, said in an interview Tuesday.

“We’re not grading our lab-grown diamonds because we don’t think they deserve to be graded,” Cleaver said. “They’re all the same.”

Those who think lab diamonds is going to provide a breather from the declining demand for mined diamond, might want to think again about the uncertainties. 

The key is: All lab-grown diamonds are the same. 
While I am unsure whether lab-grown diamonds require cutting, each lab-grown diamond is exactly the same as mentioned by De Beers.

This will eliminate the need for several of Sarine's products in the lab-grown diamond line, possibly, planning, imaging, trade and scanning. These processes are required because each mined diamond are "different" and value can be extracted by using Sarine's products. While I am unaware of Sarine's sales for each product line, it will nonetheless affect Sarine sales.

Next, I am making an assumption that margins for lab-grown diamonds will be narrower, due to its lower ASP and the lack of scarcity. Given the commodity nature of lab-grown diamonds, I think there is a higher possibility that margins will be lower than that of mined diamonds. If the margin is lower, most likely it will squeeze other suppliers in the value chain as well. The hope would be the industry participants will be content with market share, and brand differentiation for lab-grown diamonds.



The hope for investors in the diamond industry would be, once again, consumer spending preference. 
That consumers will once again view diamond as timeless treasure, or the price of lab-grown diamonds will be lower enough to entice consumers to purchase a larger quantity.

Just my 2 cents worth.

Hi Holymage,
 
Given that De Beers’ investments into the synthetic diamond space still pale in comparison to the investments the company is making in the mining space, I think the strategy by De Beers can be interpreted in several ways.
 
1)   It serves as a small hedge and enables De Beers to enter into the fashion jewelry market, competing with jewelry made with zircon etc.
2)   It publicly sets a low production cost/price and therefore implied value of synthetic diamonds which might deter further investment in the space.
3)   It is also able to use the profits made in the mined diamond space to subsidize losses if necessary to ensure leadership in the synthetic diamond space.
 
I don't think the longer term impact on Sarine's Galaxy related business is going to be very drastic.  Synthetic diamonds require cutting and polishing and do contain inclusions, just like mines rough diamonds. In fact, De Beers is going to be relying on an Indian third party to provide such services for the lightbox line of products.
 
The bigger issue for Sarine, I think, is that the uncertainty caused might deter investment, especially after the Gitanjali Gems and Nirav Modi scandals have caused banks to tighten financing to the diamond polishing and cutting industries.

[bardsmanship]

Hi Holymage,
 
Given that De Beers’ investments into the synthetic diamond space still pale in comparison to the investments the company is making in the mining space, I think the strategy by De Beers can be interpreted in several ways.
 
1)   It serves as a small hedge and enables De Beers to enter into the fashion jewelry market, competing with jewelry made with zircon etc.
2)   It publicly sets a low production cost/price and therefore implied value of synthetic diamonds which might deter further investment in the space.
3)   It is also able to use the profits made in the mined diamond space to subsidize losses if necessary to ensure leadership in the synthetic diamond space.
 
I don't think the longer term impact on Sarine's Galaxy related business is going to be very drastic.  Synthetic diamonds require cutting and polishing and do contain inclusions, just like mines rough diamonds. In fact, De Beers is going to be relying on an Indian third party to provide such services for the lightbox line of products.
 
The bigger issue for Sarine, I think, is that the uncertainty caused might deter investment, especially after the Gitanjali Gems and Nirav Modi scandals have caused banks to tighten financing to the diamond polishing and cutting industries.

Do you know if the Indian third party De Beers is going to rely on for Lightbox will be scanning the diamonds for inclusions, or just cutting and polishing them?

Grown diamonds do contain inclusions, but less than natural diamonds. And if the cost of producing them is cheap enough there won't be the need to scan grown rough diamonds for inclusions and plan them in order to maximize the carat weight and clarity of the polished diamonds - the labs can just make more. So I don't think we can count on the grown diamond market to help Sarine's Galaxy business.

The key is still how the market for natural diamonds is going to be affected.

[pianist]

anyone has issue with the company keep asking us shareholders to fill up the tax status form in order to enjoy some tax savings on the dividends?

[corydorus]

anyone has issue with the company keep asking us shareholders to fill up the tax status form in order to enjoy some tax savings on the dividends?

Really. I have never filled any form so far in any of my company ....

[pianist]

Will there be privacy concern

[Clement]

anyone has issue with the company keep asking us shareholders to fill up the tax status form in order to enjoy some tax savings on the dividends?

The form enables us to show eligibility for a lower withholding tax rate on our dividends.

Don’t think anyone will have an issue, especially as the tax savings is on our end.

[pianist]

anyone has issue with the company keep asking us shareholders to fill up the tax status form in order to enjoy some tax savings on the dividends?

The form enables us to show eligibility for a lower withholding tax rate on our dividends.

Don’t think anyone will have an issue, especially as the tax savings is on our end.

such form need to be filled n submitted every time sarine declares a dividend or is it a one time exercise? so its a recurring frequent exercise?
I just wondering why CDP or the company or its Israelis trustee can't collaborate in some of the information requested