On a fairly regular six-week cycle, my friend Jim and I have the same discussion. “George,” he will say in that Tennessee walking horse drawl of his that replaces modifiers with word elongation in order to add emphasis, “I just can’t understand why your billionaire friends are installing thousands of additional CVD machines, when these Lab Grown diamonds aren’t gonna be worth more than about a dollar fifty each at some point in the future.”
Yes, Jim and I have been having this discussion pretty regularly, and I always answer by reminding him that increases in CVD supply will be vastly outpaced by increases in demand for CVD diamonds as gemstones. But this response is only part of the story. And since I suspect that many of you might be asking the same question (and in all fairness to Jim, it actually is a pretty good question), I will devote this month’s article to the rest of the story.
Our tale begins in 1965 with an extraordinarily accurate set of predictions made by Gordon Moore, founder of both Fairchild Semiconductor and Intel. Moore posited a doubling every year in the number of components per integrated circuit for the subsequent decade, and then in 1975 revised his forecast to a doubling every two years. Moore’s prediction wasn’t just prescient; it became gospel for several generations of chip manufacturers, guiding long-term planning and setting research and development targets, thus functioning to some extent as a self-fulfilling prophecy. And if you want to see the results of his predictions, just look at your cell phone, or your notebook computer, or your TV, or your kitchen appliances. Look at just about everything that has an electric cord, and even some things that don’t, like your gas-powered car, and you will see computer chips at work, not just running virtually everything in the world, but doubling what they can do at roughly the same price every two years!
In fact, given that Baby Boomers have done a poorer job than their parents at just about everything, one might reasonably assert that we owe the incredible period of prosperity that we have experienced during the past 40 years not to our stewardship of the world and the global economy, but rather to the extraordinary increases in productivity that Moore’s Law and those delightful little computer chips have granted us. That’s the good news.
The bad news is that as the density of these components grows higher and higher, so does the amount of heat they will be generating. And by the mid-nineties, scientists began to realize that at some point around 2025, if Moore’s Law continued to accurately predict chip component density, the heat being generated would ultimately exceed the magic temperature of 150 degrees Celsius, at which point silicon’s properties change and are no longer optimal for the task.
Fortunately, there is a material that’s up to the challenge, a silicon alternative that will enable devices to be smaller, cooler, faster, more powerful, and cleaner. That material is diamond. For power electronics, diamonds provide a tantalizing possibility material. They are thermally conductive, which means diamond-based devices will dissipate heat quickly and easily, foregoing the need for bulky and expensive methods for cooling. Diamond-based semiconductors are capable of increasing power density, improving thermal performance within a device. And diamond films, which are about one-seventieth the diameter of a human hair, are able to form device structures that are over a thousand times thinner than the leading silicon counterpart.
Now consider the fact that the global diamond business is currently valued at about 90 billion dollars, and is projected to reach 140 billion dollars by 2030, increasing at a compounded annual growth rate (CAGR) of 4.4 percent. The global computer chip business, on the other hand, is currently valued at 573 billion dollars, and is expected to grow to 1.4 trillion dollars by 2029, with a CAGR of 12.2 percent. Which causes me to ask the question: if you had CVD machines, would you be starting to look at ways your diamonds could be used in the semiconductor business?
Understand that there are also geopolitical ramifications to this discussion that merit consideration. When Mao wiped the Kuomintang off the map of mainland China in 1949, his army lacked the continuing military resolve and resources to finish the job, allowing remnants of the KMT army and hundreds of thousands of followers – two million in all – to escape to Taiwan, an island about 100 miles off the mainland coast. For the past 75 years, the Taiwanese have been dancing on a knife’s edge, as various leaders of the CCP have alternately threatened and then backed off launching an invasion. But now, with dramatically diminished US resolve after soul-crushing failures in Vietnam and Afghanistan, as well as the final consolidation of power by the most bellicose Chinese leader since Mao, I’m thinking Taiwan is toast (a scenario that must have my honors thesis professor at Brown, Dr. Ying-Mao Kau, at one time probably the leading expert on US-Taiwan relations, reeling with dread).
In the context of this article, what happens in Taiwan is a big deal, because 60 percent of the world’s semiconductor chips, and over 90 percent of the high-performance ones, are made there, most by a single company: Taiwan Semiconductor Manufacturing Corporation. Fortunately, TSMC makes silicon semiconductor chips, not diamond ones (yet), but if their infrastructure is either physically destroyed or commandeered by the CCP, there will be global chaos. Furthermore, if you’re the sort of person who enjoys connecting the dots, this scenario may shed light on why the bulk of China’s LGD growth is being funded by the Chinese Communist Army.
All of this adds up to one gigantic inescapable conclusion: Demand for LGD is going to skyrocket, at rates far more rapid than the growing community can match, as the trillion-dollar semiconductor business turns its sights on lab as the primary substrate for chip production. It happens that my billionaire friends have their roots in our industry, so they’re laser focused on the future of the diamond jewelry business. But are they licking their chops imagining an environment where most of their competition will be diverted to chips? You can probably guess the answer to that one.
One last thought: given how quickly American consumers have adopted LGD even with the knowledge that prices are falling, how do you think consumers will respond when LGD prices start rising due to crazy levels of chip-induced demand? I think my friend Jim will be pleased.