China lab-grown diamond makers target chip, AI applications for growth

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China diamonds eye tech applications

Highlights

Chinese lab-grown diamond producers plan to increase industrial and chip-related output above 50% by 2030 as gemstone competition pressures prices.
Henan Liliang Diamond will redirect 1 billion yuan ($149.18 million) from gem-grade expansion to a new functional-diamond project amid rising AI-driven demand for thermal management materials.
Diamond-copper modules from Chinese researchers improved chip cooling by 80% and performance by 10%, offering higher gross profit margins (about 50%) versus gem-grade diamonds (30–40%).

Shift toward industrial and chip-related demand

As reported by Reuters, Chinese lab-grown diamond producers are looking beyond gemstones as competition intensifies and prices come under pressure, aiming to expand sales into semiconductors, thermal management and quantum technology.

At entrepreneur Feng Canjun's factory in Zhengzhou, about 70% of annual output of 2 million carats currently goes into jewellery. Feng said he is looking to raise the share of products used in functional materials to more than 50% by 2030, while cutting the jewellery share to no more than 30%.

Industry participants and analysts say synthetic diamonds are valued for properties that can improve the performance of advanced electronics and computing systems. Thermal management is seen as a nearer-term opportunity, while the use of diamonds as a semiconductor material remains further from broad commercial adoption because chip applications require much higher purity and tighter manufacturing standards than diamonds used in cutting and drilling tools.

AI infrastructure demand sharpens strategic importance

The industry's pivot comes as AI drives rising demand for data-centre capacity and greater need for materials that help control heat in computing systems. The International Energy Agency said in a 2025 report that data-centre electricity consumption is projected to more than double by 2030 to about 945 terawatt-hours, roughly equivalent to Japan's annual power consumption, with AI as the main driver.

Some Chinese producers are already investing for that shift. Henan Liliang Diamond plans to redirect 1 billion yuan, $149.18 million, originally raised for gem-grade diamond expansion to a new functional-diamond project, according to a June filing. In April, diamond-copper cooling modules developed by Chinese researchers improved heat transfer from chip modules by 80% and lifted chip performance by 10%, according to the Ningbo Institute of Materials Technology & Engineering.

Wider adoption could reshape the thermal-management materials market now served by companies including Germany's Henkel, U.S. chemical firm Dow and Japan's Shin-Etsu Chemical. Feng said gross profit margins are 30% to 40% for gem-grade diamonds, compared with about 50% for industrial diamonds, reinforcing his plan to shift production toward higher-value industrial uses rather than simply expand output.

Our earlier article on the U.S. AI data-center buildout highlighted how soaring financing costs, construction delays and power-grid constraints are starting to slow expansion plans. We noted that only a portion of announced projects looks truly viable as investor sentiment cools and local opposition and permitting hurdles grow, raising doubts about how quickly new capacity can come online.

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