Declining jewelry margins push Chinese diamond factories toward cooling AI chips

Synthetic diamond production lines in China are moving toward a new economic outlet that redirects the industry's compass away from jewelry markets, as abundant supply and collapsing prices of manufactured stones push major manufacturers to shift their focus toward AI servers and semiconductor factories. Industrial data show that producers in China, who account for roughly half of global lab-grown diamond supply, are reconfiguring their lines to meet the thermal-management requirements of advanced electronics, leveraging the superior physical capacity of diamond to dissipate heat generated by high-performance processors and large data centers.

Figures from Kine Research, cited by Reuters, show that China's lab-grown diamond output is projected to rise from 28 million carats in 2025 to 52 million carats by 2030. This massive production expansion has created sharp price pressures on jewelry stones, prompting producers to seek functional outlets with proven financial returns. Feng Kangjun, whose factory Giarrivo produced two million carats last year, explains that about 70 percent of its output currently goes to the jewelry sector, but it aims to reduce that share to no more than 30 percent by 2030 while raising the functional-application share to over 50 percent. This shift is based on the on-the-ground profitability gap.Overall profit margins for jewelry diamonds range between 30 and 40 percent, while industrial-diamond margins reach about 50 percent.Its use is expanding in cooling AI servers, quantum-computing technologies, and chip manufacturing.

This industrial pivot coincides with a strategic repositioning observed in natural-diamond markets, which dominated discussions at the seventh Dubai Diamond Conference held alongside Dubai Diamond Week. Ahmed bin Salim, founding CEO and managing director of the Dubai Multi-Commodity Centre, explained that natural-raw supplies are facing an irreversible contraction due to mine closures and production cuts in Canada, South Africa and Botswana, requiring a focus on carat value and geological provenance rather than volume competition. The centre released a report drawing on the experience of Swiss watchmakers confronting the quartz crisis by emphasizing craftsmanship and scarcity. Although Dubai trade reached a record $41.7 billion across 359.5 million carats in 2025, with natural diamonds accounting for 95.8 percent of its value, the landscape ends up with a clear split between the luxury jewelry market and the functional-components market for computing.

This supply-chain shift has a tangible impact on cloud-infrastructure managers and data-center developers across the Arab region. Gulf states, particularly Saudi Arabia and the United Arab Emirates, are seeing massive investments in launching ultra-high-performance computing complexes to handle AI workloads in dry climates that demand huge cooling power, making heat-dissipation efficiency the most influential factor in operating costs.The adoption of synthetic diamond as a heat-dissipation substrate in processors provides a pathway to reduce the consumption of liquid and conventional cooling systems.It also helps raise the performance ceiling of chips without encountering thermal throttling. This obliges technology procurement officers in the region to monitor the shift of Chinese factories toward functional materials, as it offers manufacturing alternatives that could lower the capital cost of future server systems.

This trajectory reflects a deep shift in global precision-manufacturing priorities; the technology race is no longer limited to building software models, but is reshaping the pathways of mining and lab industries, turning the stone from store-front displays into essential hardware that protects computing centers and ensures their operational stability.