INDUSTRY: Synthetic Rivalry

One day in February 1955, Sir Ernest Oppenheimer, then board chairman of De Beers Consolidated Mines, Ltd., received shocking news. General Electric Co. had succeeded in making a synthetic diamond. Hastily, the world’s diamond king conferred with De Beers’ top officials, finally said: “If it must be, then De Beers must do it too. We cannot stick our heads in the sand.” Last week De Beers finally did it; the company announced that it had developed a synthetic diamond to compete with G.E.’s highly successful man-made stones as industrial abrasives.

Actually, De Beers turned out the first synthetic diamonds in 1958, but it kept this a secret while it hustled to get a jump on G.E. on patents. It filed provisional patent applications all over the world, including the U.S. where G.E. had no patent. The Defense Department had placed a secrecy ban on the G.E. process, only lifted it last September. The ban prevented G.E. from receiving a final patent that would have made their process a matter of public record.

De Beers, however, could not file permanent patent application on its process until it was sure that it could produce the synthetics on a sustained commercial basis. While De Beers continued work on the project, G.E. was taking approximately 10% of the U.S. industrial-diamond market away from De Beers’ natural industrial stones, indicated that it could supply half of the U.S. market for industrial diamonds. Synthetics are not only priced lower than natural stones, but manufacturers say that in many cases they are substantially more efficient.

When De Beers perfected its process so that it could produce stones in commercial quantities, the company filed final applications in 48 different countries. Two weeks ago, after De Beers had posted its final application in Washington, G.E. broke a five-year silence, broadly outlined how its process works.

De Beers’ Chairman Harry Oppenheimer, who took over when his father died in 1957, says he will not produce the synthetic stones unless it becomes “economically necessary.” The diamond combine prefers to concentrate on its monopoly on gems and natural industrial stones, developed its process to prevent any other synthetic-diamond producer from drastically undercutting natural industrial diamond prices. Despite De Beers’ discovery, G.E. has a long head start, is improving its stones. It disclosed last week that it had developed a diamond material that can be used in metal-bonded wheels, a use that was not possible before. Ideally, Oppenheimer sees “an expanded world market, in which both the natural and the synthetic product could coexist.”