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Losing Touch With "the Masses": Lessons From the Rise and Struggle of Henan's Diamond Industry

If one were to find the most fitting footnote to sixty years of rise and struggle in Henan's diamond industry, Mao Zedong's formulation "from the masses, to the masses" may cut through the fog of history and touch precisely on today's pain. It is not merely a political slogan but a dialectic about understanding and remaking the world: correct understanding arises from practice (the masses), and must ultimately return to practice to be tested. Examined through that logic, the trajectory of Henan's diamond industry was made by "the market" and is now undone by it. This article works through three disconnects in turn: a lagging technology path, new growth tracks reduced to capital-markets storytelling, and world-leading capacity paired with no pricing power at all.

Henan DiamondPublished 2026-07 · Updated 2026-07-28 · 8 min

01Out of the Market, Back to the Market

This is not merely a political slogan but a dialectic about understanding and remaking the world: correct understanding arises from practice (the masses), and must ultimately return to practice to be tested. Examined through that logic, the trajectory of Henan's diamond industry was made by "the market" and is now undone by it. The industry's beginning was itself a vivid case of coming "out of the market". In the 1960s, facing a foreign technology blockade, researchers at Zhengzhou's Third Institute of Abrasives and Grinding rooted themselves in the urgent needs of national industrial construction. The birth of China's first synthetic diamond in 1963 was precisely an answer to the practical problem of depending on others for "industrial teeth". That exploration came from a deep reading of a market gap and a national strategy. The half-century that followed was a brilliant practice of going "back to the market". Technology moved from laboratory to factory, and Henan's entrepreneurs scattered hard technology across a vast market. From Zhengzhou to Xuchang, from Zhecheng to Fangcheng, the diamond industry grew wildly in the soil of the market. By 2024, China's output and sales of industrial synthetic diamond accounted for more than 90% of the world total, and its lab-grown diamond capacity for more than 70%. In that period firms served the market, market feedback continually refined production, and a virtuous cycle formed: practice, understanding, practice again. Yet the cruellest thing about any dialectic is that things always turn into their opposite.

02Disconnect One: A Technology Path Lagging Behind International Peers

While Henan's firms settled for grinding it out in the low-end abrasives market, the technological frontier of the global diamond industry quietly shifted. The data show China holding a marked lead in conventional industrial diamond, but a considerable gap behind Europe, the United States and Japan in the high-value functional diamond materials used for electronic devices and semiconductors. The generational gap in technology is especially clear. Internationally, microwave plasma chemical vapour deposition (MPCVD) is widely regarded as the best method for synthesising large, high-quality single-crystal diamond. In theory, given a substrate of sufficient size, single-crystal diamond of corresponding size can be produced. Yet while overseas laboratories and companies work on scaling 4-inch homoepitaxial diamond wafers, most firms in Henan still hold to their incumbent advantage in high-pressure high-temperature (HPHT) synthesis. The HPHT method is constrained by the volume of its high-pressure equipment, leaving limited room to increase crystal size, and it must introduce a catalyst, which makes impurities hard to reduce. This path dependence has meant Henan has long failed to break through to larger diamond in MPCVD polycrystalline production, watching the high-end market be monopolised by overseas majors.

03Disconnect Two: New Growth Tracks Reduced to Capital-Markets Storytelling

Even as the market signal turned unmistakable - customers wanting a 10 mm by 10 mm diamond heat spreader to cost no more than a hundred yuan - the response from Henan's firms has looked slow and restless at once. Thermal management should be the field where diamond generates commercial value fastest. Diamond conducts heat at roughly 2,200 to 2,400 W/m.K, six times copper, and is regarded by international majors such as TSMC and Samsung as a key material for solving the thermal problem in AI chips. A Stanford University team has developed a low-temperature CVD method able to grow diamond film directly on a semiconductor surface at around 400 degrees Celsius; applied to gallium nitride transistors, it lowered device operating temperature by about 70 degrees. From GaN to CMOS, from RF power amplifiers to 3D chip stacking, diamond-based "thermal scaffold" designs are moving toward industrialisation. In Henan, however, these frontier tracks have largely become capital-markets stories. Take one listed company in Henan: its controlling subsidiary works in CVD diamond and is described by the parent as a "new growth driver", yet in 2024 that subsidiary posted a net loss of roughly 50 million yuan, more than doubling year on year, with operating cash flow of about negative 150 million yuan - a third consecutive loss-making year, widening each year. While overseas companies work with DARPA to validate diamond integration in gallium nitride power amplifiers, some Henan firms are still telling stories with concepts rather than genuinely addressing affordability for the market. As an industry specialist put it: the sector needs steady development, and companies should focus on solving real technical problems rather than blindly following trends.

04Disconnect Three: First in Capacity Worldwide, Nowhere in Pricing Power

In 2025 Henan's lab-grown diamond industry faces a severe test of fire and ice. The contrast between a booming production end and a chilly consumption end has pushed the contradiction of "a mine without a market" to its extreme. The figures are stark. Even with the global lab-grown diamond market projected at US$36.8 billion, Henan's production-to-sales ratio for lab-grown diamond in the first half of 2025 was only 12.73%, and 90% of jewellery-grade capacity remains clustered in low-value segments. The price system has fallen into a vicious circle: a one-carat low-quality round stone has dropped below 1,000 yuan, and core product prices are down 74% from their 2021 peak. Some leading firms have seen lab-grown diamond revenue fall more than 25% year on year. More ironic still is the distribution chain: 80% of rough must first be exported to India for cutting and polishing before returning to China, losing over 50% of the value-add and facing carbon-footprint standards besides. 72% of Generation Z choose lab-grown diamond only for the low price, and behind a 37% penetration of the bridal market lies an entrenched perception of a "cheap substitute". This state of leading the world in capacity while handing the market away is the most direct consequence of drifting from market demand into self-congratulation.

05The Closing Act, and "the Resolve to Look Downward"

This is what may be called the closing act. Even with more capital poured in, if the patterns of management, of investment, of production control and of technical innovation do not change, new investment merely repeats the same mistaken loop - keeping an old machine alive without letting it come back to life. As a specialist in diamond industrialisation put it: yesterday's application was jewellery, today's is the heat spreader, and only the day after tomorrow's is semiconductors. The next step for Henan's diamond industry lies not in how much capital it draws in, but in whether its entrepreneurs can recover the resolve to look downward - to walk once more into that vast real market and listen to the demands that went unheard. Moving from a large producer to a strong technology nation, and upgrading from "Henan capacity" to "global brand competitiveness", turns on whether the original intent of "from the masses, to the masses" can be found again. Otherwise, having once conquered the world, one will in the end be forgotten by it.

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