Delving further into the issue of fragmentation in the midstream (manufacturing) of the diamond sector covered in last week's post, Ehud said in August 2015, "The more we examine the facts, the clearer it becomes that the main problem faced by the diamond industry is that the midstream – the manufacturing sector of the diamond pipeline that mainly polishes diamonds – does not get its fair share of the pie."
"The diamond sector is viewed by the public as a lucrative sector to operate in, enticed by the allure and profitability that diamonds represent. However, the diamond industry's midstream in reality suffers from very low profitability, constantly teetering on the verge of loss, while the mining sector and retailers – respectively the upstream and downstream of the diamond pipeline - maintain much wider margins."
"It is time to wake up," Ehud stated. "It is essential for all sectors of the diamond industry that the midstream makes money and justifies its huge investment of capital, knowledge, market fluctuation and financial risks, and unlimited dedication of time.
For the sake of a long lasting and healthy industry for all its participants, we have a responsibility to adjust the current model so that the indispensable manufacturing sector receives its fair share of the profitability pie. This is a crucial step in creating a strong industry that will be stable for years to come."
The next posts will drill down into possible solutions Ehud proposed to address this problem of deep fragmentation in the diamond sector.
Miners vs. the Midstream: Who Needs to Change?
Excess Fragmentation in the Diamond Market and Lessons from Other Industries
Survival Mode: Why the Diamond Industry's Credit Addiction is Leading Us Down the Wrong Path