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Israeli Trade Rediscovers Importance of Diamond Manufacturing
Q & A With Yoram Dvash – Chairman of the Israel Diamond Exchange's Industry Committee and CEO of Y. Dvash Diamonds
Aug 24, 2014 3:09 AM
By Rapaport News
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RAPAPORT... Yoram Dvash is an Israeli diamantaire who has polished diamonds for more than 25 years and is CEO and founder of manufacturer Y. Dvash Diamonds. In an interview with Rapaport News, Dvash, chairman of the Israel Diamond Exchange’s Industry Committee, talks about the efforts he and local industry have made to establish a new manufacturing facility in Ramat Gan that will serve as a training center for a new generation of Israeli diamond polishers.
 Rapaport News: How did you decide to enter the diamond industry?
YD: A relative of mine in the business told me to give it a try and he was very persuasive. I decided to give it at least a year and that it is how I began.
I started out as a polisher and learned how to polish the entire stone. After a while, I understood that I would have to remain in the factory for many years before I was promoted to the bourse, so I left and started my own company, Y. Dvash Diamonds.
I opened Y. Dvash Diamonds in 1991 and little by little I managed to build my business in manufacturing fancy-cut diamonds.
Round diamonds are the most popular cut, certainly for wedding bands. But there is still a market among people looking for fancy-cut diamonds, which stand out because of their slightly different shape. Fancies may be a relatively small part of the overall diamond market, but the number of established suppliers of fancies is also small. This means that you have more of an opportunity to stand out and become a well-known supplier.
Over time, we began manufacturing rounds as well because we have offices in Hong Kong and China, where most of the trade is in rounds. Simply put, we wouldn't have much business in the Far East if we only offered square cuts.
Rapaport News: Do you manufacture in the Far East to maintain competitive prices or to be closer to the Chinese market?
YD: No, we polish our diamonds only in Israel, even the smaller stones. Although, nowadays we don't sell too many small-sized diamonds. We used to sell more pointers, but little by little we moved into larger sizes mainly between 1 and 3 carats.
For many years, we had a manufacturing operation in Thailand but we ended up closing it because ensuring quality standards was too difficult. If you want to maintain quality control at your operation its pays to keep things close.
This will be one of the major draws for Israeli manufacturers to join the new manufacturing facility that is being built in Ramat Gan. In fact, the bourse just announced that renovations have already begun at the factory site.
Rapaport News: That is interesting since Israel doesn’t seem a natural choice for manufacturing in terms of labor costs or access to rough diamonds. Why would diamantaires want to bring manufacturing back to Israel?
YD: The key thing to understand is that diamonds are not like textiles. If you manage a textile factory, your raw materials are relatively cheap. You are paying, let’s say for example, a few dollars per yard of fabric. Consequently, labor comprises a much larger portion of the total productions costs. When you manufacture diamonds, every carat is worth something like $1,000 or $2,000, so the cost of labor comprises only a small portion of the final price.
Diamond manufacturing has taken off in Asia, particularly in the last couple of years, but not for top-quality diamonds. Due to our technology and the expensive rough diamonds we polish, the disparity in labor costs between Israel and China as a share of the total cost of manufacturing is insignificant.
Some other important elements to take into account are the costs of shipping and insuring diamonds and the time it takes to ship diamonds from manufacturing centers to grading laboratories and trading centers.
Rapaport News: What is your role in setting up the new manufacturing facility in Ramat Gan?
YD: After the last election at the Israeli Diamond Exchange (IDE), I was chosen to serve as chairman of the IDE’s Industry Committee. I was also selected as chairman for the industry committees at the Israel Diamond Manufacturer Association and the Israel Diamond Institute – the other two diamond industry associations in Israel.
I also serve on other committees, but these three appointments were the most important because it was the first time that all three industry associations had chosen one person to represent the industry. For many years there were sharp political disputes between the different associations in Israel, but today when people meet outside the industry we present a united front.
I decided to volunteer to spearhead this process because I am at an age and place in life where I can give back a little to the community and this is the largest project taken on by the IDE in the past 20 to 30 years. To build a factory that will have close to 100 workers recruited from different sectors of Israeli society is no simple task.
We are already beginning to see the impact of the preliminary work done by the committee. Just a year ago manufacturing was not on the agenda here and the Industry Committee had a budget of just $4,250 (ILS 20,000). This year, our budget is $425,000 (ILS 2 million).
Rapaport News: In that case, how do you plan on utilizing this money? What kind of services will the new manufacturing facility provide?
YD: The idea behind this project was to create a one-stop shop for local manufacturers. One of the most important services we will provide to manufacturers is access to state of the art technology at discounted prices. In particular, the equipment provider Sarine Technologies has agreed to provide its Galaxy rough mapping system at the facility and offer manufacturers a discount of between 5 percent and 15 percent on the usual usage fees. This is significant because some manufacturers spends many thousands of dollars per month on usage fees, while others don’t even have access to the Galaxy’s mapping software at all.
I am proud to say that even though it is still under renovation, the demand for space at the new facility already exceeds our availability. We have already received roughly 95 requests for the 75 available spots.
The facility will also be used to train new polishers. We expect to have six or seven classes in the first year with approximately seven people in each class, and growing from there based on demand.
Rapaport News: In a previous interview with Rapaport News, Diamond Controller Shmuel Mordechai said that a majority of IDE members are dealers. Are there any worries among the IDE’s members that this project will divert resources from improving and maintaining Israel’s standing as a trading center?
YD: No, because the return of manufacturing to Israel is important to the local trade. In the past, the people at the IDE who kept the system oiled and running were the small manufacturers. These were producers who had monthly turnovers of $300,000 to $400,000 and would only make a profit of 3 percent or 4 percent. Individually they were small players, but if you multiply this sum by the 100 to 200 such manufacturers that existed in Israel, they produced tens of millions of dollars’ worth of goods per month. Over the course of the year, their combined turnover could reach as much as $1 billion of polished goods, which they would sell at low markups to the traders.
The IDE is happy to support every area of activity because the more the center succeeds as a whole, the more work everyone will have. This is not just for polishers and manufacturers, but also for gemologists, brokers and dealers because the more that Israel can be a primary source for polished goods, the more business there will be.
When a dealer tries to sell a diamond to an Indian or American buyer, it is a hard sell because that same buyer can travel to India themselves to buy the stone. The stone isn’t any cheaper in India, but it is easier to sell where the polishing is done because the value illusion is stronger and a diamond’s value is largely based on illusion.
Right now, the IDE is standing on one foot, which is trading. The manufacturing project can only help Israel’s diamond sector grow and allow us to stand on two feet.
Rapaport News: Looking toward the future, where do you see the local industry and your business in the next 10 years?
YD: I think that in every industry it is hard to predict where things are headed in the next 10 years. With new technology and the speed with which changes take place even looking ahead three to four years is difficult.
I don't think there will be many polishers or manufacturing in Israel within another year, but the manufacturing facility is a start.
Right now, on a personal level, my business is doing well but I am thinking about what will come next. When things are still healthy it is the time to make a change; you shouldn’t wait until the industry shifts underneath you to react. This means that right now I am really taking the time to think about the next change I need to make in order to remain relevant as a player in the industry in the coming years.
As a company, we have already made a lot of changes. For example, we shifted from small stones to larger ones. We used to focus almost entirely on fancies, but now we do rounds as well. We have even manufactured necklaces. We are always looking for new things because it is a global market and the competition is tough. In this business, you are always competing with hard-working and ambitious people, whether from India, China, Israel or the U.S.
Rapaport News: What advice would you give to someone who wanted to enter the diamond industry?
YD: Anyone who wants to enter the field first needs to have the appropriate knowledge base. They should take courses in gemology and polishing and then decide what niche in the industry suits them most.
Personally, I believe in the importance of taking baby steps. First learn the basics and then figure out your specialty.
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Tags:
IDE, Industry Committee, Israeli manufacturing, Rapaport News, Ronen Shnidman, Yoram Dvash
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