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Japanese Start Cutting to Stay in Business

Apr 2, 2004 1:41 PM   By Kazuko Ito
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For some diamond enterprises, the only way to survive today is to swim upstream. However, the current flowing in the other direction is powerful: International name brands have nearly taken over the downtown shopping areas. Sightholders have formed strategic alliances with Japanese marketers. Together, these two phenomena are changing the shape of the Japanese market. The solution for some Japanese companies has been to move upstream into diamond manufacturing.

“I had to,” said Naomasa Ueda, president of Gem International Co., Ltd., who started manufacturing several years ago. “I could not find enough goods in the polished market.” Gem International now owns a factory in Ramat Gan and operates another in Romania.

Individual Strategies

Although the number of Japanese manufacturers is small, each has a unique

philosophy and strategy. Gem International specializes in fancy shapes in cape colors ranging in size from 30-pointers to 10-caraters. The company produces an average of $1 million to $1.5 million worth of diamonds monthly. The production is mostly sold to Japanese jewelry manufacturers in Kofu and to jewelry retailers, but small portions are sold on the international market.

AP Corporation is another manufacturing pioneer. The company’s name, AP, stands for “Always Perfect,” reflecting its market niche, selling well-made stones and registered ideal cut diamonds. When Sarin’s DiaMension was introduced into the market about a decade ago, AP quickly adapted the machine into the company’s sales pitch. As the company became more marketing-minded, it attempted to tie manufacturing into the sales strategy. Gabi Tolkowsky, the grand nephew of Marcel Tolkowsky, who outlined the relationship between proportions and diamond brilliance in 1919, provides Gabi’s Ideal Fancy Shapes to AP today.

Because well-made and Triple Excellent graded stones have become the Japanese market’s norm, competition among marketers is fierce. “It is not easy to manufacture well-made stones all the time,” said Shigeyuki Ishida, president of AP Corporation. “The problem is what to do with the rest of production that is not ideally cut.” Today, the company outsources diamond production.

Kanenori Kagawa of Hope International said, “We are probably the biggest manufacturer of Hearts and Arrows.” Because precisely manufactured stones always exhibit the Hearts and Arrows pattern of reflected facets, such stones were once commonly called Hearts and Arrows in the Japanese trade. But when the company that discovered the effect named itself Heart and Arrow Co., Ltd., the trade was no longer free to use the name. The Central Gem Laboratory, a leading Japanese grading laboratory, named the pattern Hearts and Cupids instead.

If stones do not show Hearts and Arrows, we will return them to the factory and repolish them until they do,” said Kagawa. Today the company has 300 cutters in India and “hopes to double” its production within a year.

Mathematical Applications

Hohoemi Brains Co., Ltd. found a mathematical formula called O. E. Cut that prevents the unwanted spectrum of light rays, such as red and yellow, from coming to viewers’ eyes, making the finished stones look much whiter and brighter. The company has recently registered an international patent on the O. E. Cut. It is capable of manufacturing from 0.01 carat to over 3 carats in round brilliant and princess cuts.

“The production is still small,” saidYoshinori Kawabuchi, president of the company. “Because of the precision work required, mass production at this stage is impossible.” But he is not interested in mass distribution to wholesalers or dealers. “O. E. Cuts are the value-adding elements to high jewelry. They should not be sold like a commodity,” said Kawabuchi.

Starting last Christmas season, Hohoemi joined up with FDC, one of Japan’s trendiest jewelry/accessory marketers. Soon its products are slated to appear at one of the major department stores. Kawabuchi is traveling to China this month to take a look at the potential of the Chinese market.

“China will probably grow to be a huge market,” said Kagawa , who recently opened a Hope sales office in Hong Kong, in addition to his Antwerp and New York offices. “But China aside, we would be happy to cater to the greater Asian communities throughout Southeast Asia.”

In Hope’s New York sales office, stones are sold with AGS certificates. “Our stones get AGS 0 without fail,” said Nick Ishii, executive director in charge of the New York office. “I wish AGS would

provide pictures of the stones on the certificates as Japanese labs do. The pictures clearly show Hearts and Arrows images, which would be a great advantage for retailers to show to their customers.” The company’s biggest problem, said Ishii, is “not having enough goods, particularly in larger sizes.”

Like other manufacturers, Japanese

diamond cutters find that securing rough is their toughest problem. Hope International has three rough buyers stationed in Antwerp. “Whenever we hear rough is available, we fly there, be it Africa or Siberia or Canada,” said Kagawa. “I flew to Konakri, Guinea, myself,” said Ueda of Gem International, “but Antwerp is the best place for me to buy.”
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Tags: China, Guinea, Hong Kong, India, Japan, Jewelry, Labs, Manufacturing, Production, Sightholders
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