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AGS Laboratories Closes Down – Another Nail in the GIA Coffin!

AGS Laboratories Closes Down – Another Nail in the GIA Coffin!Photo from Unsplash

Originally Posted On: https://www.jogiadiamonds.com.au/blog/ags-laboratories-closes-down-another-nail-in-the-gia-coffin/

 

In October last year, American Gem Society (AGS) Laboratories announced they were merging with the now dominant Gemological Institute of America’s (GIA) laboratory. According to the press release, GIA offered an endowment, which was believed to have “a fair bit of money involved” in return for AGS’ intellectual property and AGS’ Las Vegas location, which it will use as a research facility.

 

The History of AGS Laboratories and Why Were They Different

The American Gem Society was founded in 1934 by Robert M. Shipley, who founded the GIA a few years earlier in 1931. However, it wasn’t until 1996 that AGS established its own laboratory. Back in 1996, it was fairly revolutionary as it was one of  the first laboratories to grade the cut of a round brilliant – something GIA did not do until 2005.

In 2005, AGS introduced their light performance grade, which was a culmination of many years of research. Essentially, the light performance grade looked at the entire diamond and how much, and how symmetrically light was refracted and returned from a diamond, rather than just relying on a set of arbitrary angles, percentages and measurements. The best way to describe the new cut grading system was that it was three dimensional, rather than two dimensional. The benefits of the new light performance system were two fold, a) it wasn’t based on some rules that were far too lenient like GIA’s cut grading system, thus was not controversial; and b) it could be used for other shapes of diamonds, which AGS expanded upon in the years following the introduction of their light performance grade.

Therefore, AGS quickly gained a reputation as being a boutique laboratory, where only the best cut diamonds were graded. Because their colour and clarity grading was regarded as good as the GIA’s, diamonds with AGS certificates and an ideal cut grade commanded a premium over their GIA counterparts, especially if they were fancy (non round) cuts.

In addition to grading light performance in their own lab, AGS allowed members of the trade and even consumers to use their tools to grade the light performance of a diamond. Firstly, their light performance software was available to purchase (and later download for free) and could be integrated into both OGI and Sarin proportion scanners, which we used between 2008 and 2010. Secondly, their ASET was, and still is an inexpensive way of grading fancy shape diamonds. We still use the ASET as part of our cut analysis for fancy shape diamonds, along with the Ideal-Scope for rounds.

Future of the AGS Light Performance Grade

GIA will continue to offer a supplemental digital-only light performance report to diamonds it grades. Only those diamonds that meet the ideal light performance grade will be eligible and the cost is US$25. This report will be offered with or without the ASET image.

Thoughts on AGS Closure

Firstly, I wasn’t entirely surprised at AGS’ closure. For about 10 years now, I suspect their business had been either stagnant or declining, based on the amount of AGS certified diamonds on offer both by diamond manufacturers and on trading platforms such as Rapnet. However, I don’t think this was because of a bad product, but moreover, I think this was because AGS failed to gain traction with large Indian manufacturers. This was in most part because of the rise of the Chinese and Middle East markets where GIA gained market traction, presence and name recognition, making it difficult for other grading laboratories to compete. This essentially left their only clients as a handful of jewellers and wholesalers in the US, as well as one or two manufacturers in India who only used AGS for less than one percent of their diamonds.

Above: GIA’s dominance has lead other laboratories to close down or be a shadow of their former selves.

Secondly, I think AGS leaves behind a lot of unfulfilled potential. I remember, back in 2008 when they announced grading for emerald and oval shaped diamonds, thinking that it would be a lot easier to buy and sell these shapes (with more shapes to come) as AGS graded them just like rounds. Alas, this was not to be and I don’t remember seeing any AGS graded oval shapes ever – either in-person or online. Again, I think this is because AGS simply didn’t have the support of Indian manufacturers. In retrospect, I think it may have been a better business decision to focus AGS graded diamonds to the American market and licence their cut grading software to manufacturers on a per stone basis, say US$10 per stone to provide a verified light performance grade (based on a 3D scan done by the manufacturer and verified by a GIA certificate) and online based certificate.

Thirdly, time will only tell whether GIA will continue to offer AGS light performance grading certificates. My prediction, given that many GIA graded round diamonds graded as “excellent” are in actual fact very poorly cut, is that GIA will phase it out in a few years due to low take-up by the industry.

Future of Diamond Grading

AGS’ closure, whilst a setback for consumers and retailers wanting to buy and sell the best cut diamonds, certainly isn’t the end of light performance grading. In fact, I would say we reached “peak cut grading” sometime around 2008, when AGS started grading fancy shapes. Since then, no new technologies have been invented or released, and we still use the Ideal-Scope, AGS ASET and OGI proportion scanners to grade the cut of diamonds. Whilst smaller labs and equipment manufacturers such as Sarine have released new products, even purporting to use artificial intelligence, these all use old technology, or a mix of old technologies.

I would say the next frontier in diamond grading is automated or machine based colour and clarity grading. Whilst automated colour grading has been in existence for decades, most notably through the Gran Colorimeter, automated clarity grading has been a far bigger challenge. Today, there are a few labs offering automated colour and clarity grading, such as The De Beers Institute of Diamonds, however, the machine grading is always checked by a human. If diamond colour and clarity grading was fully automated and accurate enough to be used by the GIA, then the amount of time, and thus money saved would be enormous. Furthermore, if said colour and clarity diamond grading machine was openly available, GIA’s dominance would most certainly end with new grading laboratories opening up and even retailers and manufacturers grading their own diamonds.

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