Technology enhances the Swiss watch industry

'Swiss Made' watches are the best in the world, famed as the ultimate luxury purchase. But will the tech revolution ring the final bell for traditionally made pieces?

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The Swiss watch industry is set to evolve over the next few years thanks to technological developments

Swiss watches are so much more than just telling the time – they are highly sophisticated works of intricate engineering that are emblematic of precision, beauty and prestige. Around the world, the words ‘Swiss Made’ are synonymous with luxury and the finest quality that the watch industry has to offer. “The reputation and credibility of ‘Swiss Made’ is such that it is difficult, if not impossible, to sell an expensive watch if it would not be ‘Swiss Made’,” says Jean-Claude Biver, CEO of Tag Heuer and President of the Watch Division for LVMH. A pricey affair, Switzerland’s treasured products hold such value and esteem from one decade to the next that they increasingly appear on the pages of enviable investment portfolios.

Swiss made

According to the Swiss Federal Council, the words ‘Swiss made’ can only be used in certain circumstances. As such, a watch is considered to be Swiss only if it complies with all of the following:

– The movement is Swiss
– The movement is cased in Switzerland
– The manufacturer carries out the final inspection in Switzerland

Swiss movement has its own set of regulations and must comply with the following:

– The movement was assembled in Switzerland
– The movement has undergone inspection by the manufacturer in Switzerland
– Swiss made components comprise a minimum of a 50 percent of the value, excluding assembly costs

The prominence of the Swiss market is evidenced by the figures; according to Credit Suisse’s Swiss Watch Industry report, the market accounts for just 2.5 percent of global production in terms of units, but far outstrips all other in terms of value. Deloitte quantified this as being 20.6bn Swiss Francs in 2013 – a record for the industry following a decade of strong growth and rising demand from Europe and the Middle East.

Contrary to common belief, the Swiss were not the premiers of horological commerce. The first watch was actually made in Nuremberg in the 16th century, with subsequent inventions introduced by the Germans, as well as the French and the English. It was however upon the arrival of two master watchmakers in the 18th century that a new era had begun and one that would name the Swiss as the finest producers in Europe, and indeed the world. Since the days of Abraham-Louis Breguet and Jean-Antoine Lépin, Switzerland has dominated the market, yet there have been times when this title was almost lost. And now, in the mid-twenty tens, the industry faces its latest challenge, this time taking the form of ‘connected watches’.

Fabrique d’Horlogerie
Still making watches today, Blancpain, Perrelet and Vacheron Constantin were among the first in the 1700s, setting a standard of excellence for Switzerland’s avant-garde culture. Upon the onset of the industrial revolution, as costs reduced significantly and mass production was made possible, the market rose to new levels. Production also grew in terms of the tiny components that most watchmakers were unable to make – a practice that continues to this day. The industry’s expansion then came to a halt as a result of Europe’s Depression and two world wars. When recovery ensued, wrist and pocket watches were all the craze in the post-war era, with many having a particular fondness for the recently innovated automatic and self-winding pieces.

Despite impressively overcoming such looming political and economic obstacles, the most testing period for the Swiss watch industry was actually in the 1960s. Although it had been a Swiss engineer that developed the first electronic wristwatch, the Accroton Bulova was beaten to market by an American made battery-operated piece – the Hamilton 500. Not to be outdone by their transatlantic competitors, research and development into creating an electronically charged quartz wristwatch began; it took five years to develop components that were small enough to fit inside a watch case. The work may have been innovative at the time, but the Swiss were not alone as Citizen and Seiko were making their own quartz-powered timepieces. Despite its availability, Swiss companies were slow to embrace quartz technology, so immersed were they in the tradition of mechanical engineering. This led to a drastic decline in exports, with Japanese rivals dominating the quartz movement.

The saving grace for Switzerland then came in the form of Swatch in 1983. With the Swatch Group, affordability and durability were coupled with Swiss precision engineering, thereby ushering in a new wave of demand across the globe. With quartz models being available at any price range, Swiss watches were back in vogue. That is not to say that production for the mechanical timepiece stopped, for the cost to the industry in terms of machinery and such an absolute transition would have been too dear and the price in terms of losing the tradition too great. While quartz watches offer more cost effective options for consumers, watch lovers still have an unmatched fondness for mechanical movement, which persists to this day in spite of the technology’s age.

As evidenced by the quartz revolution, at times, Swiss watchmakers have been slow to adopt new trends, but they have always bounced back to reclaim their place as masters of watchmaking. Maintaining this prominent position in the global market despite the huge disparity in pricing, say compared with Chinese manufacturers, is no easy feat. “The Swiss have maintained quality, service, innovation, R&D, investments and strong distribution and marketing networks. Thanks to these cumulative efforts, they have been able to increase the importance and dominance of ‘Swiss Made’ in the upper price segments,” Biver tells European CEO.

Latest challenge
In the coming years, numerous smart watches are likely to appear on the market, but for now, Apple is leading the trend. When the Apple Watch was unveiled in June, it was greeted by a flurry of anticipation and demand. The watch, which connects with the iPhone, enables wearers to send text messages, browse the internet and measure daily activity levels. With convenience being its staple feature, the futuristic device holds great appeal for the tech savvy consumer.

At the lower-end of the range, prices for Apple’s ‘Watch Sport’ begin at $349, while the mid-range collection has twenty models that cost between $549 and $1,099. Then on the other end of the spectrum, there is the ‘Watch Edition’ collection, which can range between $10,000 and $17,000. With 18-carat yellow or rose gold cases to hold the small screen in place, the eight models are certainly aimed at the luxury watch market. Hoping to appeal to those that may usually purchase a Rolex, Omega or Tag Heuer piece instead, the tech powerhouse has been making a splash in the fashion industry, with the watch appearing at Paris Fashion Week and on the cover of Vogue China. Given its price, the high-end Apple watch certainly holds a degree of prestige and luxury, together with the impression of wealth for the wearer, both of which could tempt those usually in the market for ‘Swiss Made’ counterparts.

Indeed, it may work. Apple watches are the envy of many consumers. In an increasingly technological and connected world, it makes sense for such a device to be the next big thing. They offer an ever more precious commodity in today’s hectic lifestyle – convenience. Something that many people will pay through the odds for, certainly those that the Watch Edition is aimed at. Moreover, it offers convenience along with an even more valuable commodity, time. Given the excitement over the release of the Apple Watch and that Android rivals, such as Samsung, Sony, Motorola, Asus and LG, are now offering their own versions – this is not a passing trend. Thus, Swiss watch manufacturers must take heed of this shift and of the technological advancements that are unfolding at present, certainly as their competition now comes in the form of global powerhouse Apple.

Learning lessons from history, the Swiss industry has taken note of the new trend, with Tag Heuer and Montblonc among those at the forefront. Brandished as the “world’s first luxury Android wear watch”, Tag Heuer is collaborating with Google and Intel for the piece, which is due to come on sale before the end of 2015. With a longer battery life and a more stylised design, Tag Heuer is certainly hitting the market hard with a product that can rival and perhaps even outdo the Apple watch.

That being said, there is also another possible consequence of smart watches – one that could improve the entire market, even for those of the mechanical persuasion. As explained by Biver, “The impact may be quite positive because should the connected watch become a success, it will certainly help and promote the fact to wear a watch on the wrist of the new generation, who are not wearing watches anymore. The success of the connected watch, will also help to promote the «real» watch, the one that will be repairable even after 100 years, compared to a connected watch that is obsolete at the most after five years”. While the popularity of the smart watch inevitably grows, so will that of traditional watches; simply put, wearing a watch is becoming fashionable once again.

The art of time
Swiss watches will always have their allure as beautiful timepieces. Appreciated for their complex and delicate mechanisms, they are a romantic reminder of tradition and age-old luxury, while also representing excellence and precision, traits that are enshrined in the culture of the industry. “The heritage the major maisons hold is unparalleled in luxury and the marketing around ‘Swiss Made’ within the horological field resonates trust and expertise,” says Lloyd Amsdon, Director at the Watchfinder & Co. Those who can afford to purchase luxury Swiss watches, will continue to do so, both for their aesthetic value and as investment pieces. In fact, it seems possible that prices, certainly for pre-owned pieces, may rise further still in a world of tech timekeeping as the science of horology and masterful engineering are cherished even more so than they are at present. “I see big growth for watches among the new generation thanks to the promotion done by the computer companies with their connected watches. And I also see big growth in the accessible luxury watch segment made for the middle class,” says Biver.

It seems inevitable that Apple and Android watches will advance further and that demand will mount as the pieces offer more in terms of their applications and practicality. And as they evolve, those models that came before the next generation will become obsolete, in the same way that a smart phone or a laptop quickly loses both its edge and value, sometimes within a matter of months after release. As such, connected watches are more aligned with the tech industry than they are with the luxury watch industry, no matter how much Apple tries to market it so. “The smart watch is simply an extension of tech gadgetry. Just as a luxury watch has nothing to do with telling the time as we all carry around mobile ‘phones- a smart watch has nothing to do within this market place,” Amsdon tells European CEO.

Those wishing to maintain the value of their purchase will always opt for the traditional over the new age watch. ‘Swiss Made’ still means something special for consumers and collectors, which cannot be replaced by ‘Apple made’. Of course, many will succumb to the appeal of a futuristic gadget that conjures up the kind of tech featured in science fiction, and there are those with deep enough pockets to enjoy both worlds. Despite the lure of the smart watch and its promotion as a luxury good, it will never have the beauty, nor the nostalgia of classic ‘Swiss Made’ watches. With a Rolex or a Patek Philippe, there comes a history, a saga of excellence and luxury that is simply unparalleled anywhere else in the world. The lower-end Swiss models may suffer as a result of the new trend, but those steeped in the mechanical tradition will hold strong, while providing their own ‘smart’ offerings so as to not fall behind of the changing consumer preferences. “Traditional watchmaking is a true luxury craft and any watch fan appreciates that hundreds of moving parts painstakingly made and assembled to create a ticking watch”, Amsdon comments. Which explains why the preference for mechanical movement watches over quartz technology still exists, thereby illustrating that for watch lovers, there is simply no comparison of a Swiss traditionally hand-made piece to a mass-produced, short-lived tech gadget.