First there was quartz, now there is the smartwatch
As smartwaches increasingly gain traction, can Swiss watchmakers face up to the latest threat to their livelihood? Or do they even care?
The Samsung Galaxy Gear smartwatch. Swiss watchmakers say that smartphones are just a fad. Photo: Fabrizio Bensch/ Reuters
In the 1970s, Switzerland’s watchmakers were almost put out of business when they underestimated the importance of the quartz watch. Though the industry recovered and is prospering, today it faces a new technological challenge from smartwatches, such as Samsung Electronics’s $299 Galaxy Gear. As with quartz four decades ago, the devices are being met with a shrug.
According to a survey by consultants Deloitte, two-thirds of executives in the Swiss industry say smartwatches pose no threat. “How would you like it if your boyfriend brings you a smartwatch instead of a nice diamond watch?” said Johann Rupert, the billionaire controlling shareholder of Cie. Financiere Richemont , which sells watches under 13 brands including Cartier and Vacheron Constantin.
“I’m not sure it’s going to have a huge impact on classic watches. The industry should brace for the arrival of smartwatches, said Andreas Hofer, a partner at Boston Consulting Group in Zurich. Researcher Strategy Analytics predicts global sales of 1 million smartwatches this year and 7 million in 2014. Sanford C. Bernstein forecasts that Apple could see iWatch revenue of $2.3 billion to $5.7 billion in the first year of selling such a device.
Swiss watchmakers “shouldn’t say too quickly it’s a trend that won’t affect them,” said consultant Hofer, who checks his iPhone to be on time. “There should be some modesty.”
The high-end Swiss watch is so low-tech that from a practical standpoint, it should no longer exist. When battery- powered quartz watches arrived on the scene in the 1970s, many consumers abandoned older mechanical ones -- both those that require winding and self-winders, which tap energy from the motion of the wearer’s wrist. The number of Swiss employed in the industry fell from about 90,000 in 1970 to just over 30,000 in 1984, and companies decreased from 1,600 in 1970 to 600 today, according to the Federation of the Swiss Watch Industry, a manufacturers’ group.
A big reason: Quartz watches were cheaper and more reliable. Even the most expensive mechanical watches lose several seconds a week and require maintenance every few years that can cost more than two new iPhones. Timezone, a watch- enthusiast website, calls them “an anachronism.”
Despite its continued reliance on centuries-old technology, the industry has fortified itself since the 1980s. Switzerland’s exports of timepieces rose 11 percent last year to a record 21.4 billion francs ($23.7 billion), based on wholesale prices, according to the Federation of the Swiss Watch Industry. Exports climbed 8.5 per cent in September from a year ago, data from the federation showed today. Mechanical watches made up a third of revenue in the $58 billion watch market last year, and the segment will expand 33 per cent by 2016, researcher Euromonitor International forecasts.
High-end Swiss watches can fetch stratospheric prices: Patek Philippe’s Sky Moon Tourbillon runs $1.3 million and Franck Muller’s Aeternitas Mega 4 is $2.9 million. “The more you learn about watches, the more you realize there is real know-how behind them,” said Gabriel Vachette, 30, who runs a website about watches and owns roughly 20. He got the bug from his father, who has 100. “You can tell a story with a beautiful watch,” Vachette said. “People who buy a Galaxy Gear will get rid of it in a year or two.”