The Swiss watch planet in movement – Part 1

Pierre Maillard

September 2010

The Swiss watch planet in movement – Part 1

Pierre Maillard

September 2010

On December 18, 2009, the late Nicolas Hayek sent tremors through the microcosm of the Swiss watch industry. In response to questions asked by Bastien Büss of the business publication AGEFI, Hayek made no attempt to hide his bad mood when he angrily answered: “We have reached a point of no return, of frustration, and of anger on the part of our personnel as regards the deliveries to third parties, that is to say, to other brands. We are going to officially ask permission from the Commission for Competition [COMCO] to be relieved of our obligation to sell movements to everyone or quite simply to third parties.” Hayek’s decision concerns “everything that is produced by our industrial pole: movements, regulating organs, and all other watchmaking components such as escapement parts—palettes, gears, palette wheels, balance plate—and oscillating parts such as balances and balance springs.”
The shock was total and, if COMCO acquiesces, the blow will be felt from now to years to come. It is well known that to design and create a movement—despite the new computer-assisted tools—we are looking at years of development.

The blood flow of the Swiss industry
The Swatch Group and its industrial arms (essentially ETA, Nouvelle Lemania, and Frédéric Piguet for movements; as well as Nivarox-FAR for other components—balance, regulating organs) can be compared to the blood flow that nourishes a large body of the Swiss watch industry.
It is one thing to slowly bleed the body, which finds itself already in a weakened state, but when a tourniquet is applied and tightened, doesn’t the onset of gangrene become a real threat? In the same interview, Nicolas Hayek clearly declared, “The Swatch Group never ceases investing in its industrial tool [citing amounts of 1.7 to 2 billion francs over the last few decades], yet the majority of other watchmakers treat us like a supermarket while they only invest in marketing.”
It is true that those watchmakers who now wonder what the future holds for them have, in their own way, blithely sawed off the branch they have been sitting on, and with no thought of the consequences. As an anecdotal example—but one that is fairly representative—a long-time observer in the watch arena recently explained that “up to the middle of the 1990s, ETA gave a discount of five percent to any watchmakers who mentioned the ETA origin of their movements in its communication.” Clearly, there was no reason to invest in the fabrication of their own movements, quite the opposite. But since then, the winds have changed and watchmakers were already warned before this happened. In his harsh way, Nicolas Hayek actually did them a favour in 2002 when he warned that as soon as possible—according to the decision of the COMCO, this measure will take effect in January 2011—his group would first stop the delivery of ébauches and kits, and only sell finished (and decorated) movements. This decision forced most of his competitors to speed up their processes of integration and industrial verticalization, which also boosted business for a few independent suppliers which previously had been limited to assemb-ling and personalizing ETA movements that they received in kit form.
This non-delivery declaration has also had ‘collateral’ effects on the dense industrial fabric of the Lemanic and the Jurassian Arc regions (and even beyond the border). This re-industrialization effort—which we can now gauge—owes everything, or much at least, to the determination of the Hayeks (and the son, now, will certainly follow the same path) to turn off the tap and the flow of movements. When all is said and done, however, this decision may well prove to be a beneficial one in many respects.

The Swiss watch planet in movement – Part 1 The ETA 2826-2 MECHANICAL BIG DATE CALIBER and the SKELETONIZED ETA 2894S2 CHRONOGRAPH CALIBRE

A few numbers
Even without precise numbers, it is estimated that the Swatch Group has between 60 and 70 per cent of the market for mechanical movements, with approximately 3 to 3.5 million movements out of a total of 5.1 million mechanical calibres produced annually in Switzerland (2009 statistics). Doing the math, it is clear that ETA and the other Swatch Group entities equip nearly two out of three watches. If we add the 600,000 or so watches produced quasi-totally every year by Rolex, this means that out of the 5.1 million total movements, the remaining 1 million are made by all the other companies combined. As Henry-John Belmont, consultant and former head of Jaeger-LeCoultre, explained recently at the Forum de la Haute Horlogerie, “It is certainly not the individual brands that will succeed alone in providing the investments necessary for the production of 1 or 1.5 million movements. The fabrication of 250,000 basic ETA 7750-type calibres requires an outlay of the order of 100 million francs and 200 to 250 employees. Aside from these amounts, the crucial problem is a lack of qualified personnel if it actually becomes necessary to find 800 to 1000 people, or even 1500 depending on the need.”
We are not yet at this stage, however, since Hayek deliberately qualified his threat, reserving the right to “continue deliveries under certain conditions—and why not?—to a few loyal, serious, and historical clients.” As for the others, he is no longer interested in them. “They have to invest or to join together,” he said, adding with a touch of irony, “Everyone claims to be a manufacture and to be able to produce in-house all the parts of a watch, even the most complicated ones.” So, get to work!
Whatever happens, the COMCO will certainly be called upon to take a final decision, and before that happens a lot of water will flow under the bridge—time for the market to speed up its vertical integration and the diversification of its offer.
In light of this situation, what have watchmakers been doing? Since 2002, we have witnessed a ‘triple play’: the rise in strength of industrial companies offering direct alternatives to ETA; the accelerated industrial verticalization of brands creating their own in-house movements; and an explosion in the number of special semi-industrial movements in the mechanical haut de gamme sector.

I. CLONES AND ALTERNATIVES

The largest and the most ‘faithful’ supply of basic ETA-type movements, in all senses of the term, is provided by Sellita. Right after the announcement of the delivery stoppage of ETA kits, Sellita—which assembled and customized approximately 30 per cent of ETA ébauches for third parties—launched its own production of cloned calibres whose patents had expired but which formed the basis of ETA’s historical offer. These include the famous and indestructible ‘tractors’, namely the ETA 2824, 2834, 2836, and 2892 series, as well as the Valjoux 7750.
The production of the Sellita range, SW 200, SW 300, and SW 500 is estimated to be around 1 million pieces per year. The advantages of these movements are Sellita’s competiveness and the fact that they are perfectly compatible with the ETA movements, thus assuring global after-sales service. From Anchorage to Timbuktu, there will always be a watchmaker who has experience with ETA movements and who is therefore capable of repairing the Sellita clones.

The Swiss watch planet in movement – Part 1 SW500 Calibre by Sellita. Alternative to the ETA 7750 movement. Automatic chronograph, 25 jewels, 28,800 vib/h (4 Hz). Diameter: 30.00 mm. Height: 7.90 mm. Hours, minutes, small seconds. Automatic ball-bearing winding-mechanism. 60-second chronograph, 30-minute and 12-hour counters. Date and day, corrector. Stop-second device.
SW300 Calibre by Sellita. Alternative to the ETA 2892 movement. Automatic, 25 jewels, 28,800 vib/h (4 Hz). Diameter: 25.60 mm. Height: 3.60 mm. Hour, minute, and centre seconds. Automatic ball-bearing winding-mechanism. Date, corrector. Stop-second device.

Acquired in 2008 by the Festina group, Soprod has also created an alternative to some ETA calibres. Under the name Alternance, the first calibre off the assembly line was the A10, a basic movement that is totally compatible with the famous ETA 2892. It required an investment of around CHF 18 million. (According to some experts, the student has even surpassed the master.) Other models will follow, notably a large date as well as a chronograph, already announced but apparently still not quite ready. Soprod’s stated goal is to gradually increase its capacities to a production level of 300,000 movements—a goal that is still a way off.

The Swiss watch planet in movement – Part 1 Soprod movement

Another company producing ETA clones is La Joux-Perret, with an annual capacity of around 60,000 to 80,000 movements. Among these, half are ETA clones and the others are in-house calibres with ‘high added-value’, such as a flyback chronograph. Basically, La Joux-Perret wants to concentrate its development in the high-end category by creating ‘specialties’ that the brand intends to reserve for reliable brands with whom it has already developed and is currently developing special projects. In this regard, we can mention collaboration with such brands as Hublot as well as the Richemont (for Panerai among others) and LVMH (TAG Heuer and Louis Vuitton).
In the near future, other companies may also join these ranks. Among them, one name comes up over and over again— Dubois Dépraz. With already a large clientele, this supplier of mechanisms and additional modules (chronographs; simple, annual or perpetual calendars; minute, five-minute and quarter-hour repeaters; time zones; lunar phases; power reserve) has in the past also created a chronograph calibre (without column wheel) that was industrialized in quantities of 3.5 million units until 1970. The company might therefore be tempted to dust off its own chronograph movement. Would it be compatible or not? Time will tell. Among the other players that are now supplying, or are preparing to supply, exclusive movements (not ETA clones) to third parties, is Vaucher Manufacture, which is mostly owned by the Sandoz Family Foundation, also owner of Parmigiani, of which Hermès has purchased a 25-percent share. Another such player is Fleurier Ebauches, which belongs to Chopard.
Vaucher Manufacture had to recently lower its expectations when it announced a reduction in personnel with the layoffs of a quarter of its 210 employees. “The recovery in the domain of movement supply is not as pronounced as in the other sectors of watchmaking,” stated Florian Serex, General Manager of the company, adding that “the company’s activity and its product offer must be adapted to the contingencies of the market.”
In other words: the movements proposed by Vaucher Manufacture—with very classic workmanship—are most likely positioned too high for the current economic situation and are not, or no longer, in tune with the demand, oriented towards larger sizes than the 11 or 12 lines proposed by the movement maker. This is one example that shows it is not so easy to become the alternative player, and that monetary investment is not always the answer.

The Swiss watch planet in movement – Part 1 “Dressage Annual Calendar” by Hermès
Retrograde-type mechanical self-winding annual calendar display on a 225° segment. Hermès Calibre H 1930, 12 lignes made by Vaucher Manufacture. 28,800 vibrations per hour (4Hz).55-hour power reserve thanks to a series-coupled twin barrel, 330 parts. Hand-chamfered and polished bridges and mechanisms. Exclusive Hermès decorative motif (sprinkling of “H”s). Oscillating weight in 916 (22ct) gold.

Chopard, a ‘business class’ alternative?
With its L.U.C. Chopard Manufacture, Chopard has already mastered the production of its own movements, used exclusively in the haute horlogerie sector and in very limited numbers. These L.U.C. Manufacture movements are well-known for their quality, originality and high degree of finishing. Armed with this success, Chopard has decided to move to the next step and produce its own ébauches, but this time on an industrial level. The goal of the new company, Fleurier Ebauches SA, founded in July 2008, is to increase the independence of the family company. Within the next four to five years, it plans on producing approximately 12,000 to 15,000 movements per year, of which two-thirds will be automatic calibres and one-third chronographs. The total investment is said to be around 15 million Swiss francs.
The new entity is located only a few hundred metres from the L.U.C. manufacture in Fleurier in an old, but entirely renovated, industrial building that offers a large working area of 5,100 square metres. Over time, it can accommodate 50 to 60 employees. In the first part of the building, now finished, there is an impressive series of high-capacity production machines—the Precitrame MTR 312, each equipped with nine units with three axes and four tooling heads, allowing for a total of 36 simultaneous operations. As Karl-Friedrich Scheufele says with delight, “The L.U.C. movements are first class while those from the Fleurier Manufacture are business class.” In other words, they represent somewhat higher volumes with good quality. “Having said that,” adds Scheufele, “I have learned in this adventure that creating industrial volumes is more complicated since everything must be planned well in advance and the slightest error can have major consequences.” The first of these new calibres, the FE 151, is currently undergoing Chronofiable testing. It is a versatile automatic calibre (28.8 mm) featuring three hands, instantaneous jumping date, a stop seconds function and power reserve of 60 hours. The second step will be a simple, but integrated chronograph. In the beginning, it will be used in the brand’s existing steel collections, produced in volumes of 7,000 to 8,000 pieces. Chopard also reserves the right to sell these calibres to third parties.