A Brief History Of ETA: THE Swiss Watch Movement Maker

A Brief History Of ETA: THE Swiss Watch Movement Maker

A Brief History Of ETA: THE Swiss Watch Movement Maker   feature articles

ETA is one of the most prevalent and powerful companies in the modern watch industry. It is Switzerland's largest movement maker with countless small and major brands relying on the products they make. Its story has, as we will learn, defined the watch industry of today. However, despite all its previous and present roles in horology, for many, ETA remains a relatively unknown manufacture, or worse: a three-letter word that scarcely means more than the fact that the movement inside their watch was not made by the company whose name is on the dial.

One of the reasons for this can be found in the marketing practices of the industry. We see retail brands tirelessly looking for yet another way of exploiting their history so as to convince the pondering buyer. ETA however, unlike retail brands, does not want to sell directly to the public. Consequently, they will never publicly advertise their technical achievements to make you or I buy a movement or two from them. What they do instead is sell ébauches (semi-assembled movements) and complete movements in vast quantities to watch brands, who will then dress them up in accordance with their own brand's DNA.

The other reason why it might be difficult for the masses to learn more about the manufacture is that in-house movements have become a major selling point for most mid- to high-end brands. Therefore, when it comes to a watch without a proprietary movement, the general method is to rename the ETA (or any other supplied) movement to a different code chosen by the brand. Surely, sometimes the base ETA/Sellita/Soprod, etc. movement is modified by the company that purchased it, but oftentimes the only thing "custom" about one of these calibers is the rotor with the particular brand's name on it.

As a result, for those relatively unfamiliar with the world of watch making, ETA might appear as if it was some sort of an objectionable, undesirable name in the industry, something that should be avoided. But that could not be further from the truth. ETA is an indispensable element and something without which Swiss watch making would never be what it is today. In this article we will discuss the history of ETA through reliving the incredible ups and downs of not just a manufacture, but an entire industry as well.

A Brief History Of ETA: THE Swiss Watch Movement Maker   feature articles
Click to expand: Our summary of important dates for an easier understanding of this complex story

Before we get into the details, please allow me to note that there is no one complete source of information, no one place where all relevant data is easily available. At times, controversial data can be found, primarily because getting exact statistics regarding the earlier years is very difficult. Having said that, we will closely follow the history of the Swiss watch making industry to see how ETA not only managed to fit into it, but also how it made a major difference just when it was most sorely needed. We begin with looking at the watch industry of the early 1900s to see where and how it all began for the company.

Prologue

By the early 20th century, the Swiss watch industry was comprised of larger manufactures (etablisseurs) which were assembling complete watches mostly from purchased parts and movement kits and workshops (ateliers) which specialized in either making different parts or building ébauches. In practice, this meant that a number of ateliers were making very specific components (such as the balance spring, mainspring and other parts that demanded great precision and expertise) while other workshops were building semi-assembled watch movements (ébauches). Ébauches are movements that contain most basic structural elements but are not equipped with a mainspring or the escapement. You might rightfully ask, "If everyone had been making parts and unfinished movements, then who built watches?" The answer is that the blank movements, as well as all other components, were sold by these independent workshops to watch assembling firms (etablisseurs) who then modified, decorated, fully assembled and regulated them for their own timepieces. However...

The beginning of World War I turned the industry inside out as most supplier firms quit making watches or other components and started using their machines and human resources to produce and sell ammunition. Since demand had been much greater for ammo than for fine watches, this was a rather obvious decision. Once the war was over though there was no need for such immense amounts of bullets and all these firms wanted to return to their normal activity to make ébauches and components again. And so they did, causing a sudden oversupply of their products. They all acted independently of one another as there were no powerful groups or authorities to control them. Consequently, it was much too late when they realized that the demand from watch making companies for such a vast amount of parts or ébauches was greatly insufficient.

The workshops were desperate to stay alive and to achieve that they had to get rid of their piled up stocks - at any price. In a vicious pricing competition, they sold all redundant parts to Swiss companies and - to make things worse - to non-Swiss competitor watchmakers as well! These (mainly American) companies bought these high quality Swiss movements and used them in their lower priced watches. This way they could provide much more reasonably priced timepieces than their Swiss counterparts while using just about the same movements! In essence, Swiss workshops were selling components at great losses when the companies who they wanted to buy from them were going under because non-Swiss brands were selling comparable watches at much lower prices.

These seriously daunting circumstances were topped off with heedless crediting by some of the Swiss banks. In summary, the industry had to face steeply decreasing turnover, strong foreigner competition gaining momentum, and an unremittingly increasing debt. The result? By the mid 1920s the industry owed about 200 million Swiss francs to its lenders.

A Brief History Of ETA: THE Swiss Watch Movement Maker   feature articles

The Gears Line Up for Partnership

It was obvious that strong corrective measures were necessary as the companies themselves, separately, never had the power to make a difference and to turn things around. The first step in an effort to break these unnerving trends was the 1924 founding of the Swiss Watch Federation (FH, for short), uniting some three quarters of the industry. Two years later, as a second stage, with strong financial support from some powerful Swiss banks, the corporate trust Ébauches SA was created by the three largest movement makers - Schild SA (ASSA), Fabrique d'horlogerie de Fontainemelon (FHF), and A. Michel SA (AM).

The three basic rules that these companies set for themselves made this a unique co-operation and one of great importance. First, all three founders maintained the right to run their management as they deemed best while they agreed on setting the same prices. This removed the threat of competing against each other by cutting prices to dangerous levels. Secondly, they standardized the specifications of some of the movement parts to optimize manufacturing and lower the related costs. Finally, in December of 1928, they strongly regulated the export of unassembled movement parts (chablons) with the "convention de chablonnage" in an attempt to eliminate the threat of any of the participants selling components to foreigner companies. This did sound very promising and so by the early 1930s more than 90% of all ébauche-makers had joined this holding.

As most ébauche workshops have gathered under the virtual roof of Ébauches SA, the companies assembling and selling complete watches saw the benefits of such a move as well and so they began looking for a way to join their forces. Soon enough, in 1930, the group SSIH was established by the merger of the houses Louis Brandt, Omega and Tissot. In 1932 they were accompanied by Lemania, now enabling the group to create chronographs.

Despite all the clever co-operations between the Swiss companies, they had no chance to avoid the next crisis coming their way. Closely following the internal pricing issues of the 1920s is the financial crisis stemming from 1929. The Great Depression, of course, hindered the entire industry causing some 20,000 watch makers to lose their jobs. While uniting the majority of movement makers under Ébauches SA had been an important step, the extended managerial freedom meant that the corporate trust lost its abilities of defining a singular direction which participants could follow collectively. There was an obvious need for another organization, one with the power to overview and regulate Swiss movement making as a whole. Consequently, in 1931, the General Swiss Watch Industry AG (ASUAG) was established. It was partially funded by the Swiss Confederation with a hefty sum of 13,5 Million francs (out of the total 50 Million franc budget that was required to create ASUAG). All that money was to serve one clear intention: to create a super holding that would amalgamate and subsequently direct the industry. With its massive financial backing, ASUAG advanced accordingly. By 1932 it united several manufacturers of movement parts under its subsidiaries of FAR and FBR, responsible for lever assortments and balance wheels, respectively.

A Brief History Of ETA: THE Swiss Watch Movement Maker   feature articles
Dr. Joseph Girard and the 28-year old school teacher Urs Schild founded the ébauche factory "Dr. Girard & Schild“, the company that was renamed to Eterna in 1905

The Beginning of ETA

Missing from the participants of any of these giants was Eterna - and with this we really are getting closer to understanding how ETA SA came to be as we presently know it. Eterna was originally founded as the ébauche factory "Dr. Girard & Schild" in 1856 and was renamed to Eterna later on, in 1905. Regardless of the name changes and one heir following the other in leading the company, by the crisis of 1929, Eterna had already employed more than 800 people and produced about two million parts annually.

At the time, the firm had been managed by Theodor Schild, the founder's son. He felt great responsibility for the company his father had created, but he also had to see that Eterna was affected by the economical meltdown no less than any other company around it. Theodor saw the possible advantages the merger with ASUAG/Ébauches SA could bring in such a problematic situation, but he remained reluctant to actually join them. First of all, he wanted to make sure that his firm's freedom in decision-making remained intact after they united. Secondly, Ébauches SA - as its name suggests - was exclusively for ébauche-makers and not for watch assemblers. This meant that Eterna had to be split into two parts: one to join the holding and one to manufacture complete watches. Once he eventually came to an agreement with the super holdings, the company was split into two indeed. Eterna remained a company assembling watches while it created its new movement maker division that was called ETA SA.

As we can see, ETA could never have come to existence had it not been for the countless ups and downs of the industry and all the crises that needed urgent solutions. And despite the relatively "recent" date of 1932, when ETA was officially established, we have to note that the manufacture had been making ébauches and movements as "Dr. Girard & Schild" and then as Eterna since 1856. It is just that legally, this movement-maker facility was separated from the mother company of Eterna in 1932 and started its new life as ETA SA. Once the merger was completed, Theodor Schild retired and Rudolf Schild took the helm of ETA.

A Brief History Of ETA: THE Swiss Watch Movement Maker   feature articles
Vintage Eterna Automatic watch advertisement

The complex tasks of movement manufacturing had been split up into three large segments within ASUAG. Manufactures like FHF, Fleurier, Unitas and others were responsible for building hand-wound movements, chronographs were created by Valjoux and Venus, while ETA and some others were in the business of building automatic ones - something fairly new on the market. By 1948 ETA established its watch making school that allowed it to recruit and train craftsmen as the industry rapidly expanded during the ‘50s and early ‘60s. Furthermore, ETA had been busy developing new movements that incorporated ball-bearings in the automatic winding mechanism.

In 1948, their efforts came to fruition as they announced the Eterna-matic, the first automatic wristwatch with this innovation. This new technology proved to be so successful that a formation of five ball bearings have made up the logo of Eterna ever since. Finally, they also tested high-frequency movements and in the mid-seventies even managed to break into what would later mostly remain Zenith-territory: 36,000 vibrations per hour. Unfortunately, these models were discontinued for some startling reasons, reasons which we are just about to discover.

Rounding out the list of crises are not one, but two major downturns actually. Both stemming from the middle of the 1970s. At the time, in 1974 to be exact, the industry was at its best, producing about 84 million watches a year! Clearly, the oil- and quartz- crises could not have come at a worse time or be any more painful of a hit for the Swiss. In a nutshell, the primary issue was with relative value as, Swiss watches became horrendously expensive as a cumulative result of these two crises... more »

54 comments
mrfreaz
mrfreaz

I might be simple, but I think that if you have something that people are willing to buy, you should sell it! Supply demand where you find it!  Mr. Hayek feels he is now somehow "above' the rest of the watchmakers in his country, and refuses to sell them the movements and parts they want. He believes that hording them for himself will make him strong. Mr. Hayek is about to learn a big lesson. At this time, his company is still outnumbered by other watchmaking companies. Although he feels in a powerful position, it is not strong enough to dictate demands to companies he doesn't own. He will find that they will not just go away or beg him to buy them out, and instead, he may soon find himself in fierce competition with them. He has managed to convince the Government that it is his choice alone whether or not to supply them, so this is the choice he has made - too cease being supplier, and instead be a manufacture of finished watches. Understood, but whether or not it is the right choice remains to be seen. His former clients will find someone else happy to replace him as their main supplier, and their business will make this supplier very powerful. Mr Hayek's business will shrink, his ETA shops will sit idle, and he will beg companies to buy his parts again, but by then it will be too late. He may instead find himself begging them to buy ETA. Eventually, Swatch will be added to the many would-be monopolies that sought to crush rather than work with their rivals.

somethingnottaken
somethingnottaken

As for the problems this is causing Mark (and other independant watch brands):  that's probably the goal. To force small brands out of the market and raise barriers to entry in order to protect large established brands from new and less expensive competitors. This will probably be good for the luxury watch market, but bad for buyers of more modest means and the brands selling to them.

If prices of Swiss made movements increase as expected, I expect that non-Swiss brands will increasely move to using Asian movements (especially the Miyota 9015) - this is already evident in the market. Non-Swatch value oriented Swiss brands are going to find themselves in a tough situation. Some will fail, while others will move upmarket, or give on calling themselves Swiss (I think this is especially likely for the UK, German and US brands which are currently Swiss Made). In the interim some will no doubt turn to predominantly Asian movements which barely meet "Swiss Made" requirements; however, I think it's just a matter of time before the "Swiss Made" requirements are tightened to squeeze those movements out of the market.

If Swatch cuts off the supply of Nivarox parts, movement makers could (at least temporarily) turn to Asian made parts while still having their movements meet the "Swiss Made" requirements. Asian parts might be less accurate and less prestigious, but that probably wouldn't be a huge problem for value oriented brands. Longer term, as ETA reduces the supply of movements, Sellita and Soprod will be able to increase both sales and prices. I expect they'll invest some of this money into developing in house manufacturing capability for parts previously bought from Nivarox.

wristwatchdude
wristwatchdude

Overall this is a great article, well researched and interesting! Thank you! 

I am a huge fan of Nicolas Hayek and what he did for Swiss watches. I also know that it can be very difficult to research who did what in the past, so that is why I can understand why the contributions of some other big names of the Swiss watch industry were omitted in this article; I am thinking for example about Ernst Thomke who was one of the key players in the Swiss watch world (incl. ETA, Swatch,etc.) in the 1970s and 1980s and only left what was to become Swatch Group in the early 1990s.

teapack
teapack

Thank you for writing this. I am really interested in history of swiss watch manufacturing, but online sources are limited and Ariel warned me no to read biased books from single watchmakers. So we all owe you big THANKS for doing all the research. And please, do not stop. with this one. We need more articles like this.

williamslerner
williamslerner

Excellent article!!!! Bravo David, and you have given me writer's block.......

David  Bredan
David Bredan

Wow! Thank you all for your fantastic feedback! I must say that I am genuinely motivated by your comments and that I hope I can bring you several other, similarly detailed articles over time. Thank you all once again!

Thanatos42
Thanatos42

There was no monopoly.  It only seemed so because everyone needed something manufactured in Switzerland so they could write Swiss Made and charge too much money for the final product.

It's a bit like the Côtes de Genève and COSC certification. The industry is all happy to have the government regulate these marketing terms, but they are unhappy about them making it possible to use them for anyone but the incumbents.

Shameful.

If the moneybags and thought leaders would just buy watches with Seiko movements, Hayek would have no problem selling ETA movements to all comers.

GROGADOG
GROGADOG

So . . . did they not used to have antitrust laws in Switzerland or what? How did all of this stuff happen?

bluzer
bluzer

I'd read most of the story in bits and pieces over the years. Assembling it all here with such great perspective makes it a great resource for all horology fans.

Chapeau!!!

DG Cayse
DG Cayse

The chart on pg. 2 showing gross sales vs. net profit is what makes shareholders throw chairs at annual meetings (yes, it does happen).

Obviously the effects of interference in the market by an outside entity - the Swiss Gov't.

One thing not mentioned, in this otherwise excellent overview, is the emergence of the Asian players into the game. It is wise to consider their growing importance in the caliber (and all parts) manufacturing scheme.

Thanks for the article Mr. Bredan.

AnthonySmith2
AnthonySmith2

Very informative, there is a long path ahead for the watch industry with plenty to gain for us the consumer along the way. Personally, I can't wait to see new innovations in the watch industry. George Daniels was right all along!!

LapYoda
LapYoda

Excellent review article, well-researched and balanced.  I learned a lot.  Thanks for writing it!

aleximd2000
aleximd2000

And btw I like your article David, you are very sympathetic man.Keep it on

aleximd2000
aleximd2000

I think already the price leash was lost and the price race begun. i am very interested in seeing the modeling of the future in house movements. I totally agree with Hayek( hey man if you hear me make me a discount) but with the antitrust regulation they are their own victims. 

the biggest winners in my oppinion will be comapanies like JlC Rolex zenith and so on who had enough money and developed their own calibers so the transition will be smoother, but if you can see as in case of them the prices are not so prohibitive. I am angry on TAG because their new prices are very harsh.

And agree very much in what Hayek senior said that everybody in the watch industry is a lier ( not referring to you Mark of course). About those CEO's who declared that we produce everything in-house, and even PP is buying products from Dubois Depraz for ex.

Cheers watch nerds   alex

MarkCarson
MarkCarson

Thanks for the detailed post. Really great David.

If Swatch owned Intel, then all of the PC makers would be told to make their own chips. Think how ridiculous that would be. 

I understand Hayek (both Sr. and Jr.) not wanting to be told what to do. But that is precisely what they told the entire Swiss watch industry in the 80s. Only to reverse position once they had consolidated everything. I'm not saying these were bad decisions for Swatch. But it made strategic planning difficult for independent Swiss brands.

Near term, the recent decisions of Swatch and COMCO will raise prices on all "Industrial" (commodity) Swiss mechanical movements (in fact it already has) that independent brands have to buy. Companies such as Sellita and Soprod will do well by filling the void. But short term, they can only increase production so much each year.

For better or worse, Japanese, and especially Chinese, movements don't demand the same respect which effects positioning of brands based on their decision to use, or not use, a Swiss movement. Try selling a $1000 USD watch using a Chinese clone of an ETA 2824-2 movement.

Bigger non-Swatch brands are increasingly making their own movements. But that certainly does not reduce near term costs. So the net effect is that for the next 5 - 10 years, expect to see the price of watches with Swiss mechanical movements to only raise. In fact, I will have to raise the prices of my watches by $200 for 2014 because of the almost tripling of movement costs over the last 3 years.

rickwhittington
rickwhittington

I actually have a vintage unitas watch with unitas on the dia..

armenta
armenta

Now this is the type of article that I come to ablogtowatch for! Like the article states multiple times, research and development  over expediency and marketing. I love the long form conversation. The mainstream world largely can't focus on anything longer than a few moments. The journey for this industry has not been a short one, why should the article thus be short. Thank you David, for a taking us on a journey, a true testament to content discovery. Save the marketing speak for the short-of-attention types, none of which are here...... at least I hope.

kevinwcs
kevinwcs

Great article, not exactly brief but really, really informative. Thanks.

GradyPhilpott
GradyPhilpott

@mrfreaz

It may come as a surprise to some that Nicolas Hayek, the man who almost single-handedly saved the Swiss watch industry, has been deceased for a few years and that his stated purpose for limiting access to ETA movements was to strengthen the Swiss watch industry by encouraging watch brands to develop in-house movements and to encourage competing movement makers to step up quality and production to fill the void left by ETA.

Mr. Hayek was also troubled by the fact that ETA movements were finding their way into organized criminal activities, which is to say they were being used in counterfeit watches.


I think Mr. Hayek was perfectly correct in his motives for limiting access to ETA, because what he hoped would happen has indeed come true.  Watch companies that once depended solely on ETA now produce their own movements or have them in development and Sellita, for one, is indeed stepping up to the plate, so to speak, to fill the void.

MarkCarson
MarkCarson

@mrfreaz With the growth that the Swatch group has seen over the last decade, they will be happy to only have ETA supply movements to Swatch brands and not having to worry about allocating some of their production to outside brands (LVMH and Richemont in particulare) that they compete with in a big way. The ruling don't prohibit Swatch from selling to other brands. Only that their obligation to do so will decrease in the coming years. They are free to supply movements to other brands that they "like".

What Hayek Sr (now deceased) said was that other brands should make their own movements. Yes, he was tired of being the engine and parts supplier to other brands who would then name their purchased ETA calibers as their own. But on the other hand, what if  Ford supplied engines to GM and Chrysler and Honda and Toyota and then demand grew but they found that the government mandated that they keep supplying engines to the competitors at existing volumes instead of letting Ford grow their business. Especially if Dodge Charger then said "Powered by a Mopar Hemi 351" when in fact it was a Ford Windsor 351 motor.

I really don't want to defend Swatch, but this is not a black and white as we might want it to be.

The winners in this are Sellita and Soprod (among others) who are backlogged currently filling orders for  ETA clones to companies who are finding it hard to get ETA movements. And yes, it has spurred brands to increasingly make their own calibers. But that may be a mixed blessing for reasons too long to list here.

Cheers.

stickymud
stickymud

@David Bredan Man, You really did an amazing job ! I'm relatively new to the horology world, I began getting interested about it something like a year ago and since the, I can't help myself learning horology history and technics about watches with articles like yours.

I'm learning the most as I can before getting my first mechanical watch to get the one that fits my desires (historical, technical and aesthetics) to have THE ONE I'm not going to get tired of !

I'm also getting better at my english with your articles ! It's another level than at school and on certain websites, keep it going !

MarkCarson
MarkCarson

@Thanatos42 Until recently, the movements in the Seiko Monsters for example, did not hack (stop seconds) or hand wind. The latest generation of Seiko movements (not talking Grand Seikos here) are much improved and have better accuracy. But before that one could easily argue that an ETA movement was a better product. Whether an ETA movement is a good value is something each consumer has to decide for themselves. The other factor is the increased valuation of the Swiss Franc against other currencies (like the U.S. dollar) which makes Swiss anything costly. Cheers.

MarkCarson
MarkCarson

@GROGADOG Seems that the Swiss government and Swiss industry have always had a cozy arrangement. What is good for the Swiss businesses is good for the Swiss economy so the politicians play ball. They figure their competition was outside of Switzerland more than within. I know, that's a strange concept in the U.S.

MarkCarson
MarkCarson

@aleximd2000 Frederique Constant has a watch with an in-house movement which retails for $2595 USD. That seems to be about as low as you find these days for a Manufacture movement in a Swiss watch. While I applaud FC for this movement and price point, if the same watch was based on a ETA (or clone) movement, it would no doubt sell for under $2000. Brands like TAG Heuer are only going up-market with their in-house movement watches (and overall I suspect). Looks like "Swiss Watch" is on its way to being "Luxury Watch" in all cases (for mechanicals  that is - don't want to get into Swatch). 

I agree that companies like Zenith, JLC, GP and Rolex  are less effected. But none of them really sell in the moderately priced segment (under $5000 USD).

Cheers.

Thanatos42
Thanatos42

@MarkCarson So, back in the day, Intel moved a lot of motherboards.  They didn't want to be in that business because the margins and ROI were lower.  They did it because adoption of their newest CPUs and core logic chipsets were too slow.  Essentially, they were forcing their clients to be more competitive by creating a competitor.  They were happy to abandon the market once matter improved.

The big difference between Intel and ETA is that Intel gets to charge what it wants for the CPU and core logic chips, subject to market forces.  Swatch cannot improve margins on the ETA movements because the regulators know this will cripple Swatch's competitors.

PC Makers have thin margins because the component manufacturers keep all of the profits.  Except for Apple, of course.  They are the Cartier of the PC business.  If PC's were easy to make from sand and plastic, we would see a lot more vertical integration.

LapYoda
LapYoda

@MarkCarson So you're saying that if we want to save money on one of those Ka La watches, we need to act now? :)

MarkCarson
MarkCarson

@GradyPhilpott So you really think Hayek Sr. was only looking out for the best long term interests of his competitors? I think you, ahem, may have been inadvertently drinking the Swatch corporate Kool-Aid. Yes, I know Hayek said such stuff - for public consumption that is.

Sellita is interesting in that they were a contracted assembler for Swatch before becoming a full-on source of cloned ETA movements. So they have a more intertwined history than you might otherwise expect from what looks like an outright movement competitor. And at this point I think Sellita still gets their hairsprings from Nivarox (Swatch owned). And from what I hear, the order backlog with Sellita is over 2 years. So its a good time to be Sellita.

Cheers.

s_design
s_design

@MarkCarson @mrfreaz 

Comparison with car companies that what if one company was forced to make engines for all other companies.. this comparison is also made in the article, I find it invalid. 

Real comparison would be if GM had bought all smaller companies that made engines and parts to supply to all car makers, then become a monopoly in making engines (when it served their purpose) but later decided that they will stop supplying engines and tell everyone to go make their own. In order to run the competition out of business and do so under the guise of making others to innovate and the industry to develop.

This decision seems done only on the bases of blind greed by the swatch group who wants to have a leg up on the competition in the short run. But in the long run will be their down fall.

mrfreaz
mrfreaz

@MarkCarson @mrfreaz  If supply for parts is that scarce, then I guess Swatch may have a valid argument in limiting parts to outsiders. If demand is so strong, this is a good thing for everyone. I wonder though, if that may be due to all the choices in brands on the market today? I wonder if overall demand would suffer if ETA movements were not available in the many non-Swatch brands that a customer may prefer? For example, I would buy a Movado but probably not a Hamilton, even with the same movement inside.


Using the car analogy, what if Dodge wants to build their own engines, but pistons are difficult to make and Ford has the only piston factory in the country? Isn't that the dilemma facing Selitta now regarding mainsprings and balances?

somethingnottaken
somethingnottaken

@MarkCarson @mrfreaz To expand on this monopolies eventually end up being heavily regulated by the government, and this reduces their freedom to profit from innovation - Swatch may not mind (too much) being forced to sell older movements to their competitors, but how about being forced to sell new and innovative movements that they want to use as a competitive advantage? For example:  the co-axial and non-magnetic movements ETA are making for Omega.


To avoid this, ETA/Swatch need to have competiting movement makers. Cutting off the supply of ETA movements allowed this to happen. First by creating a market Sellita, Soprod, etc.. Second by "encouraging" Richmont, LVMH and a handful of smaller companies (Nomos, Fredrique Constant, etc.) to make low and mid range movements in house (if I recall correctly, the high price, high complication, haute-horology movements have always been made in house or commisioned from a handful of specialty manufacturers).


As Mark pointed out, the winners are competing movement vendors:  Sellita, Soprod, Miyota, Seiko, etc.. The losers are small watch brands (like Mark's) who are finding it harder and more expensive to obtain Swiss movements.

Thanatos42
Thanatos42

@MarkCarsonTotally fair.  I was generally thinking of the GS movements and non-ETA 7750 clones. I don't know that you can even buy GS movements from Seiko in bulk.

But the point remains, nobody selling luxury watches will use a movement that prevents them from writing Swiss Made on the dial.  That this market niche exists at all is a bit of a miracle.  I mean, these watches keep terrible time, after all.  Let's be serious.  It's jewelry with spinning parts in it.  Why do we have silly regulations in a far away country about where the spinning bits need to be made?  It's all historical accident.

There's nothing to prevent a non-Swiss company to manufacture and sell a luxury watch with non-Swiss movements except the perception by the target market that such things must say Swiss Made and have a Geneva Seal.  A. Lange & Söhne is a notable exception.
The other argument to be made here is that the Swiss Made rules are irrelevant because nobody in their right mind would invest in developing mechanical watch movements.  The market is completely saturated and the technology is severely outmoded.  Nobody will pay to develop competing hairspring technology, so most of the industry will just dry up leaving the whole pie for the big players.  Is that bad for Switzerland?  I don't know that it is.

aleximd2000
aleximd2000

@MarkCarson @aleximd2000 I agree with u my dear virtual friend

But 2 things for that -the market will level this situation I am sure and the second is that in the near future more and more companies will develop calibers and to penetrate the market slice they will have to bring down the prices. I think this is going to be. And if not we have to buy second hand or from bankrupt guys! Anyway I wait for the oriental companies for developing a very reliable caliber and to repeat the story with eta. All the best   alex

MarkCarson
MarkCarson

@Thanatos42 Being a computer (software) guy for about 30 years, I have a somewhat different idea of Intels motives in the motherboard business. But that discussion would go too far off topic. Cheers.

MarkCarson
MarkCarson

@LapYoda Yes. But wait until Friday - that is when I will announce "Black Friday" / "Holiday" discounts. January 1st prices will (sadly) have to go up. I'm not real happy about it but I really have no choice. 

I will have a few watches available at the current prices after Jan 1st  but limited to stock on hand.

GradyPhilpott
GradyPhilpott

@MarkCarson @GradyPhilpott  I think you know nothing of the man who could have made a great deal of money brokering the sale of the Swiss watch industry to the Japanese, which is what would have happened, if Mr. Hayek had simply done the job he was hired to do.

However, Mr. Hayek understood what watchmaking meant to the Swiss and what a travesty it would have been to sell 400 years of Swiss history to the Japanese.

So, hearing of new technology that would make it possible to make watches more cheaply in Switzerland, Mr. Hayek formed the Swatch company and of course you should know the rest of the story.

Yes, Nicolas Hayek became a very wealthy man in venture, but Mr. Hayek was thinking of more than his personal well-being and were it not for his entrepreneurial spirit and skill and were it not for his respect for the Swiss watch industry, he could have let everything founder except his own little company that sold watches faster than he could make them.

So, because Mr. Hayek saw the opportunity to do more, that is why he is credited with saving the Swiss watch industry and why so many watch names now call the Swatch Group home.

You may call me a Swatch Kool-Aid drinker if you wish, but the truth is that I'm just a guy who is fascinated by time, timekeeping, history, and who collects Rolex watches and some others, but not one Swatch Group watch.

I eventually will purchase a Speedy Pro Moon Watch, but that will probably the be the only modern Swatch Group watch I will ever own.

You, Mr. Carson, sound like a typical cynic who believes that all business is evil and that the bigger the industry, the greater the evil.

My research into the life and motives of Nicolas Hayek, doesn't reveal a saint by any means, but it is abundantly clear that he spent many years of his life working for the greater good with regard to Switzerland and their watch business and actually history bears this out, regardless of his run-ins with the Swiss government and the fear he induced in those watch companies who were just "playing dress-up," as he once described the minimal activities of some watch companies.

MarkCarson
MarkCarson

@s_design I agree - Swatch's motives are far from pure. They are hailed as the savior of the Swiss watch industry which may be true overall in result. But I think it was done for the benefit of (what became) Swatch more so than to aid their Swiss compatriots/competitors. I doubt Nicholas Hayek sat down and said to himself, "If I don't do something, Rolex might go under."

MarkCarson
MarkCarson

@somethingnottaken So far as I know, COMCO (Swiss govt competition org) has mandated supplies to existing customers at decreasing levels based on current deliveries over the coming years. I take this to mean existing movement designs. I have never heard that newly developed movements, which are not in use by brands outside of Swatch, are in any way required to be supplied to outside companies. For example the Power 80 used by Tissot may not be required by COMCO to be available to others.

I only mention this as it impacts statements about "innovation". Really we are talking about movements whose patents have expired and that can be legally cloned (Sellita) or where alternate designs of similar dimensions (like the Sopord A10) exist to fill the void. I don't see the latest ruling from COMCO having an impact either way on Swatch's ability to innovate and keep such innovations for themselves.

Co-Axial is another ball of wax I suspect as George Daniels licensed it to Omega. Not sure how free even Swatch is to use that technology if not produced in Omega movements and/or watches.

And guys like me are so far off the radar for Swatch that we will find new ETA movements in quantities we need from distributors or else in the coming years, we too will be using Sellita, Soprod, etc. 

Thanks for the the insightful comments. Cheers.

mrfreaz
mrfreaz

@somethingnottaken @MarkCarson @mrfreaz  I think you are right that Swatch wants to profit more from their innovations. I think we agree that Swatch lately seems more interested in competing and less in "sharing". Perhaps the Swiss are becoming more American in their thinking, moving away from their historically more "collaborative" style!

However, I'm am concerned most with the impact to the smaller companies this change in direction makes. The problem I have with Mr. Hayek (I use Jr. and Sr. interchangeably since they follow the same philosophy) is the way in which he wants to suddenly withdraw ETA as a supplier, when it makes something like 80% of the market's movements. The companies dependent upon ETA need movements in order to sell watches, didn't find that a fair position to take. It took governmental intervention to correct the situation.

aleximd2000
aleximd2000

@MarkCarson @aleximd2000 I don't want to see that moment when a chinese something will click in my wristwatch. If that happens I will give up my collection on ebay and that's it. Until then my opinion is that china the artificial giant will fall as a prisoner of his own economical politics.

MarkCarson
MarkCarson

@aleximd2000 Hi Alex. Also remember that besides dictating production/sales levels, the COMCO ruling on Swatch/ETA has pricing controls. So I think Swatch wants to raise prices as much as limit production. They seem to be more interested in 'not selling to anyone we don't want to' than cutting production to the companies they do 'like'. 

You are right that in long term prices will stabilize. But I think that will take years and it will still be at more than current prices (which are already triple from 3 years ago). Companies like Sellita are the winners in this I think. 

I also agree with you that the Asian movement makers may surprise people in the years to come. For instance, if a Chinese movement maker adopted Japanese quality controls (and lost their 'cheaper is better' mentality) and then applied hand labor (at their modest labor rates), the whole 'hand finishing'  center of gravity could shift from Switzerland to China. Almost spooky to think about...

Cheers

Thanatos42
Thanatos42

@MarkCarson

I am also old.

I was actually talking about the Pentium and Pentium Pro stuff, but I see they are doing it again.

mrfreaz
mrfreaz

@GradyPhilpott @MarkCarson  I don't dispute his great accomplishments in watchmaking history. It is with the abandonment of earlier principles, now being carried out by his son, where I think he has made a bad and very selfish detour. I do not think it realistic nor desirable for all watchmakers become manufactures. For one thing, it would result in some very expensive watches. While stopping counterfeits is a good thing, restricting ETA movements across the board also hurts legitimate companies as well.

MarkCarson
MarkCarson

@mrfreaz Agree. Imagine how hard parts will be to come by in a world where every brand makes their own movements. And the life of watchmakers (repairers) becomes that much harder from technology, documentation, and logistical standpoints. So watch servicing will cost more, take longer and have a lower success rate overall. While the expense and time may not be a big deal for owners of  Patek Phillipe, MB&F, etc. it will surely impact watches that mere mortals can buy. 

I don't fully understand the counterfeit issue. For instance why would a high end fake of a Rolex use an ETA movement? The movement is wrong for the watch anyway so why not just use a Seagull or Miyota? The only scenario that makes sense to me is using an ETA movement in a fake Swatch brand watch. But is there really a market for fake Hamilton and Tissot watches??? Putting an ETA movement in a fake Brequet is ree-dick-you-luss. Aren't Rolex and AP Royal Oaks the most counterfeited watches? (both of which are not Swatch brands).

Counterfeit movements are a completely different issue that involves parts and where they are made, etc.

emenezes
emenezes

@MarkCarson @mrfreaz Perhaps the way forward is the one pointed by Chr. Ward.  They stated that they intend to make their new in-house movement available to other watch makers.  Perhaps instead of one dominating maker of calibers, there'll be several.  And, about service, perhaps Chr. Ward got it right and is bringing industry practices to the 21st century by servicing their watches themselves.  If new industry practices would make things difficult for those businesses which resist changes, the latter better change as well, lest they end up closing shop.

mrfreaz
mrfreaz

@MarkCarson @mrfreaz  Yes, Mark, service is another very important practical consideration you bring up. I'm not anti-manufacture, I own a Frederique Constant Maxime and a Jean Richard, which are considered to be on the "reasonable" end of the scale. Nice watches, but the Maxime, which must be a popular model, has been in Switzerland for service going on 6 months. Mr. Stas just got involved to try to get it returned! So it definitely complicates things.

MarkCarson
MarkCarson

@mrfreaz I'm also not manufacture movement adverse. But even if the price of say two $2K USD watches were the same and one has an ETA and other an in-house movement in very low production and also newly produced. I would be much more nervous about parts, service and reliability with the IHC. So I understand the "status/snob" appeal of an IHC, but at some price points I think it is over-rated. But like it or not the landscape is changing. 

I would like to see a truly modern movement created by a movement company who is more than willing to sell them to everyone at a reasonable price point (starting at no more than $350). 4Hz, zero reset seconds hand with the minute hand snapping to a minute during hacking, silicon balance components for magnetic resistance, power reserve indicator (yes even on an automatic), discreet day/night indicator so you don't set the date advance 12 hours off. And a version with GMT/24 hand as an option. Column wheel chronograph to grow from the base movement. The movement diameter could be larger than 11.5 lignes. I'm thinking more like 34 mm (vice roughly 26 mm for 11.5 lignes) which will allow for date wheels to be further from the center pinion plus more room for larger barrels. But keep the thickness to 5mm or less for 3 hand/GMT and no more than 6.5 mm for the chronograph. Not asking for much eh? 

Anyone have a couple of million laying around and REALLY want to change the watch industry? Then open source the design (patent free) from day one to encourage multiple sources of all the parts involved. Ah...dreaming...

Trackbacks

  1. […] believe one must look at other industries and extrapolate the pros and cons to the watch industry. (A Brief History Of ETA: THE Swiss Watch Movement Maker – Page 3 of 3 | aBlogtoWatch) There is no question that the watch industry will forever be dominated by a few huge companies […]

  2. […] the more you'll understand movements. Here are some good links as a start : How a Watch Works A Brief History Of ETA: THE Swiss Watch Movement Maker | aBlogtoWatch Smoke and Mirrors – part 1 (ETA grades explained) Smoke and Mirrors – part 2 (ETA […]