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A Brief History Of ETA: THE Swiss Watch Movement Maker

A Brief History Of ETA: THE Swiss Watch Movement Maker Featured Articles

Three proprietary hairspring designs: Omega’s Si14 by Nivarox-FAR, The Parachrom spring by Rolex, and the Silinvar Balance Spring by Patek Philippe

It seems then that everything was perfect in ETA-world. However… it was this extreme extent of centralization that soon became one of the greatest problems for Nicolas Hayek and the group itself. While this excessive re-structuring undoubtedly helped them to recover and gain momentum, ETA’s significance within the industry soon proved to be much, much too large – and by the time they realized this, it was already too late. You’d have every reason to think that such a dominant position is a good thing, but it actually is something against which the Swatch Group has been fighting for more than a decade now. Here’s why.

A Reason to Reduce Supply

As the industry was growing, more and more brands were “revived” or created from scratch and – quite obviously – they all needed movements to equip their watches with. So why didn’t newcomers develop their own movements in the first place? Firstly, because ETA was there to supply high-quality, reliable, easily customizable movements any time of the day. Secondly, the problem is with cost and time. Developing a movement from scratch can take five years or more and might require an investment of up to 10 million francs. It requires a more reasonable investment to come up with a design, create the case, the dial, the marketing campaign and buy a finished movement from ETA, than to spend years without selling anything only to start your brand with a proprietary movement. Last but not least, an in-house movement all by itself will never be a guarantee for success. If any one of the aforementioned factors are flawed (the design, the marketing, the distribution) you can boast about your 10 million franc movement, but the watch will never sell.

What you do instead is buy tried and proven ébauches or finished movements from ETA and slightly modify them to suit your requirements. For those not familiar with them, the most ubiquitous ETA movements are the hand-wound 6497, the automatic 2824-2, the automatic chronograph 2894-2 (a modular chronograph, produced since 1996) and the 7750 (an automatic, integrated cam/lever chronograph produced since 1973). These all have several different variations and there are several other calibers as well, but the history of the movements deserves a dedicated article. What we must mention though is that ETA calibers come in four different “grades” that correspond to different levels of finish, quality of execution and – unsurprisingly – different prices as well. Standard is the cheap and cheerful solution with an accuracy of +/- 12 seconds per day and 30 seconds maximum positional variation. Elaboré is a step up with a performance of +/- 7 and 20 seconds in those fields. Top Grade has the finest finish and higher quality components overall than the previous two grades with an accuracy of 4 and 10 seconds. Finally, there is the Chronometer grade which is a Top Grade movement with COSC certification. This clearly shows just how superb ETA’s selection is and how well-catered to external brands are when it comes to choosing what movement to use.

So what’s the problem? The problem for ETA and Swatch was that they simply had to sell movements to any Swiss watch company regardless if it belonged to the Swatch group, was an established manufacture with centuries of history, or was a new fashion brand created two months ago. Switzerland’s Competition Commission (or Comco, as it is frequently called) ruled that since ETA (and Nivarox-FAR) were in a monopoly position, they had no freedom in deciding who they would supply with ébauches, movements and components and who they would not.

The authorities’ reasoning is that there hardly were any alternatives to ETA and if ETA stopped supplying parts and movements to others, then those affected would be practically out of business because they have nowhere else to go. All this is more or less true. In two stages ETA had absorbed a vast number of smaller and larger workshops and companies. Firstly when it took over all manufactures within ASUAG and secondly when it underwent Swatch’s expansion craze. In the eyes of the authorities, ETA was the movement supplier in Switzerland. Hence, if they decided not to sell to external companies they risked anti-trust violations with stratospheric fines. The Swatch Group, ETA and Nicolas Hayek became the prisoner of the industry that would never have survived without them.

A Brief History Of ETA: THE Swiss Watch Movement Maker Featured Articles

A customized ETA 2824-2 by Christopher Ward. Source: christopherward.co.uk

All this was not so much of a problem for Swatch during the early ’90s when there were fewer brands to cater to. But as Mr. Hayek put it, by the early 2000s ETA became a supermarket for watch brands. Just about anyone could have created a brand and ETA was bound to sell movements to them. To give you an example: if you wanted to create your very own watch company but preferred to start out without investing millions into manufacturing, what you did is go to an établisseur company (much like an OEM manufacturer, these are firms that purchase movements or ébauches in huge volumes from ETA and will build watches for just about anyone), you tell them what design you want, they’ll make it and print your name on the dial. ETA, as I just mentioned, was unable to decide which company they would or would not supply with movements and so they had to sell blanks and complete movements to these établisseurs too. By 2001 Nicolas Hayek had had enough of this. His, and hence the Swatch Group’s view on the situation is as follows.

What he saw is that the Group spent billions of francs on expanding ETA, improving its manufacturing abilities and developing better movements, only to be bound to sell these to big and small brands alike who would then directly compete with Swatch group brands. As the New York Times quotes Nick Hayek, CEO of Swatch Group and son of Nicolas Hayek: “We are in a ridiculous situation that would be like having BMW supply all the engines for Audi and Mercedes. In no other industry do you have one company supply all the critical parts to the people who then compete directly with it.” To top it all off, Swatch was not allowed to raise its prices without Swiss authorities immediately investigating the move. Therefore not only was Swatch bound to sell movements but they were prohibited to raise profit margins either (ETA did increase its prices a few times over the years but the raise was always strictly moderated by the authorities).

What was told by many was perfectly summarized by Jean-Claude Biver (Chairman of Hublot) for the NYT: “Thanks to Swatch, there is no other industry with such cheap entry costs.” Well, Nicolas Hayek wanted this to be over once and for all. To be fair, we have to note that Hayek Sr. did began warning all brands to start investing into their own manufacturing facilities as early as the end of the 1980s. From 2002 however, he was determined to make ETA perform serious cuts for all three of its main profiles: manufacturing ébauches, movements and key components.

It all began with ébauches in 2002. A plausible reason for this is that the ébauches-issue starkly signified just what was driving Nicolas Hayek to be so furious. These semi-assembled movements were purchased by établisseurs (that I previously mentioned) as well as external watch brands and were often built into movements that would later on go into high-quality counterfeit watches, or were completed by Swiss brands who would then communicate that these were their proprietary, in-house movements. Needless to say, none of these trends made Hayek or ETA particularly happy. What is more is that ébauches accounted for a microscopic amount of profit of the Swatch Group. Hence, in August 2002, the Group announced that it wants to drastically reduce the amount of supplied ébauches to external companies and to completely stop such operations by 2005. This, of course, caused major upheaval in the industry and Comco immediately intervened. To keep a long story short, ETA agreed to keep on supplying ébauches until 2008 without reducing quantities and to not stop altogether before 2011.

Then it was the case of supplying complete movements (made by ETA) and components (from Nivarox-FAR). In 2011, Swatch sought Comco’s permission to decrease the number of movements and components it sold to competitors. It is important to bear in mind that the availability of movements and that of parts are taken into different consideration by Comco. We already mentioned just how much of a task it is for small and major brands alike to develop their own movements, but creating the infrastructure that allows one to produce key components in-house is even more demanding than that. Most patents have long expired on many ETA movements so it’s relatively easy to clone them (like Sellita did when designing several of its most popular calibers), but it is borderline impossible to gain access to the know-how that allows Nivarox-FAR or Rolex to make their own springs. This resulted in two different rulings by the competition authority.

A Brief History Of ETA: THE Swiss Watch Movement Maker Featured Articles

I created a montage from the official charts for the Sellita SW300 (on the left) and the ETA 2892 on which it is based on (to the right). For the ultimate watch nerdery experience compare the base assemblies of the two and see how remarkably similar they are.

It allowed the Group to cut back on the supplies of completed movements. And although nine companies (including Sellita, Frédérique Constant, Louis Érard and others) separately challenged the ruling in court, in December, 2011 the Federal Administrative Court rejected their appeal against the Federal Competition Commission’s (Comco) decision. This practically allowed Swatch to reduce the amount of supplied complete movements by the end of 2012 to 85% of 2010 levels.

As Watchtime.com reports, “The reduction was extended through 2013. ComCo announced on July 12 [2013] another 10-percentage-point reduction in 2014, bringing the amount to 75 percent of the 2010 quantities. Having said that, authorities were not so allowing when it came to Nivarox-FAR cutting back on assortment supplies (such as levers and pallets, balance wheels and springs, escape wheels, etc). They ruled that it would be ‘premature’ to allow them to withhold deliveries of such parts to non-Swatch companies.” As told by Watchtime, “In 2011, it [the Competition Commission) allowed provisional cuts in assortments of five percent of 2010 quantities, which it extended for 2012 and 2013. Those cuts apply until the end of 2013, ComCo said. It said nothing about 2014, presumably supplies of assortments will return to 2010 levels.”

To try and make sense of all this bureaucracy let’s see what the reactions were within the industry. Essentially, there are two very different approaches to this issue. Some say that what is happening now might (and as they say, most likely will) eventually result in a crisis that is of similar significance to the quartz crisis. Their reasoning is that if small brands will not be able to receive movements from ETA (and more importantly hairsprings and other indispensable components from Nivarox), then these brands will simply “cease to exist.” Others say that in the long run, this will serve the industry by eliminating those who have exploited it by relying on the comfort of its infrastructure, purposefully avoiding making any serious investments and spending on advertising and marketing instead.

Surely, not everyone is able to make a 5-10 million franc investment, but then again the Group’s intentions had been made clear long ago. Politics aside, the actual managerial/strategical reactions are as diverse as the brands in the Swiss watch industry themselves. Several small and large companies have decided to start developing their own movements with more or less success. These brands often work together. Some belong to the same luxury-group and so the group’s management orders one brand in the portfolio to “help” another. We will also see some independent brands unite their forces to share the related costs while others will look for other major suppliers such as Sellita, Soprod, Vaucher Manufacture or try and purchase movements from watch brands who make their own (like Zenith, Jaeger-LeCoultre, Girard-Perregaux, etc). Finally, there is a mixture of these realized through obtaining a solid base movement and modifying that to suit unique needs with the use of different modules from Dubois-Depraz (read about Ariel’s visit to the manufacture here), Vaucher Manufacture, Fleuier (and here’s my visit to the VMF manufacture) and others.

ETA Today

In conclusion, we can say that the late Nicolas Hayek wanted to give the Swatch Group the right to decide whom it would or would not supply with movements and components. He believed that this would serve the long-term interest of his group and the entire industry as well. He articulated his intentions (that he wanted to quit selling everyone everything) many times and he advised brands to start focusing on manufacturing their own parts and calibers instead of financing marketing campaigns and ambassadors.

Having said that, not everyone would be out of the ETA “circle of trust.” As Watchtime magazine quotes him in its 2010 August issue: “We will keep our promise to sell movements to our traditional watchmaker clients. But the development of the industry in the wrong direction over the last few years forced us to react now against delivery to all others.” This means that the Group will continue selling parts to several external companies (a majority of those that have invested into making their own movements will receive supplies in the future, such as Patek Philippe will continue to receive hairsprings from Nivarox and Rolex’s Tudor will still get movements from ETA). But the Group will not be selling to everyone and anyone from now on.

A Brief History Of ETA: THE Swiss Watch Movement Maker Featured Articles

One of the alternative solutions is the use of movement modules. Pictured is the VMF5000, a perpetual calendar module by Vaucher Manufacture Fleurier. Looks fantastic!

I feel that a primary reason for the deafening outcry we have been hearing from the industry is to be found in the level of comfort it enjoyed for the last 25-30 years. A great number of non-Swatch brands relied exclusively on ETA/Nivarox without seriously investing into their independence. However, what used to appear as nothing more than an improbable turn of events, suddenly (in such a technologically sophisticated industry 1-3 years is “sudden”) became harsh reality.

Affected brands will have to leave the well-worn path of constantly relying on a single external supplier and go down either one of the following two routes. The first option for them is to work together to create new matrices of companies in order to re-allocate the responsibilities linked to the supply of movements and different components. The second option for each is to fight on their own and invest extremely heavily into their own manufacturing capabilities – but this will cost them an even greater amount of resources and time.

Further, former suppliers to ETA such as Sellita are proving extremely capable in the mass production of ETA movement clones. Because patent protection no longer applies, anyone with the industrial skill can technically copy any of the older ETA movements whose patent rights have expired. So while it isn’t clear whether Sellita (also Swiss) and companies like it will innovate, they should be able to meet at least a large chunk of the demand for ETA movement clones.

Having said all that, I still believe that this will not be yet another end for the industry. On the contrary. Everything is given to make for a future that is more sustainable and that is with more genuine inner values. I am greatly excited to see what the next 5-10 years will bring because the present situation will inevitably force luxury groups, major and minor companies, high-end and more fashion-oriented brands alike to either invest into technology and develop their own movements and parts or purchase from new companies who have done it for them. It will force the industry to think more. With ETA out of the equation I am eager to see what the coming years will bring us on the level of mass-produced movements that go into luxury watches. This is not about ETA anymore, it is about an entire industry. And I feel that – in part – is what Nicolas Hayek wanted to achieve.

Since the 1856 establishment of its origins as “Dr. Girard & Schild,” ETA has fused with a nearly infinite amount of smaller and larger Swiss manufactures. This unique past allowed the company to obtain the priceless know-how and experience of these participants and transform them into a group which was ultimately responsible for saving and revitalizing the Swiss watch industry. Despite the several key roles it played during the 1900s, for the coming years it is destined to give more and more room for others to develop and to ultimately create a more versatile world of watch making. There are several unique watch manufacturers with great heritage and tradition, but if anything, ETA SA has a history of dizzying heights and drops, flecked with great success stories and some of the most severe crises of the 20th century.

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Comments

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  • Robbie82

    Great article!

  • stickymud

    Uber great article !
    I have learnt a lot in a short time with it !
    I’m positively surprised of the history of ETA, they have been the good guys of the watch world in fact :p
    I can see Nicolas Hayek in the corner of a dark room, hands crossed in his sofa and a big Cuban cigar saying to every brand they’ve been supplying : “Watcha gonna do now ?” in a mafiosi way.
    Much respect to that brand, and a lot of thanks for the article !

  • Michael Clerizo

    Excellent. Thank you, David.

  • Vectis

    Thanks David for such an in depth ,well researched article.

  • kevinwcs

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

  • 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, I felt 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.

  • rickwhittington

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

  • 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 decision of Swatch and COMCO will raise prices on all “Industrial” (commodity) Swiss mechanical movements (in fact it already has) that independent brand 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 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 in 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.

  • 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

  • aleximd2000

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

  • LapYoda

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

  • 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? 🙂

  • 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.

  • 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.

  • 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!!

  • 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.

  • 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!!!

  • GROGADOG

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

  • 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.

  • 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.

  • 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. The figure their competition was outside of Switzerland more than within. I know, a strange concept in the U.S.

  • 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.

  • 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.

  • 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 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.

  • David Bredan Please do (write more similar articles).

  • D S Vilhena

    Great article!  Thanks for it!

  • 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.

  • 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 !

  • williamslerner

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

  • David Bredan

    williamslerner Thank you William for your kind comment (although I had no such intentions!)

  • 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.

  • 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.

  • 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

  • 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 much as limit production. In fact, they seem to be more interested in ‘not selling to anyone we don’t want to’ rather than cutting production to the companies they ‘like’. You are right that in long term prices will stabilze. But I think the will take years and it will still be 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…

  • 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.

  • 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.

  • 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.

  • mrfreaz With the growth that the Swatch group has seen over the last decade, they will be happy to have ETA supply movements to Swatch brands without having to worry about allocating some of their production to brands (LVMH and Richemont ones that is) 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 they other brands should make their own movements. Yes he was tired of being the engine and parts supplier to other brands who would them name their purchase 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 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 a Dodge Charger then said “Powered 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 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.

  • 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.

  • 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?

  • 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.

  • 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.

  • 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 that they were a contracted assembly 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.

  • 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 brand 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 who 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.

  • 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 and 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, the history of horology and who collects Rolex watches and 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 watches 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.

  • GradyPhilpott Guess we will agree to disagree. Cheers.

  • 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.

  • 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.

  • 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.

  • 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. 
    4Hz, zero reset hacking seconds hand with the minute hand snapping to a minute during hacking, silicon balance components for magnetic resistance, power reserve indicator (yes on an automatic), discreet day/nigh 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. Not asking for much eh? 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. 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…

    • Morganne MacDonald

      Love the idea of open sourcing and fresh ideas. Brilliant.

  • 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.

  • 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.

  • 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.

    • Mad Doggie

      It’s interesting that one can pay $400 for a watch with an ETA 2824 or $3000 for another watch of similar construction and material with the same ETA 2824.

      • hope none

        I saw that Tudor uses ETA movements. For some reason, I thought they used Rolex movements, but without the finishing.

        I like mechanical watches. I’m tired of trying to buy parts to fix these timepieces.

        I hope the future isn’t, “When you buy a Rolex–your actually leasing the watch. Any repairs will be made at our Factory, at high factory prices.”

        A note to all watch manufacturers, don’t destroy your industry, by being clever. Sell parts to the anyone with the money. The jackass bought a $5000 a amalgam of metal. He should be able to have Anyone repair his watch? A man who wears a Rolex knows what he wants in life right?

        I’m not bashing Rolex–they all are restricting part sales. It’s quite a problem for independent watch repairers.

  • TomasinaCovell

    Well I’ll just write my letter and ask for the exact parts I need then!

  • Emperius

    Let this be a reflection for today’s watchmaking.
    https://www.youtube.com/watch?v=2I6cCGTVNTI
    It’s not the movement, but the brand that overprices the bracelet, talking directly to all Swatch Group brands.

  • bgrsymons

    I am not unhappy to see the demise of the Swiss watch industry. First of all the new generation ETA movements have a wasted finish on an inferior movement design and an impracticably engineered outlay, all is flawed. Added to this is the non spares sales policy and non existent technical information back up, especially from ETA. As a watchmaker, I constantly refer my clientele to go for Japanese, non quartz, Chinese or Russian watches. They are of all much superior design quality without the policies of not selling spares.

    • Mad Doggie

      Over the last twenty years I’ve had very poor results (high failure rate) with Russian watch movements.

  • crezo

    Great article, and nice to have such an in depth writeup!

  • Needle Mapper

    A most exceptional article… a must read, for anybody new to the subject of watches.

    However, what I find difficult to grasp, vis a vis competition commissions, is why Nivarox was not forced into a de-merger – sold off.
    This is quite a common, and understood concept.
    As a stand alone company, it would grow itself by selling more components, and developing more components according to market demand.
    If its metallurgical and fab processes are so unique, it would price accordingly, to build an R&D fund, and rising prices would encourage competitive investment….. if that didn’t happen, well, lucky them! However the conditions would be right for sector growth.

    As for the ‘movements’…. I don’t think the same applies.
    As the article pointed out… the mergers, and a ready supply of movements, may have saved the industry, but that period has passed…. so time to get the market back onto an even keel.

    One ‘might’ say that the movement IS the watch, so keeping your own movement for your own watches is entirely reasonable (with the necessary weaning process).

    You can’t say the same for individual components.

  • Rob.L

    it said good, but it didn’t mation to replica watch, I am really want to know if http://www.ereplicasmaker.com/watches-Class/swiss-eta-2836-movement-Rolex.htm is the same as in genuine watch?

  • Very well written and more than up-to-date considering the current Comco decision situation. As we can see today if ETA will be released into uncontrolled freedom is in fact irrelevant. Gaining competitive edge over ETA products and manufacturing power is directly related to the Silicon hair-spring topic which IP-access is locked under a so called consortium. Better call it the silicon cartel;-) It is a shame that all that could have been covered up for so long, but as history tells us… it is going to get ever harder to cover up dirty dealings and I assume this will be the case here too.

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