Today's (12th November 2011) Financial Times article "Swatch hopes to call time on supply of components" on the impending change of movement supply from Swatch Group is both interesting and intriguing.
The subject centred on Switzerland Competition Commission's (Comco) permission that Swatch Group could cut movement supplies to 85% of 2010 level and regulating mechanism suppy to 95% from next year (2012). If you think this is insignificant, apparently "movement maker" Sellita and 10 other anonymous parties think otherwise. They turned to the Federal Administrative Court to contest Comco's decision and requested that the decision be rescinded permanently. The final decision could be made by the court in the next few weeks, perhaps much sooner than expected.
Sellita is incensed because a little noticed clause in Comco's ruling allowed Swatch to axe sales to other movement makers by 30% and this will badly affect the supplies of ETA components to Sellita thus potentially affecting its ability to sell "Sellita" movements to others.
While it is no secret that Sellita isn't making their movement completely (100%) in-house, what was surprising was the huge number of Sellita movements being sold to China. I first heard from a source on June that at least 600,000 of movements are sold to China and then again on September this year from separate reliable source, except that the figure quoted was much higher at about 800,000. But since I could not get anyone who is willing to be quoted nor could it be independently verified, I decided to keep quiet.
Today's Financial Times article however has more or less confirmed the observation, and I quote "...Research into Swiss customs data shows movement makers in the past decade exported 800,000 to 1.2 million units a year, the OVERWHELMING BULK going to China. Of the total, ETA's share declined steadily....In the case of China, the reduction was even more striking; ETA's sales this year amounted to just 17,000 units - meaning almost 900,000 other movements have been sold by other Swiss sources". While this segment of the article did not name Sellita, it is worth nothing that ETA and Sellita are two of the biggest 3rd party movement suppliers in the industry today. One being forced by the authority and the other, apparently doing a profitable business willingly ;-).
And curiously, the same article said "Intriguingly, the data raises the question of what was being done with all those movements in China"!
We shall see if such export to China will affect the court's decision.
In conclusion, a very well written article by Financial Times.
Excellent article! What puzzles me actually most is what is China doing with all those movements. I have to admit that my knowledge about their watchindustry is somewhat limited, but if I'm not mistaken they have one independent who makes his own movements, a large industry that makes lower end watches based upon Russian movements and a perhaps even larger industry that makes more "European inspired" watches. It is the last category that I can see the use of these Swiss made movements or am I missing something here?
There is an existent of a very legitimate Chinese watch industry, but the use of such Swiss watch movements in such scale is curious, or shouldn't be too curious if we think deeper. :-)
These numbers are outrageous.
One thing is sure, in ten years from now we will have a complete different watch world
and I do not know, if I really want to know.
It just goes too fast.
GEO
CARTIER forum moderator
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[www.troisanneaux.com]
That's one of the reasons there has been so much debate on the new criteria being discussed to earn the 'Swiss Made' label. At present, 'Swiss Made' is meaningless at best and by most measures, positively misleading.
I've also heard of brands who have partial work done of their watches in Asia some of them surprisingly high end. From an economic point of view this makes sense, although it is not something we want to hear. We still associate Asia with cheap labor, although that is of course not all they have to offer. I agree with Jaw that the Swiss made label still has a lot going for it, but if they want to keep it this for the future they might want to look into it as Ian pointed out.
Since I think we can eliminate the possibility of those 900.000+ movements being used into a high quality Chinese brand, and that makes me wonder why isn't there a high end Chinese brand? A larger desire for foreign, yet established brand names rather then a domestic high end watches?
Enough food for thought!
Martin
Martin Green
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Contributing Writer
Moderator
Revolution Online
I m quite sure that the question is easily answered if you look at the fake market, there are several levels of fake from the cheapest that will last days to the high end which will hold much longer with a Swiss made engine...
Then again talking of Swiss made I'd like to point out that it's far from being a safe bet as to quality for a lot of things including watches, I bought SWISS MADE toys at Geneva airport for my kid and he almost got injured by them because of their bad conception (a wooden toy that has screws of 2cm that a baby of few months can uncover in few seconds is far from a good sign) and the maker had the bad taste to say it s because they're made by an atelier of handicapped people he employs....
I would not be too surprised that one day we discover that the fake market belongs to Swiss!
edited by marks: fixed various typos
Edited 1 time(s). Last edit at 11/13/2011 01:28PM by MarkS.
It is the subject line and the ending of your post I can't agree with "Swiss far from being a guaranty of quality". You have a point there and while it applies sometimes, it can't be affirmed as a mater of fact.
Sadly enough not everything labelled "Swiss Made" is effectively made in Switzerland anymore. The "Swiss Made" printed on watch dials does not mean anymore what it used to, leading to much confusion. Ian really sums it up with "At present, 'Swiss Made' is meaningless at best and by most measures, positively misleading."
Looking 25 years back, things were different. The greed was not as big as it is now, CEO's were watchmakers rather than peanut counters and many things around or inside a watch were effectively made in Switzerland. The country, the citizens and the people buying were all proud of it, satisfied, returning clients and the best ambassadors far around. Find me a cardboard box or a luxury box around a watch, which is still made in Switzerland. The super sophisticated fancy boxes and most prototype series are still made here, that's true indeed. The vast amount of production series though come back to Switzerland by boat from the East. Nobody sees a difference on the pricing though, except the shareholders . That is nothing new and largely followed in other trades but something which itches me seriously.
The same applies to watch components. Two years ago I serviced a watch made by a famous Swiss middle range brand. Great was my surprise to read "Swiss Made" on the visible side of the dial and "Made in Malaysia" on the back of it.
So far, Swiss politicians do not really see where the battle leads and too many watch executives are driven more by money and shareholder pressure rather than by long term visions for their brand and the industry in general. Not everything is rotten and corrupt yet but this topic needs dedication and serious action asap. Always remember, a client has more power than he believes and should ask questions even when they hurt. The large majority of the trade still behaves well. It would help significantly if the safety net imposed by Swiss laws would not enable all the jiggery-pokery some are playing.
This said, by imposing no more delivery to the watch supermarket of (real) Swiss Made movements to 3rd parties, the late Nicolas G. Hayek turned the helm on the right side and surprisingly motivated more than a few to shift investments from luxury cars and the like to production facilities.
Now China is a tremendous market and I can imagine that a large amount of the 900'000 watch movements (if they were ever sold to China) won't come back in fake watches but stay in China in Chinese watches. Some will come back in fake watches or "Swiss Made" watches outsourced in China. I can only support all the ones fighting against that because it won't bring us anything good. We can all remember this the next time we are offered cheap watches on the beach .
If China progresses like it does, it won't take long before they master the higher end as well and then, the fun will really begin. At that point, if watch manufacturers are still in business in Switzerland they will have to invest massively in education in order to reconquer reputation from disgusted clients. I remember checking a minute repeater in Hall 6 in Basel back in 2010. There was not much to compare with a Swiss movement apart the fact it was a working minute repeater. China will master the finishing as well and much faster everybody expects here. Many companies sold know-how and facilities to China when nobody wanted them anymore here. Some even flew over and taught them how to use the machinery.
To finish with the toy you bought at Geneva Airport, I'm sure there was an age indicated on it. Regulations are severe for toy manufacturing and they also do apply in Switzerland. Recommended age plays an important part in it.
Your last sentence "I would not be too surprised that one day we discover that the fake market belongs to Swiss!" goes in the same basket as the title of your post. The fake market is a very lucrative international business and belongs to dark circles making large amounts of money with it. While there might be money from it in our banks, the business can IMHO be associated in no way with Switzerland. While our government is slow in taking measures against the diluting of the "Swiss Made" signification, they thankfully were hard and fast with our banks. I was never in the position to land in a bank's hall with suitcases filled with money to check this out personally but I do believe that it takes much more work, to hide money in our country nowadays.
Since all goods need buyers we're back at "a client has more power than he believes". When a smoker stops smoking, that Rolex he dreams of is accessible after 18 months already. Hence, there is really no need for fakes. The Fondation de la Haute Horlogerie has it right: "Fake watches are for Fake people".
Thanks Mark for editing my typos and your answer, sadly part of your answer is right and part isn´t:
you re definitely right when you talk about the CEO s of brands being heartless peanuts counters at the moment leaving being the retaillers around europe for markets in Asia seeking only higher sales and forgetting who helped the brands survive when people were all for the quartz a few years ago. I hope you re also right when you think that only money from the fake market is Swiss... But helas you re completely wrong about the toys and regulations in Geneva airport or the power of the the buyer. I rung all bells I could find about these toys and nothing much happend: the geneva airport told me they can t or won t check all the products sold there, there was nothing like a minimal age on the toy with the screws problem or another one with small part that could suffocate small children. The regualtion authority of swiss airports didn t even bother to answer me. The only real interest I received was by a reporter from the consumer association of roman swiss who intend to do an article on it and here s the horrible answer I received from the producer of the toy:
Bonjour monsieur Luber
Vous avez acheté dans le magasin „Schweizer Heimatwerk“ a l’aéroport de Genève un jouet „Viktor“ Ce jouet a été fabriqué dan nos ateliers pour les handicapés. Apparemment, ce jouet a été signalé les défauts de production, por laquelle nous nous excousons. Nous allon ajuster la production actuelle de sorte que cette erreur ne se produira pas.
S’il vous plaît laissez-nous connaître votre adresse afin que nous puissons rembourser le prix d’achat.
Nous nous excusons pour les désagréments causés.
Avec mes meilleurs salutations
Samuel Mani, directeur
Karo-Holzspielwaren
Stiftung Karolinenheim
CH-3472 Rumendingen
I don t know if you speak french but he s basically accusing the handicaped who work for him of not working well instead of acknowledging a conception problem... And with tons of typos on top....
The customer has mainly the right to pay and shut up because fools never die they only get replaced...
Another thing where you re right is the advancing knowledge of chinese on the watch making: I saw not long ago at retailler in Greece a few samples of a new brand with very cheap tourbillons (range from 1000 to 2000 euros!!!) and only the finish of the watch or the design was missing to have a really nice piece... That should be a real wake up call to the swiss watch industry.
Edited 1 time(s). Last edit at 11/13/2011 05:45PM by stephlub.
Firstly, let us look at how Swatch Group is forced by Comco to continue selling components and movements to 3rd parties. The popular sentiment is in favour of the restriction because of the perceived "monopolistic" practice of the Swatch Group.
Secondly because "Swiss Made" doesn't mean 100% Swiss content, and also because the cost of foreign components are invariably lower than Swiss parts, there is a general sense that the phrase "Swiss Made" is meaningless.
For both issues however, I tend to favour the minority views and my primary reason is simple, I believe that complete Honesty and transparency to consumers is the only way to allow free choice by consumers.
My views could be controversial but Personally, I believe in FREE competition. Players big and small should be allowed to compete freely in the haute horlogerie market without intervention from the government. To me, the restriction against Swatch Group distorts the market and allow the free riders not to invest their own resources into things that matter - i.e. to be more original and put in more effort in building their own watch and movements and restrict their level of original innovations. This has already been proven in recent years where the number of in-house manufacturing has increased exponentially with just the potential threat of future cut in supply.
I understand the other side of the arguments and is willing to accept them provided if the proponents are honest about it - that they lack the resources and they couldn't compete without the cheap supply from Nivarox and ETA. Unfortunately what I found irritating is that the parties who need the 3rd party movements and components the most are usually the same parties who wish to misrepresent themselves as otherwise.
When Comco allowed Swatch Group to reduce their supply in the smallest degree (15% reduction of movements, 5% of regulating component) you have eleven parties who challenge this minor change in the court in law, and 10 chose to remain anonymous. While I admire Sellita for at least standing out publicly that they do need Swatch Group components, but how about the other 10 who chose to be anonymous? Certainly they aren't afraid of Swatch Group because as I understand it, Swatch Group knows exactly who they are. It is the final consumers they are trying to hide from. And this I find unacceptable.
The "Swiss Made" issue is very similar to me in nature. While the Swiss content law allowed a lot of free hand in using foreign components since overseas components tend to costs a lot less than Swiss parts, it is still a very useful phrase because for a timepiece to qualify as "Swiss made" the movement has to be Swiss and the watch has to be encased and final inspected within Switzerland. These three factors are significant enough to make the "Swiss made" label important. As whatever the true Swiss content of the watch is, we at least know that Swiss watchmakers are involved in producing the movement, encasing the watch and regulating the watch.
My argument is not because I believe that Swiss made is inherently higher in quality (although they likely are) but I want consumers to know exactly what "Swiss Made" means when they buy a Swiss watch. And if there are flaws in the criteria for a Swiss made watch, then we should all urge for a clearer and stricter rule change, which the bigger groups are now fighting for (This is another fact which many do not know, the bigger groups are actually in favour of stricter Swiss made standards against relatively smaller players - not referring to the individual independent).
My point is that if a brand cannot use the phrase "Swiss made" on their dials, explain clearly to their potential customers why it is not so and DON'T try to persuade the consumers that the phrase "Swiss made" is meaningless (note this point is not against fellow enthusiasts who think likewise, we as individual have our rights to our opinions, but watch brands must be honest about their product origin).
Beancounters are important because they know how to count beans :-)
They are not recent inventions and they have been important from the beginning of watchmaking industry. Behind every successful brand which last for generations, there is always a brilliant watchmaker and a quiet bean counter partner behind him. Or else the brand name would have disappeared.
Steve Wozniak was the brain behind the original Apple OS but it was Steve Jobs who made it the successful company it is today.
Another word I like to add is that despite the rise of the big watch conglomerates, the playing field has never been this levelled before. In the past, watchmakers were despised and were quietly working behind the scene and an individual watchmaker, no matter how brilliant, would stand no chance of ever realising his own dream without a proper business backing (although mostly from a rich individual in those days, or the King :-)).
Jura mountain watchmaking, even for the relatively bigger movement manufacture were completely anonymous and mostly under the thumb of Geneva watch brands, who were better at building brand names and familiar with the commercial world. The true watchmakers basically live under the mercy of big brands and could not have survived without the brand support until the 1980s.
Time has changed, but in my personal subjective opinion, is for the better.
. That is nothing new and largely followed in other trades but something which itches me seriously.
.