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Friday, January 1, 1999

Markets in Time: The Rise, Fall, and Revival of Swiss Watchmaking

Swiss-Made Watches Are the Most Sought After in the World

Anthony Young is a freelance writer based in Miami who has written previously for The Freeman.

For more than 300 years, watchmaking has been Switzerland’s most identifiable industry. The country’s geography and political non-involvement have permitted Swiss watchmakers to survive revolutions, wars, and depressions. Yet there was something the industry almost did not survive: technological change.

Swiss watchmaking grew out of clock making as the ability to make smaller mechanical movements evolved in the seventeenth century. Both innovation and craftsmanship flourished in the eighteenth century. Some firms established back then are still making watches today, including Blancpain (1735), Vacheron Constantin (1755), and Perrelet (1777). For every Blancpain or Perrelet, however, there are many smaller, lesser-known companies in Switzerland. Close to 500 companies in Switzerland manufacture watches, watch movements, and parts.

The mass production of the Industrial Revolution reduced costs, but there has always remained the cherished element of handwork in a Swiss watch. In 1793, Isaac and David Benguerel along with Julien and François Humbert-Droz established the first watch movement-blank factory in Fontainemelon, hard against the Neuchâtel mountains. (A movement-blank is an unfinished, but difficult-to-make watch movement.) This region of Switzerland became a magnet for the watch parts industry. Companies specializing in cylinder, pin lever, and jeweled-lever mechanical movements made possible the establishment of small watch companies that did not have to manufacture every part of the movement themselves.

The twentieth century has had the most profound effect on Swiss watch companies. Two world wars and the Depression in between reduced the demand for Swiss watches, but the industry always recovered. The postwar economies of the world eagerly sought Swiss pocket watches and wristwatches, from inexpensive mass-produced hand-wound watches to self-winding, or automatic movement, watches. By 1974, exports of Swiss mechanical watches and movements had risen to 84 million units.

In this euphoric and seemingly irreversible climate, a quiet revolution was brewing in Switzerland. It was a revolution mostly of its own making, and it would shake the Swiss watch industry to its very foundations.

The Quartz Revolution

Work on an electrical watch began in the 1950s. Development of both the electro-mechanical movement and the battery to power it had to progress concurrently. In 1954, Swiss engineer Max Hetzel developed an electronic wristwatch using an electrically charged tuning fork powered by a 1.35 volt battery. The tuning fork resonated at precisely 360 Hz and powered the hands of the watch through an electro-mechanical gear train. This watch went on to become the famous Accutron by Bulova, which was introduced to the market in 1960. It used a proprietary design that was not adopted by the watch industry. However, the Accutron was beaten to the market by the American-made Hamilton 500, which appeared in 1957; this was the first battery-driven watch in production.

In 1962, a research center, the Centre Electronique Horloger (CEH), was established in Neuchâtel to develop a Swiss-made quartz wristwatch. Why quartz? An electrically charged quartz crystal has the ability to achieve stunning accuracy in a watch mechanism. Research and development took five years, but the center succeeded in reducing the size of the components to fit into a watch case.

The Japanese, however, were also hard at work on an electronic watch and had the financial footing to conduct their own research and development of quartz technology. The Japanese were no strangers to watchmaking. Citizen and Seiko are much older companies than many realize. The first Japanese watch plant was built in Seikosha near Tokyo in 1892, at first making wall clocks. Pocket watches and wristwatches followed. An earthquake in Tokyo destroyed the Seikosha plant in 1923, but it was rebuilt. In 1924, this factory introduced the Seiko brand name. The Citizen Watch Company had its roots in the Shokosha Watch Research Laboratory founded in 1918. The Citizen name was adopted in 1930. All watches produced at these two companies were mechanical until the 1960s, when work was begun on an electronic watch.

The Swiss Neuchâtel Observatory, which was responsible for certifying mechanical watch chronometers for accuracy, held a competition in 1968. Swiss and Japanese watches competed. The Swiss entrants swept the first ten places and the CEH was awarded the Prix du Centenaire. As a result, Japan, with a long-range commitment to consumer electronic products, threw its industrial might behind quartz watch development and production. Seiko was the first company to bring an analog quartz watch to the market, the Seiko Quartz Astron, introduced in 1969. The Swiss, however, were not far behind. The Ebauches SA Beta 21 quartz watch appeared in 1970.

Swiss Slowdown

Swiss companies, steeped in the mechanical tradition, were slow to embrace quartz technology. Mechanical movements had proven their durability and reliability for centuries. This reluctance of the Swiss to adopt quartz technology initially cost them dearly. Exports of Swiss mechanical watches plummeted from 40 million in 1973 to only three million ten years later. While some Swiss watch companies did manufacture quartz watches, Japan and Hong Kong dominated the quartz segment and decimated the Swiss industry. Many small- to medium-sized watch companies in Switzerland closed their doors by the end of the 1970s. The number of workers in the industry plunged from nearly 90,000 in 1970 to 47,000 by 1980.

In 1979, the management of the Swiss ASUAG group (Société Générale de l’Horlogerie Suisse SA) embarked on an ambitious plan to produce its own inexpensive line of quartz watches to counter the Far East juggernaut. To produce an accurate, rugged, and water-resistant watch for less than 50 Swiss francs demanded a paradigm shift in thinking regarding materials, manufacturing, and marketing. The micro-molding of plastic parts, reduction in the number of parts in the quartz movement, and ultrasonic welding were but a few of the cutting-edge technologies applied to the program.

This revolutionary watch line, known as Swatch, was launched in March 1983. The inexpensive watch, offered in myriad styles and colors, took the consumer world by storm. In less than two years, more than 2.5 million Swatches were sold. The Swatch was a phenomenon that put Swiss watches back on consumers’ wrists. As the brand went from victory to victory and sales passed 10 million, it had a profound effect on the Swiss watch industry as a whole and the world’s perception of the industry.

The technological fallout of the Swatch permitted the Swiss watch companies to market quartz watches in virtually all price ranges. But quartz was not necessarily the answer for every Swiss watch company. Many companies felt honor-bound by their tradition of making mechanical watches, while others were simply leery of quartz for the long term. As the quartz movement took hold among Swiss watchmakers, articles appeared in watch journals proclaiming that the end of the mechanical movement was in sight. Witnessing the dramatic decline of mechanical watches exported during the 1970s and early 1980s, some pundits stated it was inevitable the mechanical movement would go the way of the horse-drawn carriage. This worried many watch companies; demise of the product would entail scrapping millions of dollars in precision machine tools, investing in the new technology, and retraining a very skilled work force.

Oris—One Company’s Response

One of the many watch companies facing the quartz/mechanical dilemma was Oris. Located in the picturesque town of Holstein southeast of Basel, this company had been making watches since 1904. Its founders, Paul Cattin and Georges Christian, chose Oris as the name of their company after a valley near Holstein; the word Oris was formed from the Celtic-Roman word aurisa, meaning river. In a crowded industry, Oris has more than a few innovations to its credit. In 1938 the company introduced the pointer calendar, with the days of the month running the circumference of the watch face and the day indicated by a needle-type hand; the seconds were shown on a small dial at six o’clock. During World War II, Oris produced watches with oversized winding crowns to permit Allied bomber crews to synchronize watches with gloves on in the bitter cold environment at 30,000 feet. In 1952, the company introduced a watch line with an automatic (self-winding) movement. Oris received full chronometer certification from the Neuchâtel Observatory in 1968 for its calibre 652 movement.

Oris had survived and prospered for more than half a century making mechanical watches. Nevertheless, it led electronic watch development on several fronts in the 1960s. It was in a small group of companies, including Rolex, that contracted with a Swiss state institute to research and develop an electronic watch. It also became a member of the ASUAG group.

Oris was one of the first Swiss companies to sell an LCD (liquid crystal display) watch and did so for a number of years until Casio virtually took over this market. It had vast experience with mechanical movements, having manufactured cylinder, pin and lever, and jeweled-lever mechanical watches. Its work force was skilled in the fabrication and assembly of such watches, and there was a certain romance to a mechanical movement. Moreover, quartz, while certainly accurate, had a problem mechanical watches didn’t have: dead batteries. In most first-generation quartz watches, the batteries typically lasted only a year and obtaining a replacement could be difficult if not impossible in many places. Thus mechanical watches would remain in the Oris catalog. At the same time, the company did not want to ignore what could be a large market for quartz watches. The company took the prudent course of adding quartz watches to its line.

Oris was not convinced that the dire predictions of some industry observers regarding the mechanical watch would come true. The decision to manufacture watches with both types of movements was a cautious one, as Oris waited to see which way the winds would blow. Many watch companies embraced the quartz movement totally and never looked back. Other companies remained faithful to the mechanical movement. During the 1980s, Oris was part of the SMH group of watch companies, which included Omega, Tissot, Mido, and other brands. But Rolf Portmann, who had joined Oris during the 1950s and later steered the company through troubled waters over the next three decades, orchestrated a management buyout, and Oris was once again an independent watch company.

The market for quartz watches became crowded in the 1980s. The Pacific Rim countries were churning out literally hundreds of millions of quartz watches a year, and many Swiss companies were making them. How could Oris distinguish itself in such a saturated market? The management concluded it was hard to convey through advertising that its watches were unique. So the company decided to focus all its design, manufacturing, and sales efforts on mechanical watches.

Oris chose to lure buyers by extolling the beauty and virtues inherent in the mechanical movement, which had always been the essence of watchmaking. Many Oris models are fitted with a glass back with a screw-down case to show off the handcrafted movement inside—a feature of many other mechanical watch companies. The company has published a series of booklets describing the history of timekeeping, Oris milestones, detailed descriptions of each step in the manufacture of an Oris watch, and a lexicon of the components and functions of the mechanical watch. In so doing, the company is linking itself to Switzerland’s rich watchmaking past, building on its own successful history, and making it possible for the watch fancier to wear a piece of that history on his wrist. The company took what, at first, appeared to be a market liability and turned it into a market asset, proving it could compete with the high-tech quartz movement, no matter where it’s made.

The Swiss Comeback

In looking at the history of Swiss watchmaking over the last 30 years, it’s clear that if the industry had not responded to the electronic revolution that was coming, it would not be in the healthy state it is today. Initially, the industry was slow to embrace quartz technology, but many companies eventually realized it was the key to their survival and to the industry as a whole. In 1997, Swiss production of finished watches was 33 million pieces, with 30 million being quartz analog, and the rest mechanical. This is a far cry from the glory days of the 1970s, but there is a silver lining. Over half the value of the more than 500 million watches sold worldwide (roughly 80 percent being made in Hong Kong and China) is generated by the Swiss watch industry, totaling more than eight billion Swiss francs. Interestingly, while mechanical watches account for only ten percent of annual Swiss production, they generate nearly half of that total. Even Swatch has introduced watches with mechanical automatic movements. On the face of each one of these watches are the two words that make them the most sought-after in the world: Swiss Made.