Watch Assemblers Turn to Manufacturing of Their Own
New York Times, March 26, 2009
Strictly speaking, there are two kinds of watch companies in the world: those that make their own timepieces and those that produce them through an age-old process known as ?blissage, a French term referring to the assembly of a watch from components made by outside specialists.
The components, known as an ?uche -- the French word for ''blank'' -- are essential to the watch movement, the mechanism that powers the timepiece, but they arrive in a kit and lack features such as a mainspring, dial and hands.
For 125 years, Breitling, the Swiss company best known for its aviation-inspired chronographs, has done business as an ?blisseur. This week, however, the brand is showing a new timepiece at the Baselworld luxury watch fair that represents a dramatic change of track: Five years in the making, the Caliber B01 is Breitling's first movement built in-house.
''It was natural to go in that direction,'' Breitling's vice president, Jean Paul Girardin, said. ''Breitling is one of the few remaining family-owned brands in Switzerland. To keep this independence, we had to build up an industrial strategy to ensure our success.''
Breitling is not alone. Over the past five years, many other assemblers have announced plans to build up manufacturing capabilities. Now, the industry is starting to see the results. This year alone, Corum, Hublot and Panerai are all touting new in-house calibers, as movements are called by the trade. Montblanc, too, recently added two timepieces to its collection manufactured exclusively for it by Minerva, a 150-year-old watchmaking facility in the heart of the Swiss Jura that is closely tied to it within the Financi? Richemont group of luxury brands.
''Today, new technology, new machines -- with an important amount of money, you have the possibility to produce yourself a watch,'' said Osvaldo Patrizzi, founder of Patrizzi & Co., an auction house specializing in timepieces.
Still, he added, in the middle of a deep financial crisis, ''it's not maybe the best time'' to do it.
Switzerland's watch exports topped 17 billion Swiss francs, or $15 billion, in 2008, capping six years of meteoric growth led by the high-end mechanical watch sector. But now the industry faces a severe correction -- at a particularly difficult moment.
Compounding the effect of the global downturn is the shifting relationship between Switzerland's watch brands and its dominant parts supplier, the Swatch Group. In addition to owning a collection of brands, from the affordable, ubiquitous Swatch to the prestigious Breguet, the group controls as much as 75 percent of the parts market through ETA, the industry's largest ?uche manufacturer.
In 2002, the group's chairman, Nicolas G. Hayek, announced that ETA would gradually phase out its supply of ?uches to outside companies by 2010; from 2011 on, it would sell only finished movements.
Mr. Hayek explained the strategy as a way to force the industry to innovate and reduce the number of fakes on the market. Critics, however, saw it as a maneuver to stifle the group's competitors, even those at the higher end of the watchmaking hierarchy, such as International Watch Co., which might use an ETA caliber as a platform for a host of deluxe in-house features, called complications.
''Everybody's trying to free themselves from the specter of the Swatch Group,'' said Ronald Wolfgang, president of the North American division of Roger Dubuis, a 14-year-old Swiss brand acquired by Financi? Richemont in September 2007.
Richemont laid the groundwork for producing its own supply of parts in 2000, when it bought Jaeger-LeCoultre as part of a 3.08 billion-franc deal that included IWC and a 90 percent stake in A. Lange & S?. Jaeger-LeCoultre enjoys a reputation as a manufacture, a term of prestige that has long distinguished companies that make watches from those that assemble and market them.
The most discerning collectors insist there are only a handful of watchmakers in Switzerland who have truly earned the label. Patek Philippe, Rolex, Audemars Piguet, Breguet, Piaget, Vacheron Constantin, Zenith and a few boutique brands such as Girard-Perregaux usually make the cut besides Jaeger-LeCoultre. Now, however, with so many companies promoting their own movements, the word ''manufacture'' has lost some of its original cachet.
''There is not one definition universally used and communicated,'' said Marc A. Hayek, president of Fr?ric Piguet, a Swatch Group company that makes complicated movements on behalf of Blancpain. ''There are so many pieces in a watch movement. What makes sense to do in-house? There is not one truth.''
A choke point for many companies that would like to be known as manufactures is the production of minuscule parts, such as hair springs, that are critical to a watch's accuracy.
''Who actually makes hairsprings?'' asked Gary George Girvainis, editor-in-chief of International Watch magazine. ''There are probably about five guys on the planet who can do that.''
It should come as no surprise that the Swatch Group, through its Nivarox-FAR division, employs the majority of them. While purists argue that sourcing those components externally disqualifies a company as a manufacture, most brands do not have a choice.
''You cannot think all the parts of Ferrari are coming from Ferrari,'' said Angelo Bonati, president of Officine Panerai, which began making its own movements in 2005 and plans to launch at least one in-house caliber annually through 2015.
''The electronics, the tires, the brakes are not Ferrari. But the concept, the quality, the assembly, the idea are Ferrari. We are acting in this way.''
Regardless of how a manufacture is defined, there is no debate over the enormity of the undertaking. ''Developing a base movement, you're talking three to five years' time and between 3 million and 8 million Swiss francs, and that's for a small series,'' Marc Hayek said.
Even if the economy continues to buckle, many believe the in-house trend is good for the industry because it will force companies to push the boundaries of watchmaking, become independent and gain the legitimacy that both endeavors bring. In short, Nicolas Hayek's professed strategy will have worked.
But can Switzerland's skill base, and global demand for luxury watches, support such a strategy, or does it imply a major restructuring of the industry?
''At the moment, there are more or less 2,000 brands in Switzerland,'' said Mathias Buttet, president of BNB Concept, which manufactures complicated movements such as the tourbillon at the heart of the Concord C1 QuantumGravity introduced in Basel this week. ''If 2,000 brands each begin employing 200 people in order to create their own movements, it means the Swiss will be having a lot of babies.''