The mechanical watch segment is seeing the beginning of a major disruption
Gangbusters’ isn’t a word you would use in the same sentence as ‘Swiss’. Yet, the former is probably the best adjective to describe the growth of the Swiss watch industry in recent times.
After growing at 22 percent in 2010 (albeit from a lower base following the global economic slowdown in 2008 and 2009), Swiss watch exports were up another 19.2 percent in 2011 to over $20 billion.
To put that in perspective, Switzerland’s GDP has fluctuated between minus 1.88 percent and 3.67 percent for the last 20 years. The demand for established Swiss watch brands is so strong, especially in Asia, that many watchmakers can’t keep up with supply. Though the Swiss accounted for merely 2.5 percent of the 1.2 billion pieces exported globally in 2011, they command over 50 percent of the revenue earned.
It almost sounds too good to be true.
The Icebergs Lurketh
A major disruption has already started taking hold in the mechanical watch segment. ETA and Nivarox, the biggest manufacturers of mechanical movements, hairsprings and regulating mechanisms, will begin cutting down supplies to watch brands not owned by the Swatch Group. Both of them are, of course, owned by the Swatch Group and control between 75 to 90 percent of the market for the critical components that go into making a mechanical watch.