[Part3]SWITZERLAND: The times are changing as famous brands fight for survival

photo:Shinya Wake

Switzerland remains the ticking heart of the global watchmaking industry. High-end Swiss watches, with their elaborate mechanical movements (the sections that drive the watch), have an unparalleled brand strength.

The industry’s success has been built on a “horizontal division of labor,” whereby the task of supplying the materials, parts or tools is subcontracted out to micro, small and midsize enterprises. This has fostered innovation by making it easy for watchmakers to get their hands on various parts or tools.

However, the times are gradually changing for this way of doing business.

At a watch-hand manufacturer in Le Locle, a small town in western Switzerland, brightly polished hands were lined up on a table next to a machine used for shaving metal. Though only a small operation with seven employees, the company has a strong reputation for meticulous craftsmanship. It receives orders from several famous watch brands.

Its boss, 47-year-old Gabriel Gaffiot, established the company in spring 2010 after leaving his job at a watch part maker. The following year, something unexpected happened. During business talks with a visiting representative from a luxury watch brand, Gaffiot was suddenly asked whether he would consider accepting an investment. In other words, the rep was inviting Gaffiot’s company to join the brand’s group.

The giant Swatch Group had recently bought a major watch-hand manufacturer. This prompted concerns among rivals that it might get harder to acquire hands. These rivals had, in turn, moved to fence in other companies with hand-making capabilities.

“To think they even tried to acquire a small company like this, which only just started operating,” says Gaffiot.

Gaffiot refused point-blank, but he knows other firms that have taken the offer.

“It would be sad if we lose the practice where tiny companies like ours make inventive and original watches,” he says.

The move toward business groupings kicked off in the 1990s. It was prompted by the rise of the Japanese watchmakers some 20 years earlier.

Cheap, precise Japanese watches took the world by storm after Seiko began selling a quartz watch in 1969. At that time, Swiss watches were expensive and mainly relied on a less-precise mechanical system, so the rise of the Japanese timekeepers was a shock, to say the least. In the 1960s, more than 2,000 Swiss firms were involved in the watchmaking business. This had dropped to 600 by the 1980s, with 60,000 jobs lost as a result.

Long-established manufacturers such as Omega and Longines also felt the pinch and even considered selling to the Japanese. After much hand-wringing, in 1983 a banking group bundled these struggling brands together and put Nicolas Hayek, a management consultant, in charge. What Hayek came up with was Swatch.

Swatch began fighting back with a thin, elaborately designed quartz watch.

The timepiece consisted merely of a movement installed in a plastic case. The watch itself was very simple, but an easily affordable price and a wide range of models resulted in a big global hit. Hayek used the profits to turn around Omega and Longines and even invest in other struggling old brands or parts makers. Hayek, who passed away in 2010, became known as the savior of the Swiss watch industry.

However, a new problem now reared its head.

As Swatch morphed into a giant “vertically integrated” group, other manufacturers found it harder to procure parts without going through the Swatch Group. When Swatch announced in 2002 that it would stop supplying movements to third parties, the other makers figured they were doomed unless they rose up against “the savior.”

Manufacturers such as the Richemont Group (owners of Cartier and IWC) and LVMH (owners of Bulgari and Tag Heuer) rushed to develop their own parts makers or secure outside suppliers. Investment firms have now joined the fray, with the alliance battle heating up considerably.

“Every watchmaker has started to invest and take risks to make their own components rather than relying on the Swatch group. It is the right way for the industry,” says Eric Othenin-Girard, a reporter on the Swiss watch industry.

In this battle, though, capital strength is what counts. The Swiss watch industry looks set to continue shifting away from the “horizontal division of labor” pattern supported by micro, small and midsize enterprises to a more “vertically integrated” group-based organization.

On the outskirts of Le Locle, the Swatch Group has built a new factory. Though the number of people employed in the industry dropped to around 30,000 20 years ago, this number has since recovered to 50,000. According to the Federation of the Swiss Watch Industry, the value of watch exports hit 20.2 billion Swiss francs (around 2.189 trillion yen, or $22.15 billion) last year. This was 11.5 percent up on the previous year and represented a record high.


The Swiss watch industry is based in the western part of the country in a mountainous region bordering France. In the 16th century, the Reformation led to rising religious tension across Europe. Fearing persecution, the Huguenots, a group of Calvinist Protestants opposed to the Catholic Church, fled across the border from France to the Calvinist town of Geneva. The Huguenots counted many watchmakers among their numbers.

Over the 18th and 19th centuries, watchmaking developed as a cottage industry based in farming communities. Unlike the United States, France and Germany, Switzerland lacked the natural resources to develop its own car or electronics industries. As a result, the watchmaking sector was carefully nurtured alongside finance and medicine.


Kari Voutilainen/photo:Shinya Wake
photo:Shinya Wake

Switzerland is home to a number of independent watchmakers who are not affiliated with any company. These craftsmen create mechanical watches, which they sell on the basis of their own reputation for excellence.

The “Horological Academy of Independent Creators” is an accreditation institution based in Zurich. It has 34 full members, including 51-year-old Kari Voutilainen. He runs a three-story workshop in the small town of Moutier, where he employs 15 people, including one Japanese.

In one room, his staff was operating three machine tools. It had the atmosphere of a small, backstreet operation. “Later we do a lot of work like polishing and decorating by hand, but first we use machines to cut out components from these materials,” Voutilainen explains.

The shelves were lined with gold, silver, bronze and zinc alloys. “Some watchmakers buy components outside, but I choose to make my own,” Voutilainen says.

Aspects of his trade are quite modern; he uses a computer to create designs and high-tech machinery to check parts. Yet he still uses the same tools as 100 years ago to cut hands and cogs to an accuracy of 0.01 millimeters. Sometimes it takes an entire day to make one hand. “We even polish the back of the wheels, where a customer may never look," he says. "It’s like giving life to this mechanical equipment.”

This year Voutilainen announced the creation of a series of watches made up of 228 individual parts. Though not studded with precious stones or metals, they will sell for close to 10 million yen (around $100,000). All 25 of these limited-edition timepieces have already been reserved. The watches command a high price for a number of reasons, including: their rarity, with only a few available in the world; the brand power of a watch made by such a famous maker; and the extremely intricate and creative nature of the mechanical mechanism.

Philippe Dufour/photo:Shinya Wake

Philippe Dufour, 65, is another full academy member. He runs a workshop in the thriving watchmaking district of Le Sentier. He used to have five apprentices, but “young people nowadays don’t have the courage that watchmakers need, so I let them leave.”

Dufour learned his trade working for several Swiss and U.S. watch manufacturers. He then had a brainchild while repairing a pocket watch made centuries ago: “They made this without a calculator. So why couldn’t I do it?”

His watches sell for around 5 million yen apiece. His customers include many doctors and lawyers, and the biggest market is Japan. When he announced in 2000 that he would be creating some watches for Japan, the 100 limited-edition pieces were snapped up in a flash, leading him to accept an additional 100 orders. The final watch was finished last year, 12 years after the original announcement.

He shoulders the cost of materials and advertising, but rather than being a small cog in a larger company, he prefers to do it all himself, from the planning and production, to the advertising and selling.

“I can make relationships with people," he explains. "You know, it’s priceless.”


Translated by The Asahi Shimbun AJW. More related stories available at

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