Wednesday, August 24, 2005

Swiss Made? Trojan Dragon at the Gates of Geneva.

Excellence is undoubtedly coming out of China now, I mean, we've already seen they are right up there with complications. Now, I recently read Luger's excellent primer on "Swiss Made" and looking at the detail, realised that cheap imported parts could in future be making it into Swiss watches. In fact they could be already.


Latest delivery of watch parts in Geneva yesterday.

Let's look at the articles:
Definition of the Swiss watch

A watch is regarded as Swiss:
a. where the movement is Swiss;
b. where the movement is encased in Switzerland and
c. where the final adjustment by the manufacturer takes place in Switzerland.

So far so good you'd think? But wait what's a Swiss movement? Well let's look at article 2.
Definition of a Swiss movement

1 A Swiss movement is a movement which:
a. was assembled in Switzerland;
b. was adjusted by the manufacturer in Switzerland and
c. is of Swiss manufacture for at least 50 percent of the value of all the constituent parts, excluding the cost of assembly.

Hmmmm, so it could contain 349 Chinese parts and 1 part made in Switzerland depending on the 'cost'. So how do you define the cost. Let's look further:

2 For the calculation of the value of the constituent parts of Swiss manufacture according to the subparagraph 1 (c) above, the following rules apply:

a. The cost of the dial and the hands are taken into account only when they are set in Switzerland;
b. The cost of assembly can be taken into account where a procedure of certification provided for in an international treaty guarantees that, by virtue of a close industrial cooperation, there is equivalent quality between the foreign constituent parts and Swiss constituent parts.

Got it? Now, the present definition was written in 1972 and the world has moved on. But wait, the question is, does Switzerland actually want to do anything about this, or is it actually a profit opportunity?

8 comments:

Lyla said...

Dear Velociphile, of course it is a great profit opportunity. In fact, when asked if it is time to change the rules of the swiss made, any producer I interviewed in Basel answered "No". And everybody says that the customer should rely on the name and the tradition of the brand. Even at the Basel opening press conference the resposible people for the swiss made at the end said that "swiss made" is "Tradition"!!!! Can you believe this? I guess why people don't learn from the past. Hope that there won't be another crisis like in the 70s. As you often look at registered patents, you may have noticed that there aren't many registered in europe by swatch group or Richemont... Why?
It makes me think...
Very nice blog, anyway.
Bye,
Lyla

luger said...

FYI: the "Swiss Made" Law was amended/effected by the "Law on the Protection of Marks and Indications of Provenance" (LMP 232.11) dated August 28, 1992, which strongly increased the civil and penal sanctions. LMP was itself modified December 21 2004.

John F. Opie said...

Hi -

What I think we are seeing is that the Swiss are trying to keep their image as the premier maker of watches, while at the same time improving their profit margins by using inputs that make the "Made In Switzerland" mystique increasingly difficult to maintain.

And yes, the Chinese will end up being as great a challenge to the Swiss as quartz watches were. There is only one real way for the Swiss to survive: innovate, innovate, innovate (and at the same time be ruthless in enforcing their intellectual property rights).

Vertically integrating and turning yourself into a brand name may work on the short term, but who wants to end up like Hamilton, Gruen, Ingersoll and other famous names of the past that are now just front companies?

That doesn't advance the state of the watchmaking industry.

Best regards to a great blog...

John

Velociphile said...

John, of course I agree. I had the same thoughts in my post Mass Market Tourbillon = New 'Quartz Crisis' Ahead. Clear innovation required.

Thanks also to Luger for finding the Europstar article that discussed the whole "Swiss Made" issue back in 2004.

V

John F. Opie said...

Hi -

The problem I see is: what innovations are there that the customers will actually see and gain benefit from?

That's gonna be a tough one, since what Chinese are doing is catching up to a mature industry, duplicating in essence what the Swiss have created.

Perhaps the Japanese can be looked at as an example of this kind of innovation with their Spring Drive. But they are making the mistake of aiming at the high end of the market, with prices you wouldn't believe for a Seiko.

Gonna get tough out there...

John

Velociphile said...

Stacks more insight on "Swiss Made" by Luger at http://montresuisses.blogspot.com/2005_08_01_montresuisses_archive.html

Dario said...

It was only a few month's ago when I posted something very similar and got a LOT of heat for this... Essentially I said that the Swiss in their blind arrogance are headed towards their second big crisis. The first was due to the Japanese and their "quartz" watches, the second will be the Chinese and the Low production costs of what used to be "Swiss Exclusive" movements. The Germans have already started to edge out the Swiss Monopoly... let's wait and see...

Dario said...

Sorry!!! When I said "posted something similar a few month ago" I did not mean HERE but on ThePurists and TimeZone.

On ThePurists they where able to comment on the matter yet on TimeZone the post was actually censored and removed (this reminds me that I am going to remove my link to their page...).