business booms but tricky times lie ahead

A Swiss watch's reputation is built on its precision and reliability. FH

The cliché about Switzerland and watches seems to hold true – the Swiss watch industry is the global market leader thanks to its blend of innovation and tradition.

This content was published on July 11, 2006

After a series of difficulties and an industry restructuring in the 1970s, exports of Swiss watches are once again up. But the country's position is today under threat.

A Swiss-made watch is a highly desirable but increasingly copied object.

An original Swiss watch draws upon over four centuries of tradition, quality, expertise and innovation.

It is also highly symbolic: promoting Switzerland as an attractive, progressive country that is successful on the world stage.

In the world of watches, Swiss brands are much in demand. As a result, 95 per cent of production is exported. In 2005 watch exports rose by ten per cent, earning SFr12 billion ($7 billion).

There is a Swiss watch for every taste and budget: sports and classic models, watches made of gold or

steel, watches with mechanical or electronic mechanisms, industrial watches, stopwatches and works of art.

"We cover all market sectors, offering a unique range," explains Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry.

Higher prices

Over 200 Swiss brands produce 25 million watches per year, with prices between less than SFr200 and SFr1 million.

The average cost of a Swiss watch - SFr500 – is actually much higher than that of its competitors and has doubled in ten years "following luxury market trends", says Pasche.

At the end of the 1970s, the Swiss watch industry almost disappeared in the face of stiff competition, especially from Japan.

The sector had to be dramatically restructured resulting in two-thirds of jobs being cut by 1984 – a fall from 90,000 to 34,000.

The emergence of Swatch changed things considerably, though. Today the group founded in 1983 by Nicolas Hayek is the world's leading watch company with 18 brands and 20,000 employees working in 50 countries.

Swatch has reinvigorated the industry from the bottom upwards, producing cheap, colourful watches.

However, the current growth sector

is luxury watches.

"The Swiss watch industry has never been so focused on the luxury sector," said Michel Jeannot, editor of a Swiss watch magazine.

"Companies producing luxury watches are doing incredibly well, while those selling cheaper models are finding it much tougher," said Jeannot.

More specialisation

The irony is that companies selling cheaper watches, which helped the industry survive the crisis 20 years ago, are now in a desperate situation due to competition from Asian countries.

To get ahead, the Swiss industry is

specialising more and more.

"We are more successful as we sell better watches, but export prices are falling," added Pasche.

Fewer watches, but luxury models - so what does the future hold for the industry?

If this trend continues, local watchmakers could once again suffer.

"Low-quality watches guarantee large-scale production, which is important for Swiss job security and the transfer of skills and expertise," added Pasche. "But to consolidate our market-leader position we need to focus on all levels."

Switzerland's excellent watchmaking

reputation is based on the skills of its master craftsmen as well as the quality and precision of Swiss timepieces.

For the time being, the country's reputation and prestige as a watch making centre is intact, but what about its know-how?

Clock ticking

China is already manufacturing complicated watch movements such as the "tourbillon" that was once produced solely by Swiss craftsmen.

Chinese quality might not be the same, but it is just a question of time.

So how can Switzerland ensure the long-term supremacy of its industry

and defend manufacturing?

"Our companies need to show willingness and understand how to invest properly," replied Pasche.

"Our success is basically a cultural issue. We have the right people and we are training them to ensure the industry's future, but nothing is set in stone."

"Thirty years ago the Swiss used to make fun of the very first Japanese cars, but now they rush out to buy them," said Michel Jeannot.

swissinfo, Marzio Pescia

In brief

In Switzerland the first watch appeared in Geneva in the 16th century. By the end of the century, the city was well known for its watchmaking industry. The first watch company in the world was established in Geneva.

Today, after more than four centuries of successes, crises and restructuring, the watch industry is Switzerland's third most important export sector after the engineering, pharmaceutical and chemical industries.

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Key facts

The Swiss watch industry employs approximately 40,000 people, in particular in the Jura region stretching from Geneva to Basel.
The industry reckons that it needs to hire another 2,100 people by 2010.
It exports nearly 95% of its production.
The main markets are the US, Hong Kong, Japan, Britain, Germany and Italy.

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