The Swiss watch industry has always been a hallmark of the world of luxury watches, but what if I told you that at one point, the Swiss watch industry almost met its demise, and it was all thanks to Seiko? Yes, you heard that right. In the 1970s, Seiko, a Japanese watch brand, almost toppled the Swiss watch industry, and this is the story of how it happened.
The Swiss watch industry has long been synonymous with luxury, precision, and quality. For centuries, Swiss craftsmen have painstakingly crafted timepieces that have become the envy of watch enthusiasts worldwide. From brands such as Patek Philippe, Rolex, and Audemars Piguet, the Swiss watch industry has earned its reputation as the pinnacle of horological excellence.
The Rise of Seiko and Japanese Watchmaking
While Switzerland enjoyed its status as the center of the watchmaking world, Seiko began its journey in Japan. Founded in 1881 by Kintaro Hattori, Seiko started as a small watch repair shop in Tokyo. The company soon expanded, with Hattori producing his own watches under the Seiko brand in 1924.
As the 20th century progressed, Seiko continued to develop innovative timekeeping technologies. In 1969, they introduced the Seiko Astron, the world’s first quartz watch. The Astron’s introduction marked a turning point in watchmaking history and set the stage for Seiko’s challenge to the Swiss watch industry.
The Quartz Revolution: Seiko’s Threat to Swiss Dominance
The Quartz Revolution, which took place in the late 1970s and early 1980s, was marked by the widespread adoption of quartz movements in the watch industry. Japan became the world’s top manufacturer of timepieces, surpassing Switzerland, which had previously been known as a timepiece kingdom. The innovation of quartz movements allowed for more accurate and affordable timepieces, leading to a significant shift in consumer preferences. However, this had a devastating impact on traditional watch brands and manufacturers from Switzerland and the United States, as they were slow in responding to the mass production of watches and the introduction of quartz technology.
Swiss and American watchmakers struggled to keep up with the mass production systems and concentrated marketing strategies of a few Japanese manufacturers, leading to a decline in the number of manufacturers and employees in Switzerland and the United States. Swiss watch exports in the early 1980s dropped to half of what they were in 1974, their peak year for exports. The rising price of the Swiss franc, production and raw material costs, and labor costs all occurred simultaneously, causing a sharp decline in watch sales and forcing many watchmakers out of business.
In contrast, Japanese manufacturers expanded their markets with logical mass production systems and concentrated marketing strategies, regardless of whether they produced quartz or mechanical watches or their price ranges. By the mid-1980s, the number of Swiss watch companies dropped from over 1,600 to less than 600, and the industry’s workforce plummeted from 90,000 to 33,000. Switzerland and the United States used to produce pin lever type watches, known as Roskopf watches, to support their timepiece industries. However, the low-priced precision of quartz watches destroyed this field.
Overall, the Quartz Revolution had a significant impact on the traditional watch industry, leading to a decline in the number of manufacturers and employees in Switzerland and the United States. The mass production systems and concentrated marketing strategies of a few Japanese manufacturers helped them expand their markets, while Swiss and American watchmakers struggled to keep up with the introduction of quartz technology.
The Swiss Crisis and the Fight for Survival
The newly formed SMH (Swiss Corporation for Microelectronics and Watchmaking Industries Ltd.) implemented the “Swatch strategy,” which involved producing cheap, disposable watches that could be worn as fashion items. This strategy proved successful, with Swatch sales reaching 23 million pieces in 1986 and 100 million pieces in 1992, helping to revive the industry.
SMH also implemented a logical and efficient reorganization of the entire group, consolidating all movements into ETA and clarifying differences between brand concepts through selection and concentration. Omega, as a core brand, was mainly given resources, while SMH purchased a steady succession of parts subcontractors and established a more logical production system globally through international division of labor. Distributors/channels divided by brands around the world were consolidated into single agents/local subsidiaries per country, promoting global brand strategies.
After SMH changed its name to the Swatch Group in 1998, it acquired luxury brands such as Breguet, Jaquet Droz, and Glashütte Original. The Vendome Luxury Group, which included the Cartier, Mont Blanc, and Tobacco brands, was reorganized under the Richemont Group in 1988. Since then, Richemont has acquired watch and jewelry brands such as Piaget, Vacheron Constantin, Panerai, IWC, Jaeger-LeCoultre, and A. Lange & Söhne, one after another. The world’s largest luxury goods group, LVMH, also began investing in timepiece manufacturing and sales from 1999. LVMH acquired Zenith, TAG Heuer, Hublot, Bulgari, and many other famous luxury brands, reorganizing them within its large capital group.
Despite the emergence of quartz watches, luxury mechanical watches maintained their prestige due to their unique qualities, such as artistic craftsmanship, elaborate and complicated structures/functions unique to mechanical movements, and high added value of advanced technologies such as new mechanisms and materials. Sales of mechanical watches with high added value increased year by year globally, and the total export value of Swiss watches increased by about four times from 1991 to 2011.
With the significant expansion of the timepiece industry fueled by growing demand for luxurious mechanical watches, major groups in the luxury field began acquiring and reorganizing watch brands from 1995 onward. The Swatch Group acquired Blancpain, Breguet, Jaquet Droz, and Glashütte Original, while the Richemont Group acquired brands such as Piaget, Vacheron Constantin, and Panerai. LVMH also began investing in timepiece manufacturing and sales, acquiring Zenith, TAG Heuer, Hublot, and Bulgari. These groups also encouraged reorganization through vertical integration of watch distribution networks.
Overall, the Swiss watchmaking industry’s response to the quartz watch crisis led to a successful reorganization and restructuring effort that revitalized the industry. The emergence of luxury mechanical watches and the consolidation of major watch brands into large groups further contributed to the industry’s growth and expansion.
Seiko and the Swiss Watch Industry Today
Today, the Swiss watch industry has not only survived the Quartz Revolution but has also emerged stronger than ever. However, it is important to recognize the role that Seiko played in shaping the industry’s trajectory. By pushing the boundaries of watchmaking technology and forcing the Swiss to adapt and innovate, Seiko has made an indelible impact on the world of horology.
