In-House Movements A Must? Nicolas Hayek Sends Wakeup Call to Swiss Watch Industry ¶
In 2004 the Swiss Competition Committee (Comco) vetoed ETA SA's decision to reduce their supply of movements to watch manufacturers outside of the Swatch Group (ETA's parent company). ETA intended to discontinue their supply of ebauches in 2006. Ebauches are unassembled, blank movements that companies like IWC, Panerai, and Breitling modify and finish to fit their watches. These modified mechanisms are named with proprietary calibers like the Breitling caliber 13, which started its life as an ETA Valjoux 7750.
Comco and ETA settled on the terms of the supply halt early in 2005. The settlement stipulates that the movement manufacturer has to 'phase out' the sale of its ebauches. This year they were allowed to reduce their supply and in 2010 they will be allowed to stop offering the blank movements altogether. At that point ETA will sell only the more expensive, fully assembled, and finished movements. According to Comco the phasing out will give smaller scaled Swiss watch manufacturers, time to find alternate sources for their mechanical needs. According to Swatch patriarch Nicolas Hayek, the change was meant to coerce the Swiss watch-making industry into innovating and developing new infrastructure. Hayek believes that only this will prevent an imminent crisis.
The reality of manufacturing movements is daunting, however. ETA is by far the largest movement manufacturer left in Switzerland, producing more then five million mechanisms per year. They own more then twenty manufacturing facilities internationally. For these reasons, ETA is often the only viable option for small watch manufacturing companies, who do not have the resources to manufacture their own movements. The difficulty of setting up such an operation is the reason why ETA's intentions caused such an uproar within the trade. It also explains why most watches that use in-house movements are so expensive to the end consumer. There was an uproar within the trade for this exact reason as well.
It is uncertain how ETA's decision will ultimately affect the Swiss watch industry after 2010, but we are already seeing the effects of the first phase. U-Boat, for instance, is not able to manufacture enough watches to satisfy the demand. This has always been the case for this hot, Italian brand, but they are now stating the reason as lack of movements. The delay to get a watch is much longer then usual. Some of the base models will only be available in late September at the earliest. This is clear evidence that there are less ETA movements to go around.
On the positive side, the Swiss watch industry will be forced to develop new sources for quality movements. Companies like Panerai and Alpina have already responded. The Alpina Avalanche Extreme Manufacture runs on the AL950 caliber, which is made entirely at the Alpina factory in Geneva. Nicolas Hayek would commend them for improving their facilities. With a price tag that is far bellow what one would expect to pay for a manufacture watch, the Avalanche Extreme should also be commended by all lovers of fine watches.