Opinion: Is Swiss Watch Movement Maker ETA Cutting Off the Competition or Improving the Breed?

Imagine a world where virtually all mainstream auto manufacturing companies use Ford engines. Chevrolet, Chrysler, Toyota, Nissan, Audi, Volkswagen, Kia, Honda, Mazda, Hyundai, BMW — all of them source their motors from Ford. Only a few high-end brands with extremely deep pockets and long traditions, like Mercedes, Bentley, Ferrari, and Rolls Royce, make their own power plants. The rest, Ford’s competitors, buy engines from Ford and put their own names on the valve covers.

WEIGHING IN: Why Do Watches Cost So Much? | The Cigar, Simply | The Side Effects of Learning Thricely | Running From Responsibility

This scenario is roughly true in modern wristwatch manufacturing. Swiss watch movement maker ETA supplies much of the horological world with movements and ébauches (partial movements in need of finishing). Some brands simply plug in the ETA engines and carry on. Others tune them to their own specifications before labeling them as their own. In fact, for reasons we won’t discuss in this article, this situation played a large part in the salvation of the Swiss mechanical watch industry.

Then in 2002 Nicholas Hayek, then chairman of The Swatch Group (ETA’s parent company), announced that ETA would soon begin tapering back the supply of ébauches to the world of Swiss watchmaking beyond their sister brands (Omega, Blancpain, Breguet, Longines, Rado, Tissot, Hamilton, Swatch, and several more). Effectively, the Swatch Group decided to stop selling to the competition, albeit gradually.

Within the watch community, this caused an uproar nearly akin to the quartz crisis of the 1970s. The majority of Swiss watch brands used ETA movements, and they feared for their economic lives. In 2003 the Swiss Competition Commission launched an investigation — and the pissing match started in earnest. ETA claimed they would wean their customers gradually, giving them time to find other suppliers or develop their own in-house movements. At the same time, they claimed that this was a move aimed at ultimately strengthening the Swiss watch industry. Competition would be improved. Brands would be stronger and healthier for having their own in-house movements — or they would die.

In 2005 the Commission ruled that ETA was in breach of Swiss law as it pertains to cartels. ETA was ordered to continue supplying ébauches to current customers at levels based on then-current supply levels and to gradually reduce numbers over a period of years. This ruling was extended in 2012, with supplies to be reduced gradually until 2019 (2023 for Nivarox products, the temperature-change resistant hairsprings upon which balance wheels are suspended).

So that’s the background. Why does this matter? Who’s right? Do we care? And if so, why?

When ETA announced their intentions in 2002, some brands — Panerai and Breitling, for example — undertook the expense of years of R&D, machine costs, factory investments, etc., and began development of their own in-house movements. That’s all to the good, and some pretty cool movements have resulted.

But first and foremost, we care about this issue because it could severely undermine and possibly wipe out some of the interesting but less-moneyed brands that rely on ETA to supply movements. Without the deep pockets to develop their own movements, their choices are few. Basically, the alternatives are ETA competitor Sellita or manufacturers in the Far East (Japan and China). Sellita makes near-clones of several ETA movements, for instance. Japanese makers Miyota (Citizen) and Hattori (Seiko) might be candidate suppliers — they make fine movements — if not for the importance of the Swiss-made label. Some Chinese brands (Seagull, for instance) are making marvelous progress in quality and reliability, but again, we suspect no one is going to tolerate a Swiss brand with a Seagull movement. With all due respect, movements from Far East suppliers aren’t really an alternative at all.

On the other side of the argument, the scale of concern over the need to develop in-house movements borders seems suspect. By one count, 124 pocket watch companies existed in the United States between 1809 and 1969. Presumably, many of these companies made their own movements. We’re not talking grand complications here. We’re talking about replacing an ETA 2824 or 2892 or a Valjoux 775x. Replacing the 7750 family of chronograph movements is a little harder but, overall, this is not rocket science. Indeed, the horological principles behind these basic movements have been around for well over two centuries, as has the basic design: the layout of the gear train, escapement, plates and so forth.

When I can search the web and find a photo blog of a hobbyist who decided to make his own watch from scratch, movement and all, I wonder how difficult it might be for a watch brand to find an engineer or two and do the same (admittedly, this particular hobbyist used portions of the keyless works, escapement, and some of the going train scavenged from an ETA 2824). Extending to small-scale mass production through tried and true manufacturing principles should be little additional challenge. I suspect however, that design is not the challenge. The challenge is having the wherewithal to invest in the people and machines capable of performing the tasks.

At the end of the day, I agree with the late Mr. Hayek. Forcing smaller brands to develop their own movement manufacturing capabilities will improve the wristwatch industry. However, it will come at the expense of the brands not capable to rising to the challenge. As design and quality improvement pioneer W. Edwards Deming once said, “Learning is not compulsory… neither is survival.”

Related Topics