orangeleader.com (Orange, Texas)

Z_CNHI News Service

October 22, 2013

For Swiss watchmakers, not yet time to worry about smartwatches

FRANKFURT, Germany — In the 1970s, Switzerland's watchmakers were almost put out of business when they underestimated the importance of the quartz watch. Though the industry recovered and is prospering, today it faces a new technological challenge from "smartwatches" such as Samsung Electronics's $299 Galaxy Gear.

As with quartz four decades ago, the devices are being met with a shrug. According to a survey by consultants Deloitte, two-thirds of executives in the Swiss industry say smartwatches pose no threat.

"How would you like it if your boyfriend brings you a smartwatch instead of a nice pavé diamond watch?" said Johann Rupert, the billionaire controlling shareholder of Cie. Financiere Richemont SA, which sells watches under 13 brands including Cartier and Vacheron Constantin. "I'm not sure it's going to have a huge impact on classic watches. "

The industry should brace for the arrival of smartwatches, said Andreas Hofer, a partner at Boston Consulting Group in Zurich. Researcher Strategy Analytics predicts global sales of 1 million smartwatches this year and 7 million in 2014. Sanford C. Bernstein forecasts that Apple could see iWatch revenue of $2.3 billion to $5.7 billion in the first year of selling such a device.

Swiss watchmakers "shouldn't say too quickly it's a trend that won't affect them," said consultant Hofer, who checks his iPhone to be on time. "There should be some modesty."

The high-end Swiss watch is so low-tech that from a practical standpoint, it should no longer exist. When battery- powered quartz watches arrived in the 1970s, many consumers abandoned older mechanical ones — both those that require winding and self-winders, which tap energy from the motion of the wearer's wrist.

The number of Swiss employed in the industry fell from about 90,000 in 1970 to just over 30,000 in 1984, and companies decreased from 1,600 in 1970 to 600 today, according to the Federation of the Swiss Watch Industry, a manufacturers' group.

Quartz watches were cheaper and more reliable. Even the most expensive mechanical watches lose several seconds a week and require maintenance every few years that can cost more than two new iPhones.

Despite its continued reliance on centuries-old technology, the industry has fortified itself since the 1980s. Switzerland's exports of timepieces rose 11 percent last year to a record 21.4 billion francs ($23.7 billion), based on wholesale prices, according to the Federation of the Swiss Watch Industry. Exports climbed 8.5 percent in September from a year ago, data from the federation showed today.

Mechanical watches made up a third of revenue in the $58 billion watch market last year, and the segment will expand 33 percent by 2016, researcher Euromonitor International forecasts. High-end Swiss watches can fetch stratospheric prices: Patek Philippe's Sky Moon Tourbillon runs $1.3 million and Franck Muller's Aeternitas Mega 4 is $2.9 million.

"The more you learn about watches, the more you realize there is real know-how behind them," said Gabriel Vachette, 30, who runs a website about watches and owns roughly 20. He got the bug from his father, who has 100.

"You can tell a story with a beautiful watch," Vachette said. "People who buy a Galaxy Gear will get rid of it in a year or two."

Many Swiss watchmakers will likely continue to do well because a smartwatch may often be an addition to a collection rather than a replacement for a $5,000 Rolex, according to Jon Cox, an analyst at Kepler Cheuvreux in Zurich.

"If you're a successful young investment banker you can probably afford to own both a luxury watch and a smartwatch," Cox said. "A Swiss watch really is a statement about yourself so other people can clearly see you're wealthy. You don't get the same 'wow' factor with a smartwatch."

At greatest risk are low- and mid-range brands such as Swatch and Tissot, Cox said. With many timepieces in the $200- $400 price range, they'll often be in direct competition with smartwatches in the minds of buyers.

Samsung's watch "shows nothing new," said Swatch Chief Executive Officer Nick Hayek. Swatch has made interactive watches for 20 years, he said, "and has gained precious experience." Tissot, a Swatch unit whose watches have had electronic touch screens since 1999 and incorporate altimeters and electronic compasses for hikers and divers, has said it will continue adding technology.

Investors are backing the Swiss watchmakers. Swatch and Richemont shares have both outpaced Switzerland's benchmark SMI Index this year, and 20 analysts recommend buying Swatch while none recommend selling the stock.

"So far the concept of the smartwatch is questionable," said Michel Keusch, a portfolio manager at Bellevue Asset Management AG in Kuesnacht, Switzerland, which holds Richemont and Swatch shares among its 2.2 billion francs of assets. "You need to charge it every day. It's a miniature screen. Everybody has a smartphone anyway."

Keusch said consumers may initially snap up smartwatches amid media hype, but that the product may fade like calculator watches did in the 1980s. He says sales may start around 2 million units a year, a fraction of the 1 billion timepieces sold annually.

HTC Corp. is developing a smartwatch that uses Google Inc.'s Android software and can take pictures, according to a person familiar with the matter. The smartwatch will join a growing segment of wearable technology that already includes devices from Samsung and Sony Corp.

History is littered with high-tech watches that are no longer on store shelves. Microsoft formed alliances in 2003 with Fossil and Citizen for watches that could receive information such as news, sports, weather, and stocks. Swatch and Tissot joined the software maker with similar products the following year. By 2008, they had all been pulled from the market.

One Swiss watchmaker embracing new technology is Arny Kapshitzer. His startup, Hyetis, says its $1,200 Crossbow ) a self-winder with a camera and GPS that can pair with phones — is the first Swiss smartwatch. Kapshitzer presented his idea to several Swiss brands, and the few that met with him said smartwatches are just a fad that will quickly die out.

"I don't believe it: I think it's a real market and the future of the watch industry," Kapshitzer said. Swiss watchmakers "are still in a comfortable situation. We're in a situation of resistance to innovation. It's a big mistake."

1
Text Only
Z_CNHI News Service
  • Screen shot 2014-04-18 at 4.44.15 PM.png Paint, doodle and sketch: 3 apps for art lovers

    In the absence of a palette of watercolors and a sketchpad, these three apps can fill in as your art supplies of choice.

    April 18, 2014 1 Photo

  • Smartphone kill switches are coming

    Smartphones need kill switches. It's a relatively easy solution to the pricey (and irritating) problem of smartphone theft. But who would have thought that the big carriers would team up with Apple, Google, Microsoft, Nokia, Samsung and lots of other manufacturers to voluntarily begin adding the technology by July 2015? The cooperative spirit! It makes so much sense!

    April 18, 2014

  • Why do wolves howl?

    Of all the myths that dog the wolf, none is more widely accepted than the idea that wolves howl at the moon. Images of wolves with their heads upturned, singing at the night sky, are as unquestioned as a goldfish's three-second memory or a dog's color-blindness (both also myths).

    April 18, 2014

  • Biggest student loan profits come from grad students

    This week, the Congressional Budget Office projected that the federal government would earn roughly $127 billion from student lending during the next 10 years.

    April 18, 2014

  • quake.jpg Pennsylvania won’t take action following Ohio ruling on quakes, fracking

    Pennsylvania officials plan no action despite new Ohio rules on drilling that affect a seismically active area near the state line.

    April 18, 2014 1 Photo

  • taylor.armerding.jpg Warren's populist pitch on student loans is off key

    Sen. Elizabeth Warren's populist rhetoric pumps up students about their loan burdens, but she conveniently neglects to mention the real problem - the exorbitant cost of college - much less how she's benefitted from those high prices.

    April 18, 2014 1 Photo

  • VIDEO: Boston bomb scare defendant appears in court

    The man accused of carrying a backpack containing a rice cooker near the Boston Marathon finish line on the anniversary of the bombings was arraigned Wednesday. He's being held on $100,000 bail.

    April 17, 2014

  • Consumer spending on health care jumps as Affordable Care Act takes hold

    Nancy Beigel has known since September that she would need hernia surgery. She couldn't afford it on her $11,000 yearly income until she became eligible for Medicaid in January through President Barack Obama's signature health care law.

    April 17, 2014

  • Lindley, Tom.jpg Golf turns into snooze-fest without celebrities like Tiger and Phil

    The Masters lumbered on last week without two of pro golf's biggest names, Tiger Woods and Phil Mickelson, and fans changed the channel. The PGA needs someone with star power if it's going to lure people back to the game.

    April 17, 2014 1 Photo

  • The case for separate beds

    The other night I slept on a twin bed in the guest room of the house I share with my husband and our two kids.
    It was the best night's sleep I've had in years.

    April 17, 2014

Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide