When Swiss rival Swatch cut supply lines, Tag Heuer made the announcement that the brand would be sourcing parts from Japanese manufacturer Seiko. The change, the Watchmaker states, would not harm the prized “Swiss made” tag.
Swatch, which has been the main supplier for the Swiss watch industry for decades, has sent watch companies searching for in-house production of materials. Some companies have opted to form alliances with other makers of dials, movements, and cases for their prestigious watches. The move was made by Swatch in order to allow it to concentrate on its own brands, encouraging rivals to build their own lines from the ground up. Tag Heuer, which is a part of French luxury group LVMH, announced its deal on Wednesday to use parts from Seiko. The use of these parts would not impact its “Made in Swiss” label, as Seiko Instruments Inc. is a member of the Swiss Chronometry Society.
It is believed that the transition will be a good thing for Swatch and competitors, as the knowledge of Japanese parts in Swiss watches will be highlighted in the days to come, despite the fact that the parts and movements are still constructed in Switzerland. The reduction in supply will benefit Swatch’s margins, as it will be able to charge the prices it wants while competitors are left investing in their own production lines.
The story doesn’t end there, however. It is currently being debated by the Swiss parliament on whether or not rules need tightening on what constitutes as “Swiss made”, in an effort to stop knock-off imitations by competitors from being able to further damage the country’s reputation for the highest of quality. The potential changes in the rulings could be both a blessing and a curse. In open support of the potential rulings, the Federation of the Swiss watch Industry claims that the Swiss Made rules would help protect jobs.
Manufacturers, however, do not agree. In fact, many of them believe that it could be the final blow that kills off the smaller companies that produce equally valuable watches. Due to the fluctuations and surges in the Swiss franc, companies have had to resort to importing parts in order to stay in business. However, the watch industry is the largest exporter, will be tied to keeping production in the country, which will dramatically increase the costs of operation. The latest proposal has been that at least 60% of a watch’s value should be produced in Switzerland, which is an increase from the previous 50% of movements being manufactured domestically. The motion has not yet been passed by the upper house.
Swatch is believed to be creating at least 500 jobs in Switzerland this year, while Tag Heuer is in process of building a new site that should create an extra 100 jobs. Tag Heuer has forecasted a sales margin of 1 billion Swiss francs for 2012. As Switzerland has a low 3% unemployment rate, watch manufactures are looking for hairdressers and manicurists to serve as staff, as these men and women are often nimble-fingered.