From Quartz to Smartwatch — Will History Repeat Itself?

As smartwatches become more prevalent, it might be worthwhile for the venerable Swiss watch industry to reflect back on the turbulent 1970s following the advent of the quartz watch.

Will history repeat itself for Swiss watchmakers — if they choose to stand by as smartwatches steal market share — or will they learn from the mistakes of their predecessors and adopt some of the disruptive technologies? Might we see a Swiss-made mechanical sensor hybrid watch with a sub-$5,000 price tag to offset the possible loss of revenue and market share from Apple, Samsung and other smartwatch innovators?

First, a history lesson: the last revolution that would forever change the watch industry started in 1962, when the Swiss watch industry founded the Centre Electronique Horloger (CEH) research center in Neuchâtel. The mission of the research center was to reinvent the wristwatch and develop a Swiss-made quartz wristwatch.

Around the same time in Japan, Seiko and Citizen were focusing on building their own electronic watches. Until that time, all watches manufactured in Japan since the late 19th century had been mechanical. On Christmas Day 1969 in Tokyo, the world’s first commercially available quartz watch was introduced — the Seiko 35 SQ Astron. With a limited production run of only 100 watches, Seiko 35 SQ Astron retailed for $1,250, roughly the same price as a Toyota Corolla in Japan at the time.

The Seiko 35 SQ Astron was accurate to within five seconds per month, or 100 times more accurate than any watch on the market. The accuracy combined with the fact it ran continuously for a year would help change the watch industry forever.

Soon after, in 1970 the CEH introduced consumers to the first Swiss-made quartz wristwatch — the Ebauches SA Beta 21 quartz. Yet when the Ebauches SA Beta 21 failed to catch on with the public, instead of doubling down, the Swiss watch industry returned its focus to crafting handmade mechanical watches. Meanwhile, the Seiko 35 SQ Astron would go on to usher in a revolution in watches.

As the Swiss watch continued to focus on their heritage, the exports of Swiss-made mechanical watches declined from 40 million in 1973 to only 3 million 10 years later. During this turbulent time, there was a massive downsizing of the Swiss watch industry, with several watch companies closing their doors. The number of individuals working in the Swiss watch industry fell by nearly half over the decade, to 47,000 by 1980.

It was not until 1983 that the Swiss watch industry rebounded to compete with the Japanese — with the launch of Swatch. The plastic watch was a big success, paving the way for the revitalization of Swiss watchmaking.

Who Will Join the Next Revolution?

Fast forward to today: the next revolution that could forever change the watch industry may have begun in September, with the official introduction of the Apple Watch. Could history once again repeat itself? If Swiss watchmakers follow the same path that they followed in the 1970s, it may very well.

Just ask Elmar Mock, co-inventor of the Swatch. He recently warned that Swiss watchmakers may have already “missed the boat” when it comes to capitalizing on the smartwatch opportunity.

So far, the Swiss reaction to the challenge posed by the Apple Watch has been a mix of indifference as well as some level of appreciation.

“I don’t think at all that this will change what we are doing,” Patrik Hoffmann, CEO of Ulysse Nardin recently told the Financial Times, following the unveiling of the Apple Watch. Hoffmann noted that luxury mechanical watches such as his — which start around $9,000 and can top $1 million — aren’t really in the same market as smartwatches that carry a price tag in the hundreds.

Meanwhile, Jean-Claude Biver, LVMH president of watches and jewelry, says he recognizes the opportunity that smartwatch technologies present to the Swiss industry, but doesn’t necessarily see it as a threat. “Adapt to this new business model and don’t underestimate the technology,” he told the FT. “But, at the same time, don’t forget that it is not the first revolution experienced by the watch industry — and it will certainly not be the last.”

If there was a history lesson from that last revolution, it’s that adaptation to a changing marketplace is key for any business — even Swiss watchmakers who can take great pride in their craftsmanship. Embrace the disruptive forces of technology and make them your own.

Biver has raised the possibility of a smartwatch for the company’s TAG Heuer brand and, as Apple sets its sights on capturing market share from the Swiss, other watchmakers might be wise to explore a similar move. For example, the strategic development of a mechanical-sensor hybrid watch retailing for less than $5,000 would not only provide a hedge against smartwatches, but potentially change the course of history — just as Seiko did more than four decades earlier.

The Seiko 35 SQ Astron quartz watch changed the watch industry by making owning and operating a watch simple. Similarly, the smartwatch is redefining what a watch is what it means to the consumer. The clock is ticking.

From Quartz to Smartwatch — Will History Repeat Itself? is an article written by Brulte & Company Co-Founder Grayson Brulte that was originally published on General Electric Reports.

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