Swatch limits movements

Original BDWF archived information from James
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James Elsener
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Joined: Tue Oct 02, 2018 8:27 pm

Swatch limits movements

Post by James Elsener » Wed Apr 17, 2019 3:46 pm

In July 2002 ETA announced that they will be discontinuing the supply of movement kits (ébauches) as of 2006. The initial phase-out period was thus three years.

The movement assembler Jaquet SA from La Chaux-de-Fonds filed a suit with the Swiss Anti-Trust Committee on August 13, 2002. Jaquet SA does not only assemble movements out of ETA-supplied ébauches but also designs and manufactures Jaquet movements using the assortments (springs) from Nivarox. These movements are used by a variety of companies.

Jaquet's was joined in its suit by Sellita SA from La Chaux-de-Fonds on August 30, 2002. Sellita's business model at that time depended 100% on the assembly of ETA supplied ébauches only.

After lengthy investigations and protracted negotiations the Swiss Anti-Trust Committee ruled that ETA had to continue supplying ébauches through to 2010.

The basic formula adopted was as below:

For the period of 2003 - 2008: 85% of the average number supplied in 1999/2000/2001
for the year 2009: 50% of the average number supplied in 1999/2000/2001
for the year 2010: 25% of the average number supplied in 1999/2000/2001

The remainder had to be supplied in fully built up movements if the plaintiffs elected to take them.

The average number of ébauches supplied referred to the single calibre family. The 7750 family is made up of the ébauches of the 7750, 7751; 7752 and 7760.

Within this family the plaintiffs were granted to shift volume on a per calibre basis by up to 30% per year as long as the total number per calibre family did not exceed the volume ETA had committed to under the ruling.

At the moment of the ruling ETA had a market dominant position in ébauches selling for up to Swiss Francs 300.00. They had a market share of 95%.

In the area of fully built movements their market share was 75%. The lacking 25% going mostly to the plaintiffs who sold the ETA-supplied ébauches as assembled movements.

What is interesting to see is that the ruling has so far had not any sizeable effect in changing the proportions! The hoped for coming about of alternatives has thus not materialised.

However, what we are talking about is 10% of the market of Swiss Made watches. 90% being quartz watches!

Out of the above follows as well, that due to the volume position of ETA in-house calibres will always be more expensive than the ETA supplied movements. Watches are a numbers game and movements even more so.

Building a new movement costs all in all approx. Swiss Francs 10,000,000.00 to start with. If you want to add complications like retrogrades, moon phases, etc. the amount easily doubles. If you have to recoup this investment on the rather limited number of movements a single manufacturer needs, you shall appreciate that in-house calibres become worth your while only for watches priced in excess of US$ 5,000.00 or thereabouts.

A viable alternative is to take supply of fully-built movements from ETA and take them apart and modify them to the manufacturer's individual tastes. This is what some companies like Breitling or TAG-Heuer are doing already successfully for their mid-range watches. Depending on the degree of changes such a movement might have not much in common anymore with the base movement. The investment is however quite a lot less as a small amount of computation and dies are involved compared to designing and manufacturing a movement from scratch.

I know what I am talking about because I set out to design our own movement in 2006 as well. Due to our limited number of production and the ever climbing cost I had to abandon the project by late 2007. I would never have been able to recoup the capital cost even if I had succeded in selling most of the movement's production to third parties.
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