Well, I guess it is time to clarify a few things here

Original BDWF archived information from James
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James Elsener
Posts: 20
Joined: Tue Oct 02, 2018 8:27 pm

Well, I guess it is time to clarify a few things here

Post by James Elsener » Wed Apr 17, 2019 3:58 pm

First things come first. The Ordinance of December 23, 1971 is what regulates the rules of origin of Swiss Made watches. It applies to all watches and not only to those manufactured by members of the Fédération de l’industrie horlogère suisse FH! Every Swiss Ordinance is a legally binding order issued by the Swiss government. You find the original legal text of the Ordinance on the relevant page of the World Intellectual Property Organisation.

A Swiss Made watch is defined by its having a Swiss Made movement which has been cased in a watch case in Switzerland. The fine-tuning and final inspection of the watch has to take place in Switzerland as well.

The Swiss Made movement is clearly defined as being Swiss if the value of the parts manufactured in Switzerland is at least 50% of the value of all the components used in the movement. Cost of assembly are excluded!

The Swiss Made movement must be assembled, fine-tuned and controlled in Switzerland.

That is in short what constitutes a Swiss Made watch.

If a manufacturer wants to be able to stamp Swiss Made on the watch case it is ruled by the Ordinance too. Here the ordinance says that at least one important step of manufacturing a watch case either stamping or milling, or the labour intensive polishing has to be carried out in Switzerland. If I break down the cost of my cases (they are all Swiss Made), the milling and the polishing are approximately 50% of the value of the case excluding the crystal.

How can a Swiss Made watch be Swiss Made if the brand has no manufacturing presence of its own in Switzerland? The watch industry in general is highly specialised. This means that each company specialises in doing one job only. Companies are thus specialised in making a movement, others just do cases, others just do dials, the next one does just hands, etc.

The final assembly of the watches is then either done by the brand itself or it is done by specialised assembly companies we call “términeur”. Matter of fact, most watches are assembled by these assemblers. This makes a lot of sense since such companies achieve, just like the components specialists, a very high degree of routine and know-how and therefore the quality will be more even than it might be with a company doing everything in-house. A company like Rolex or Patek Philippe is to me the exception proving the rule. How many of these assemblers exist? There are about 180 such specialist assemblers active in the Swiss watch industry. They assemble watches from the lower end to the highest end.

How big is the Swiss watch industry? On the site of the Fédération de l’industrie horlogère suisse FH you find the relevant statistics[/ur]. About 95% to 98% of all watches are exported. As you can see from the PDF the entire Swiss watch industry (and not only the members of the FH) manufactured in 2009 the small number of 4,811,776 mechanical movements. Of these 3,735,573 were cased in Switzerland and exported as Swiss Made watch and 1,076,203 were exported as uncased movement. From experience I know that about 1/3 of the figure of 1,076,203 are for repair purposes of watches made in earlier years. Many countries lack proper watch makers and they just swap movements if the watches need to be serviced or repaired.

Take a look at the number of quartz movements. You shall see that 21,503,630 quartz movements were made in Switzerland. Here some 17,918,579 movements were used in Swiss Made watches and the remainder was exported as movements. I estimate that the about 50% of this number is exported to be used in repairing watches.

On the website of the Japan Clock & Watch Association you shall find their estimates of the worldwide watch production. They are reckoned to be the most accurate in the industry. Take a look at the [url=
http://www.jcwa.or.jp/eng/statistics/in ... 8.html#116 ]figures of 2008. If you compare the figure 1,080,000,000 pieces to the Swiss output of 32,400,656 pieces including movements for 2008 you shall see that the Swiss watch industry accounts for 3% of the world-wide watch industry! Not much isn’t it?

We in Switzerland are famous for watches only because we are the nationa having been the longest at it from an industrial point of view. This lead to our being able to bring the first truly reliable watches to the market place. But that is another story.

In order to be issued a certificate of origin (this is needed for importing a watch at the final destination for most countries) by the chamber of commerce where the manufacturer is located we have to bring in the breakdown of cost of the watches mentioned in the certificate and substantiate that with the invoices from the supplier of the components. So from that point of view there is no lee-way. And this applies to the supplier of the components as well because he has to substantiate his cost as well! So much to the fact that a CL-888 is not Swiss Made.

As I outlined above the watch industry is highly specialised and fragmented. I shall share with you the fragmentation of our watches in this text as well.

Not only Switzerland but Germany and France have developed a strong components industry over the course of the centuries. Up to 1914 there was close to no border control between Switzerland, France and Germany in fact in most of Europe. So people and companies went to work at either side of the border without the hassle we have to undergo in our modern world. That is why companies on two sides of the borders are operational till today. By the way, the largest components supplier base you find in India these days and surprisingly not in China anymore.

Like many Swiss watch companies we have built up over the course of the years a distinct knowledge of how to get the system working that has been built-up over hundreds of years to our customers’ and therefore to our benefit.

The system of specialised components manufacturing was developed by the Swiss watch maker Daniel Jeanrichard (1664-1741) in the late 1600s to early 1700s in Le Locle in the Jura Mountain range here in Switzerland. It was Jeanrichard's original idea of outsourcing parts to specialised suppliers and then assemble these parts to fully built watches that made our hobby possible. Before his inventing the supply chain, all parts for a watch were made from A - Z by a single watch maker who then assembled the parts into a watch. Obviously this made for a very limited volume of production and high prices.

What countries do the components of our watches come from?

Stainless Steel Disks for case = South Korea
Manufacturing of case = Switzerland
Bottom of case = Switzerland and engraving done in-house in Switzerland
(our old French manufacturer went out of business last year)
Movement = Switzerland (CLARO-Semag Bellinzona for mechancial watches and Ronda of Lausen for quartz)
Dial = Germany (disk), guillochage done by a specialist subcontractor in Switzerland
Hands= hours and minutes Germany / seconds India
Crystal = Hong Kong for sapphire and France for minerals only
leather strap = Italy
buckle = Switzerland (before October 2009 from France. Company went out of business)
stainless steel bracelets = Switzerland (steel from South Korea)
stainless steel clasp = Switzerland (before October 2009 from France. Company went out of business)

A watch’s pricing is determined by the potential price you can get for it in the market place. This also means that as manufacturer on some watches you make a profit and that on others you incur a loss. Over the reach of the collection you must make a profit or otherwise you go bankrupt.

On an average automatic watch of ours with a leather strap the cost breakdown per components group and the profit margin look as below:

Case including bottom, crystals, engravings and crown 28.40%
Movement including alterations and assembly of movement 34.50%
Dial 6.80%
Hands 1.70%
Leather Strap and buckle 4.80%
Assembly cost of watch 7.60%
Provision for warranty 2.70%
Cost of tooling if offset over 1,000 pieces 3.50%
Profit margin 10.00%

You need quite a lot of tooling/programming of CNC-machines to make a watch. These are used for cases, dials, hands, etc. Tooling cost have to be paid up front to the subcontractor. The investment in a new series is therefore often staggering.

The above breakdown is for our watches. Others might look radically different depending on the level of work required to make a single component. And of course volume plays its part as well and might alter the spread of the above dramatically.

Marketing and distribution cost are a hefty chunk of the consumer price of a watch. They almost always rapidly surpass the cost of the watch.

The watch trade is a very vital part of the watch industry and matter of fact the only customer of a watch manufacturer. It would simply be impossible for a manufacturer to reach the number of consumers required to run a factory without having distributors taking care of that. We being part of an Internet community like BDWF tend to overestimate the reach of the Internet by far. It is the retailers whatever their shape and size which determine the volume of watches sold and not the manufacturer and his web presence! Sales to WIS are the icing on the cake so to speak and the volume comes from consumers falling for it when they are in need of a watch. Compulsive buying is just for us WIS.

As I am very fond of manual work, the route of full-fledged consumer brand was closed to us. The cost of all of our watches would have become more than the market place would ever bear willingly.

To most people manufacturing watches is a passion much like owning watches is a passion to many of the readers of this post. To most of us manufacturers making watches means therefore putting fun before making money. We never grow into the required industrial scale.

For those of you wanting to take a go at manufacturing watches I am open to take your offers for my company. ;-)
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