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Event Horizon 2020 - the year everything changes?

45K views 568 replies 72 participants last post by  docvail 
#1 · (Edited)
I had to look up the meaning of "event horizon".

Apparently it specifically refers to the theoretical boundary around a black hole, which acts as a barrier to light, but generally has come to mean any "point of no return".

Personally, I don't like that definition.

"Horizon" typically refers to the distant point at the end of our field of vision, where earth and sky meet, which is as far as we can see, literally, but metaphorically, it's also come to mean the limit of our perception.

I like the idea of an "event horizon" representing our inability to see beyond a specific event's occurrence sometime in the future - the event being so monumental, consequential, and unprecedented that we don't really know what comes after.

As in, what happens after 2020, when ETA will be allowed to stop selling movements to third parties?

Whether or not that will actually happen is itself a subject worthy of much debate and speculation, especially in light of the industry's health (or lack of it) in recent years.

In my view, I think it's better to consider 2020 as a future point in time when we're likely to see SOMETHING impact the industry. It could be ETA cutting off sales to 3rd parties, or, it could be ETA *NOT* cutting off supply.

But it seems to me that most people who consider ETA's actions are really only handicapping the possibility that they WILL cut off supply, as they've been saying they want to do, and what happens after.

However, I think it's equally important to consider what happens if they do NOT cut off supply.

Why?

Blame it on my true passion - poker.

Poker is a game of incomplete information, involving intentional deceit on the part of the players. In order to be a successful poker player, one must be able to analyze opponents' actions in context, and decipher their true intentions. The best players are those who can effectively combine mathematics, game theory, psychology, imagination, and improvisation.

When I heard that ETA wanted to cut off supply of movements to third parties, the first thing I wondered was WHY?

I understood that ETA's parent company, Swatch Group, gave an explanation, and that many people were repeating it, but I didn't buy it, and still don't.

https://www.nytimes.com/2011/12/10/business/swatch-group-to-trim-sales-of-watch-parts-to-rivals.html

From the NY Times article, the often repeated explanation:

"The company insists that its goal is not to strangle competitors. And it argues that its withdrawal will require rivals to raise their spending on manufacturing, thereby strengthening the quality and competitiveness of the Swiss watch sector as a whole.

'In no other industry do you have one company supply all the critical parts to the people who then compete directly with it,' Nick Hayek, Swatch's chief executive, said in an interview this year. Swatch said it had no further comment on the issue."

Spokesperson News conference Font Microphone Media

Uhm, pull the other one, Swatch Group.

Never in the history of industry has any company willingly given up an effective monopoly, of its own accord, and with no outside prompting, in order to benefit their industry as a whole, with nothing but the most magnanimous intentions.

I can think of a lot better reasons for these actions - in context - reasons which would better explain WHY Swatch Group would want to cut off supply - or make people *think* they wanted to cut off supply, perhaps more likely.

When I'm faced with a difficult decision at the poker table, I try to consider all the reasons why my opponent might be doing one thing versus another, then consider which reasons would be the most devastating, and diabolical.

My opponents are trying to do as much damage to me as they can, after all, so I tend to put the greatest weight on those reasons which would support those outcomes which would be most profitable for them, and least profitable or most devastating for me.

Why would ETA want to cut off supply, if not to help the industry, as they say? Why would they willingly give up their effective monopoly? I can only think of a few explanations:

  1. They are truly interested in seeing their competitors grow stronger - unlikely to be true, no matter what they or anyone else says.
  2. They want to create artificial scarcity, which supports higher movement prices - sensible, but could potentially backfire if competitors actually do step up to fill the void.
  3. They think cutting off 3rd parties will cut down on competition for Swatch brands - very much like the above, it's sensible, but could backfire if competitors step up to fill the void.

On the other hand, why would ETA want people to THINK they wanted to cut off supply, when in fact, they may NOT want to? I can think of some pretty diabolical reasons:

  1. They want to trick their competitors into revealing their own capabilities, capacities, and plans.
  2. They want to trick their competitors into over-investing in new production capacity, to fill the void, so that ETA can crush them by creating a glut of lower-cost movements on the market when it will do the most damage.
  3. They want to create opportunities to scoop up the assets of struggling competitors on the cheap, in the wake of the devastation their deceptiveness creates.

ETA and Swatch Group fought hard - very hard - to get court and government approval to cut off supply to third parties. It certainly looks like they're serious, or at the very least, like they want people to believe they're serious.

And, from what I can see, people have mostly believed they were serious - MECHANICAL - Who will succeed ETA?.

A lot of people and companies are scrambling to figure out how to fill the void ETA will supposedly create when they stop selling their movements outside the Swatch Group. Millions of dollars have been invested - tens, maybe hundreds of millions of dollars - and are still being invested in the effort.

Yet, for all that effort and investment, we're really not all that close to having enough good alternatives. In fact, we're pretty far away, really.

Sellita was, and may still be struggling to be completely independent from ETA, and many in the industry do not consider Sellita's movements as equal in quality.



Neither Soprod nor Eterna has either the capacity or the pricing to meet market demand.



STP and Ronda have yet to prove themselves. Every other Swiss company is either way more expensive, or quite underwhelming, or some combination thereof.

I'm not aware of any "truly" Swiss movement supplier with a ready supply of movements which can effectively be compared to the ETA 2824-2 in a performance-for-the-price sort of way, and many Swiss suppliers would still be dependent on Nivarox, also a Swatch Group subsidiary, one with an even bigger monopoly than ETA, for balance springs.

Swatch Group is metaphorically, if not literally, holding all the cards.

And what is the result of all that effort and investment on the part of all these people and companies?

Wait for it, because this is my favorite part of this story, the part where I figure out what my opponent at the poker table is REALLY doing...

https://www.reuters.com/article/us-...g-out-watch-movement-deliveries-idUSKCN0Z61FZ.



BUSINESS NEWS
JUNE 20, 2016
Swatch backpaddles on phasing out watch movement deliveries

ZURICH (Reuters) - Swatch Group SA (UHR.S) said on Monday Swiss competition authority Weko was examining if the world's biggest watchmaker could supply MORE [-emphasis mine-] mechanical movements to its customers than was set out in a 2013 agreement on phasing out deliveries...

Rivals built up production capacity after Swatch got the green light to phase out deliveries, a development that together with weak global demand for luxury watches led to an oversupply of movements.

"Weko is currently examining if a certain liberalization of the mutual agreement is possible given the structural change that has taken place in the area of mechanical movements," Swatch Group said in reply to an inquiry from Reuters.

Swatch said liberalizing movement delivery rules would let it better meet the needs of ETA's third-party customers. Weko confirmed a review was under way.

"I think it is to do with the lower production the industry is going through and Swatch Group probably wanting to improve its capacity utilization by supplying more movements to third parties," Kepler Cheuvreux analyst Jon Cox said: "If business was more brisk and there were more demand for watches overall I doubt it would be looking to do that."

Watch movement makers told Reuters at an industry event in Geneva last week that weak demand had led to a glut of mechanical movements and that Swatch had signaled readiness to again deliver more movements to the industry.

"Yes, there is overcapacity in mechanical movements. You find copies of ETA movements everywhere," Laurent Besse, head of watch movement maker Soprod, had said.

Sebastien Gigon, of small movement maker Technotime, said if ETA with its pricing power was again supplying more movements this would pose problems to rivals who built up production on the assumption ETA would stop deliveries by 2019.

"I'm thinking of Sellita, but also Soprod and people like ourselves who took big risks to develop our own movements to fill the gap that Swatch was going to leave," he said.



Sellita, which is privately owned and the only competitor able to offer watch movements at comparable prices to ETA, last week declined to comment or provide any details on its business.

Several movement makers, including Vaucher Manufacture and Dubois-Depraz, said they had already cut jobs or could do so soon due to the difficult economic situation.

Swiss watch exports dropped 9.5 percent during the first four months of the year, reflecting dwindling sales and high stock levels in No.1 market Hong Kong.


Oh. muh. gawd.

Swatch group now wants to start supplying MORE movements? And that's going to suck for their competitors? Because they took big risks to fill the void ETA was supposed to leave in their wake?

Who could have seen this coming???

Uhm, only every decent poker player on the planet.

So...does this mean that there's no reason to be concerned about what happens after 2020?

No, not at all. In fact, quite the opposite. We need to be very concerned, I think.

If you think the industry is in bad shape now, wait until ETA gobbles up or stamps out most of their Swiss competitors, all of whom are likely on shaky legs today, and could have their legs cut out from under them within the next two years.

The Japanese? I love Japanese movements. I'm a huge fan. But when the price of Oil goes up, so does the price of Natural Gas. So to do Japanese movement prices go up when Swiss movement prices go up, and, when that happens, it's often the case that quality goes DOWN, from what I've seen, and had confirmed by others.

More competition is good for the market, it forces manufacturers to deliver quality products at fair prices. When there are only a handful of suppliers for a key component, the suppliers don't feel nearly as much pressure to perform.

The Chinese? Mehhhh...we have a big disconnect between our expectations and their capabilities. I wouldn't hold out hope for a Chinese Connection to save the day.

So...what's on the other side of this particular Event Horizon?

If I had to guess, I'd say fewer Swiss movement manufacturers, not more. Or, if there are more, or merely "enough", they may be "Swiss" in name only, and not really a threat to ETA in any way. I think that could mean higher movement prices for both Swiss and Japanese movements, and probably Chinese movements as well, without any increase in quality.

If movement prices go up, watch prices go up, generally. But, it could actually be worse than that.

If Swatch can put most of their toughest movement competitors out of business, then they COULD effectively cut off supply to 3rd parties, and there wouldn't be many, if any good alternatives. Imagine if the only brands with access to ETA movements were Swatch-owned brands, which had artificially lower movement costs, by virtue of being Swatch-owned.

Imagine if Hamilton, Tissot, Certina, Mido et al were priced 20%-30% below all comparable competitors. Imagine what that would do to all brands not owned by Swatch. Imagine a Steinhart without any Sellita, for example.

You see why I think ETA never really planned to cut supply, at least not without ruining their competitors first, and certainly not because they wanted to "help" strengthen the industry, right? This isn't an effort to prevent a monopoly. I see it as a potential effort to ensure the survival of one.

Read that 2011 quote from Nick Hayek again: "'In no other industry do you have one company supply all the critical parts to the people who then compete directly with it,' Nick Hayek, Swatch's chief executive, said in an interview this year. Swatch said it had no further comment on the issue."

Kinda puts a comment like that into a different context, when you consider everything that's happened since, no?

Nick's right. You don't see that in any other industry, and before long, you may not see it any more in the watch industry.

Well played, Nick.

Well. Played.

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#4 · (Edited)
Recently I've been watching ESPN's coverage of this year's World Series of Poker, after ignoring it the last few years. It sort of sucked me back into thinking about poker, after not playing much recently, not nearly as much as I used to.

The commentators paid particular attention to a UK player who was eliminated early this year, but who apparently made a deep run and big impression in the 2016 main event, William Kassouf.

It seems he created quite a stir, alienated many other players, and earned himself more than one official rebuke from tournament organizers, for his incessant table talk, what Brits apparently call "speech play".



I was intrigued. I found some videos of key hands he was involved in, then found analysis by an expert on Poker tells, who did a thorough breakdown of Kassouf's various verbal tells within the context of those key hands.

It would be fascinating to me anyway, but it's particularly fascinating because it was so extreme, and reminded me so much of this Swatch Group situation, which never seemed to make any sense at all (at least not to me) the way most people described it, and only made sense (at least to me) the way I was looking at it.

Kassouf's verbal assault on his opponents was relentless, and at first blush, didn't seem to provide any obvious clues about the strength of his own hands. The wide-spread consensus among people watching in real time seemed to be that his speech play was very successful in getting his opponents to do what HE wanted them to do.

The thinking was that he essentially was so offensive and annoying that he was able to get opponents to lose focus, give away information, or be goaded into making bad calls when they were way behind in the hand, when he was stronger than they believed.

And yet, a skilled expert in verbal tells was able to make a convincing case that he actually gave away more information than he gained from his opponents, and laid out a set of guidelines any reasonably observant and disciplined player could use to not simply nullify the tactics employed by an opponent like Kassouf, but actually capitalize on them.

The conclusions the expert drew were exactly what you'd expect them to be - signs of strength were actually signs of weakness, signs of weakness actually indicated strength, taunting was intended to provoke an ill-advised confrontation when he had a strong hand, whereas a conciliatory tone was intended to avoid confrontation when he was weak.

The key wasn't understanding what the signs mean, it's recognizing the signs when you see or hear them. Once you know what to look for, the signs become unmistakable.

Like I said, the best poker players are those who effectively combine both the analytical/computational, and behavioral skill sets, but most tend to be more left-brain or right-brain in their approach. I'm so-so when it comes to poker math, but I'm like freakin' Kreskin when it comes to reading opponents for tells. Chalk it up to a lifetime observing people and trying to figure out what they're up to.
 
#6 ·
Does make me wonder if Swatch will get so huge that they will start buying up some of the Japanese brands.
I know people were complaining about Invicta owning Glycine, but I think Swatch owning Citizen would be another thing.
Regardless as a consumer all I can do is sit, speculate, and post the occasional watch pic.
 
#7 ·
I doubt Swatch would be able to buy Citizen, as Citizen is a huge, publicly traded company, like Seiko. Yes, sometimes public companies merge or get acquired, but I think that would be a difficult transaction to initiate and complete. The two companies are pretty comparable in size, yet likely radically different in culture and operations.

But I do think we'll continue to see consolidation in the industry, with big companies rolling up smaller competitors and struggling brands.

Candidly, it's scary, at least for me. It's not good for a small number of huge, vertically-integrated companies to be the main suppliers of an entire industry's core component.

Notice that most non-movement components are being manufactured in China right now. No big deal, to anyone, so long as we can get movements made in Japan or Switzerland. The Swiss and the Japanese aren't concerned about Chinese-made cases. A case can be made anywhere, but without the movement, it's just a case.

I was happy to see Fossil-owned STP and Ronda enter the entry-level mechanical movement game, but so far, they have yet to get and keep their $hlt together, based on what I've seen and heard.

Without viable alternatives to entry-level movements from ETA, you're left with more expensive Swiss movements from the likes of Soprod or Eterna, steadily-getting-more-expensive Japanese movements, and crap-shoot Chinese movements.

It should concern customers, too. Retail prices currently reflect weakness in demand and over-supply. That situation could dramatically change over the next few years, especially if Swatch is able to consolidate Swiss manufacturing.
 
#10 ·
Hmm. So, this is sort-of good news for seiko and citizen/miyota, as their movements will become even more in demand.*

Interesting to hear that both sellita and STP aren't doing so well. I can understand Soprod - few watches seem to use those movements. And Ronda's mechanical wonder still hasn't materialized (maybe they figured something out and cancelled that particular avenue?). But Sellitas are used in a bunch of swiss "macro" brands (oris, CW et al), and STP seems to find usage in several micros every now and then, as well as in Zodiacs.

I had the impression, at least from the usage-numbers, that at least Sellita was on firmer ground (even if there is debate on whether they can match eta quality).

*- three things about their (Japanese) watch movement making I don't fully get.
1: Why is Orient making their own, *exclusive!* low-end movements when they have connection to Seiko?
2: Why isn't Casio spinning up a movement manufacture?
3: Why isn't Citizen (and/or seiko) making some of their solar movements available? They'd have instant monopoly on the whole area and likely cut out Ronda/ETA quartz sales quite a lot.
 
#13 ·
*- three things about their (Japanese) watch movement making I don't fully get.
1: Why is Orient making their own, *exclusive!* low-end movements when they have connection to Seiko?
2: Why isn't Casio spinning up a movement manufacture?
3: Why isn't Citizen (and/or seiko) making some of their solar movements available? They'd have instant monopoly on the whole area and likely cut out Ronda/ETA quartz sales quite a lot.
I can't speak to your question #3, and I have often wondered that myself. Although I do know that Junghans has used a Seiko solar movement in one of their chronographs. Yet Junghans also makes their own solar movements (three hand with digital date) and their automatics are largely Seiko-supplied. So that's probably just a unique business relationship. But, as far as I know, Citizen supplies Ecodrives to no one else.

As to question #1, Orient is owned by the parent company that owns Seiko. So there is pretty much no overlap between Seiko watches and Orient watches as far as I understand. (On a side note, Orient seems to be struggling somewhat recently. I've seen less about them online, WISes talk about them less than just a few years ago, and I personally think their designs are slipping somewhat. So I'm curious what, if anything, may be up with Orient.)

Question #2 also has a fairly simple answer: Casio is in the electronics game. Mechanical watches simply don't belong to their brand DNA.
 
#11 ·
Don't rule out China. Fiyta (mass market) recently merged with Beijing (in-house movements, excellent quality). If Beijing's movement expertise could be scaled, they could leap-frog Tianjin Sea-Gull and leave their domestic competitors scrapping it out in the super low-cost/low-quality mire, all the while providing a credible and more affordable alternative to Miyota and Seiko.

The downside of Beijing potentially moving mass market is already obvious, however. Their current stable of watch designs is rubbish compared with even a few years ago... But I guess that's irrelevant to the potential movement supply side of the equation.

And of course the big problem remains: perception/marketing. Why buy Chinese if you can buy Japanese or Swiss? It took Japan decades to build up the clout to challenge the Swiss - not technically, but in public perception. Even if a Chinese manufacturer could speed up that process somehow, it's still going to be a hard slog.
 
#35 ·
I've ruled out China for two main reasons:

1. The market shows an extreme bias against Chinese movements generally, no matter what their quality.

2. In my experience/observation, backed up by many others, the Chinese movements are really hit-or-miss with quality.

Occam's razor: the simplest solution tends to be the right one. Why should a monopolist willingly renounce their position? To crush the competition and ensure an even longer reign. Wow, makes a lot of sense, thanks for sharing this insight.

On the other side, if your take on the situation spreads around a bit more, it can help your business in the short term: WIS scared of future price increases due to consolidation of movement producers might want to scoop up more of your watches while they are still affordable ;)
I don't imagine people are going to start purchasing more, no matter what I say.

You know doc, in light of these possible trends, have you considered for your business that quartz watches are objectively better than mechanical watches?

;-)
No, not really.

People don't buy mechanical watches because I make them. I make them because people buy them.

When my customers show a preference for quartz, I'll consider it, maybe.
 
#12 ·
Read that 2011 quote from Nick Hayek again: "'In no other industry do you have one company supply all the critical parts to the people who then compete directly with it,' Nick Hayek, Swatch's chief executive, said in an interview this year. Swatch said it had no further comment on the issue."

Kinda puts a comment like that into a different context, when you consider everything that's happened since, no?

Nick's right. You don't see that in any other industry, and before long, you may not see it any more in the watch industry.

Well played, Nick.

Well. Played.

View attachment 13316037
Occam's razor: the simplest solution tends to be the right one. Why should a monopolist willingly renounce their position? To crush the competition and ensure an even longer reign. Wow, makes a lot of sense, thanks for sharing this insight.

On the other side, if your take on the situation spreads around a bit more, it can help your business in the short term: WIS scared of future price increases due to consolidation of movement producers might want to scoop up more of your watches while they are still affordable ;)
 
#14 ·
You know doc, in light of these possible trends, have you considered for your business that quartz watches are objectively better than mechanical watches?

;-)
 
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#18 ·
Huh. I seem to remember reading somewhere that they were using Seiko movements (in their non-Meister watches). But it's been a while. So it looks like they switched to ETA? I found this link to a German language watch forum mentioning that Junghans was using Seiko movements. But it's dated 2006. So now I feel old...

Still pretty certain that they used a Seiko solar module for their Olympics-inspired chronograph, which I don't think they make anymore. And I always found that odd because they made, and still make, their own quartz movements.
 
#61 ·
Of interest for is, they have or had a few watches with Grand Seiko movements. Yes, you read hat right. Not sure if any other brand ever got GS movements to use.

I personally think it would be cool if seiko made their bomb proof 7c46 quartz movement - the Tuna movement - available for OEM.
 
#22 ·
Epson aka Seiko is the parent company of Orient so I doubt if Seiko would allow Orient to produce movements for the niche. Besides, much of Orient's design are similar to Seiko and I doubt there is a whole lot of technical differences between them.

I doubt the Japanese watch makers are overly concern about swatch's monopoly as for the most part (generally speaking) they are diverse companies with other subsidiaries other than watches.

While mechanical watches and watches as a whole seems to have growing interests, I still think for the most part they are a "luxury" niche.

However, between the 3 big Japanese companies, I do think Seiko is probably the only one that can fill any demand of "movements" if Swatch's monopoly occurs. They already have the marketing and clearly the tooling to do so.
 
#36 ·
Epson aka Seiko is the parent company of Orient so I doubt if Seiko would allow Orient to produce movements for the niche. Besides, much of Orient's design are similar to Seiko and I doubt there is a whole lot of technical differences between them.

I doubt the Japanese watch makers are overly concern about swatch's monopoly as for the most part (generally speaking) they are diverse companies with other subsidiaries other than watches.

While mechanical watches and watches as a whole seems to have growing interests, I still think for the most part they are a "luxury" niche.

However, between the 3 big Japanese companies, I do think Seiko is probably the only one that can fill any demand of "movements" if Swatch's monopoly occurs. They already have the marketing and clearly the tooling to do so.
Sorry to correct you, but Epson, which makes Orient, and Seiko Holdings, which makes Seiko, are two separate companies, both publicly traded, and managed completely separately. One does not own the other.

It's not a business connection between Seiko and Orient, it's an historical connection. They have no common operations, and one does not hold any control over the other.
.
How can we get doc to make a watch as a homage to either "Event Horizon" or "Starship Troopers"?
Find 300 people to buy one, and pay in advance, and I'll make it.

This move by Swatch makes me like the japanese even more then already do. It feels like Swatch is making a play to be the only player in the Swiss watch game, maybe even setting their sites on Dethroning Rolex, and the so called "Holy Trinity". Will they really do that? No, i doubt they will, or that they really are, but that feeling is there, and big enough to make me think it as more then a fleeting thought. I also feel this tactic is severely shortsided, and is gonna do lasting damage to the whole watch industry.
I've never put any added value on "in-house" movements, but this is why it's good for brands to develop their own in-house movements, as a means of ensuring their own future sustainability, by becoming independent of a big supplier like ETA.

I wouldn't be at all surprised if ETA did a complete 180 about supplying movements to 3rd parties. When they announced the move they were full of themselves but since then the reality of the situation has slapped them in the face like a wet fish.
They already did the 180, in 2016. That's when the Reuters article was published, and we saw the glut of movements in the market.

Reality may have slapped them around a bit, but...I'm not so sure. I was thinking similar thoughts at the time, assuming the 2016 industry slow-down was hurting ETA enough to get them to re-think their strategy.

Maybe that slow-down did hurt them, but maybe it also just got them to step up their timetable and do in 2016 what they were planning to do in 2020, and maybe 2020 will just bring more of the same.
 
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#24 ·
This move by Swatch makes me like the japanese even more then already do. It feels like Swatch is making a play to be the only player in the Swiss watch game, maybe even setting their sites on Dethroning Rolex, and the so called "Holy Trinity". Will they really do that? No, i doubt they will, or that they really are, but that feeling is there, and big enough to make me think it as more then a fleeting thought. I also feel this tactic is severely shortsided, and is gonna do lasting damage to the whole watch industry.
 
#26 ·
I doubt swatch will affect Rolex with this move - since Rolex is not subject to ETA whims. However, a forced "out-of-business" state for sellita/STP/techotime(sp?)/etc. and a subsequent ETA "swatch-only" lock will force a ton of smaller brands in huge trouble....

...

After a short "golden period" where sellita/stp drop prices to try and outcompete with eta, and eta floods the market giving all these small brands options to "upgrade" all their ranges to eta movements (... at least for a short time).

Hmm. Could it happen that the chinese fitya/etc. holdings buy out and integrate Sellita in their operations? They probably want a foothold in the "swiss made movement" market and have spare investment capital to support the manufacture for a while - all along providing a huge range of watches as platforms for carrying the movements.

Currently Sellita and Soprod out of all these companies lack the benefit of having a watch-selling "inhouse" brand. Fossil can probably afford to shift their capital from other sources (shinola etc.) into STP.. Swatch can support ETA for sure... Other than agreements with brands like Oris, Sellita afaik has no huge parent company to get tough-times support from. I honestly don't know if Soprod is even doing anything atm.
 
#29 ·
Hmm. Could it happen that the chinese fitya/etc. holdings buy out and integrate Sellita in their operations? They probably want a foothold in the "swiss made movement" market and have spare investment capital to support the manufacture for a while - all along providing a huge range of watches as platforms for carrying the movements.
They'd have to do it through some very carefully planned arrangement to avoid the 'taint' of Chinese production sinking the brand. It's hard to underestimate the derision Chinese watchmaking gets and they're caught between the general public who buys into "Swiss Made" branding but don't know enough about watches to make technical judgments and higher-end buyers who are just flat out not going to consider anything other than Swiss Made. Both groups need to feel that their brands are "fully Swiss" whatever that means.

It seems to be OK for Dubois Depraz and the in-house FC movements under Citizen, but Citizen has much more acceptability with the general public and a proven history of not interfering too much with their subsidiaries.

Currently Sellita and Soprod out of all these companies lack the benefit of having a watch-selling "inhouse" brand. Fossil can probably afford to shift their capital from other sources (shinola etc.) into STP.. Swatch can support ETA for sure... Other than agreements with brands like Oris, Sellita afaik has no huge parent company to get tough-times support from. I honestly don't know if Soprod is even doing anything atm.
To be pedantic, the relationship between Fossil Group and Shinola is complex and indirect. Shinola is not part of Fossil. Fossil was started by the Kartsotis brothers. Kostas Kartsotis hasn't completely left his role at the Fossil group, but he has sold back his share of the company in 2017 and hasn't drawn a salary since 2004. His brother Tom is still 100% working on Fossil. Kostas started Shinola as a separate entity by himself. While I'm sure that it was largely financed originally by the Fossil shares that Kostas owned, they were his personal shares. The two companies are only tied together because of shared ownership and that's going to influence decisions about what movements to buy, etc... but it's just more complex than say Hamilton using ETA movements, period, no matter what because it's their company's product.

Anyway... I'd be more worried about Sellita if ETA didn't start to pull back on movement supplies earlier before being rebuked by the Swiss anti-trust authorities. A lot of brands did shift to Sellita, and not just Oris.
 
#28 ·
I agree with a lot of your position, Doc, and we can have a cool prediction-fest about what will or won't happen. Who will come up winners or losers, and what's in Hayek's head? Who knows.

I do think you're missing one variable.

A lot of this back-and-forth in the market and willingness to supply parts, ebauches, movements and to whom etc. has given them time to perfect the powermatics and swissmatics. They are now and forever will be Swatch Group exclusives, unless something serious disrupts their business model.

Swatch can say, with a straight face, that their own in-house stuff is superior to and newer than what they sell to 3rd parties. They can even claim that their competitors are just clones of the old and busted and if you need the new hotness then they'll be happy to show you a Rado, Hamilton, Longines, etc.

That gives them an even stronger position because it lets them shape the narrative around their competitors and makes it harder for their competitors to have their own stories...

... and as noted, they've sent their competitors scrambling to make up volume (STP, Sellita) and they don't have the resources for R&D into all-new products. Ronda and Eterna have blown their wad on researching new designs, but can't scale up production (yet?). ETA is definitely influencing what priorities these guys are able to set. None of them are big enough to do both, as is the case with ETA.
 
#32 ·
I agree with a lot of your position, Doc, and we can have a cool prediction-fest about what will or won't happen. Who will come up winners or losers, and what's in Hayek's head? Who knows.

I do think you're missing one variable.

A lot of this back-and-forth in the market and willingness to supply parts, ebauches, movements and to whom etc. has given them time to perfect the powermatics and swissmatics. They are now and forever will be Swatch Group exclusives, unless something serious disrupts their business model.

Swatch can say, with a straight face, that their own in-house stuff is superior to and newer than what they sell to 3rd parties. They can even claim that their competitors are just clones of the old and busted and if you need the new hotness then they'll be happy to show you a Rado, Hamilton, Longines, etc.

That gives them an even stronger position because it lets them shape the narrative around their competitors and makes it harder for their competitors to have their own stories...

... and as noted, they've sent their competitors scrambling to make up volume (STP, Sellita) and they don't have the resources for R&D into all-new products. Ronda and Eterna have blown their wad on researching new designs, but can't scale up production (yet?). ETA is definitely influencing what priorities these guys are able to set. None of them are big enough to do both, as is the case with ETA.
New is not always better, and this is especially true in this case (I remember a thread in which powermatics and swissmatics were being discussed: longer PR, but no possibility to regulate or service them outside of Swatch and possibly even lower quality materials).

Of course they can create any narrative they want to back up their claims but: 1) only WIS really care about movements differences, most people don't even know what a 2824 is; 2) most WIS know that swatch new movements are not the complete home-run that Swatch paints them to be;

The key to undercut your competitors in the entry level market is to sell cheap(er) swiss-made watches: once the Steinharts of the world cannot keep up anymore you've won.
 
#41 ·
doc, what about licensing? swatch could be creating a market desperate for quality movements that allows them to rewrite the way they sell their movements. forgive me if i'm mistaken, but i believe currently ETA is sold essentially as a wholesale part at fair price allowing brands like glycine to buy them en masse and modify them calling them GL224 movements or whatever they like.

by artificially creating shortage in the market does that also allow them to renegotiate with glycine (or any manufacturer) the way their movements will be available? so instead of buying X units wholesale at X.XX per unit based on quantity, you will now have to license the ETA2824 from swatch. within this licensed deal swatch would be able to dictate a tremendous number of factors: price per unit flat, naming of ETA movements, minimum retail pricing based on which movement?
 
#47 ·
I'm not sure I'm entirely following the question here, but I'll take a stab at it.

This is a puzzle with multiple levels.

First, you have Nivarox, the hairspring supplier owned by Swatch. As far as I know, they're the leading supplier of hairsprings to Swiss movement manufacturers. So, without Nivarox, those other movement makers would be in trouble. All Swatch has to do to cripple those competitors is cut off supply from Nivarox.

On the surface, that seems counter-productive, because it would hurt Nivarox's sales. It would only NOT hurt if Nivarox could sell those hairsprings to someone else, like, maybe, ETA, if ETA were to increase their demand for hairsprings by increasing their production of movements.

Then, you have ETA. ETA doesn't just make complete movements, they also supply major components of movements to companies like Sellita. Without those parts from ETA, if Sellita doesn't have any other source for them, no more Sellita.

On the surface, that seems counter-productive, because cutting off Sellita would hurt ETA's sales. It would only NOT hurt if ETA could increase their own production of movements enough to use up the capacity which once supplied Sellita, but, if there's no more Sellita, then it's logical to think demand for ETA's movements would go up, and they could just use all those parts which would have been earmarked for Sellita in their own movements.

Then, you've got Swatch Group. They're completely independent and vertically integrated. Logically, we should understand that they don't simply object to ETA selling whole movements to other non-Swatch group brands, which then turn around and compete with Swatch brands. They also don't want ETA to supply Sellita, or Nivarox to supply anyone. They want it all, and they're the leading contender to get it all.

If Glycine can't buy from Sellita, because there is no Sellita, and they can't buy from ETA, because ETA won't sell, what happens to Glycine?

See? Why would Swatch want to simply increase the price of their movements when they might be able to integrate all those other struggling brands under the Swatch umbrella?

I'm not even sure what "licensing the 2824-2" means. Someone actually has to make the movement, and right now, ETA is really the only company that can do that without relying on any other companies to supply them with anything.

Who's making the movements that Glycine would "license" if it's not ETA? Glycine can't make the movements themselves, and if they could, why would they bother paying ETA to use the calibre number "2824-2"?

The market already is desperate, for a good alternative to the ETA 2824-2, because that's the benchmark entry-level affordable Swiss movement. So far, we really don't have any other movements which can be compared in an apples-to-apples way.

Sellita? The SW200 is reputed to be not as good quality compared to ETA, and was, possibly still is dependent on Swatch for ebauches and hairsprings, possibly other movement components.

STP? The STP1-11 is almost certainly using Chinese parts, and has a higher defect rate, although it's one of the better alternatives, inasmuch as STP appears independent of Swatch as a supplier, and parent company Fossil would seem to have the resources to improve capabilities and quality.

Ronda? The R150 is almost certainly using Chinese parts, will probably have a higher defect rate, and it's not yet available in large volume, although Ronda is likely independent of Swatch as a supplier, and Ronda would appear to have the resources to improve capabilities and quality.

Eterna, Soprod, and all the other Swiss manufacturers? None of them have the scale or capability to deliver a head-to-head competitor to the 2824-2. Rather than each of them working independently, they should have banded together and pooled resources.

The Japanese? Hell yes, the 9015 spanks the 2824-2 in every measurable, objective way. But if the Swiss go through a rapid consolidation, leading to prices going up, expect there to be more demand for Japanese movements, which means their prices will go up, and from what I've seen, when they increase volume to meet demand, their quality slips, and their defect rates go up. Either way, the "Swiss Made" hype will still have people illogically preferring "Swiss" movements, because "Swiss Made".

The Chinese? No thanks. It's still a wild West show over there.
 
#44 ·
Just for the sake of discussion, I think the Chinese can totally overcome the current "WIS bias." All you have to do is consider the Japanese. If you look back to the 1950-60s, the Japanese car industry had a really bad reputation, much like the current Chinese reputation for quality. Now the Lexus is considered the highest standard for quality. All things change, given enough time. Human beings tend to consider things only within their own life-time. That's totally reasonable, given that is the span in which one exists. But all things change, and they change even faster now than ever before. Consider that the iPhone was introduced in January 2007, just over a decade ago. Internet companies considered "world-changing" are now bankrupt, have been already rendered obsolete. It's a fast-paced game now. Whoever can think a couple steps ahead of the market will win, if you consider "winning" staying in business long enough to evolve into the next thing...
 
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