May 15, 2012
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Switzerland, the land that time begot

May 15, 2012

NEUCHATEL - Andrew I-Jen Chen swapped a career crunching numbers at French bank BNP Paribas to take up an apprenticeship at one of Switzerland's most prestigious watchmaking schools.

Photo: Jaeger-LeCoultre

He is one of a growing number of people attracted to a career in horology as Swiss watch firms vie for staff to meet buoyant Asian demand for high-end timepieces and to fill the hole left when industry heavyweight Swatch decided to cut the volume of mechanical watch parts it sells to others.

"In banking you just sit there working with numbers that don't mean anything," the 29-year-old from Taiwan said as he turned a hand lathe to painstakingly cut the tip of an axle, a component used in the balance wheel, which makes a watch tick.

Legislation to tighten the rules on what can be called a Swiss made product also means that watch companies are ploughing millions into new factories at a time when many Swiss firms are thinking of moving production abroad.

Exports of Swiss timepieces soared 19 percent to a record 19.3 billion Swiss francs ($20.8 billion) last year, rebounding from the 13.2 billion low hit in 2009 in the depths of the financial crisis.

This feat was achieved despite the handbrake of the Swiss franc, which rocketed from one record high to another as investors sought safety from the euro zone's debt troubles, pushing a third of mechanical and electrical engineering firms into the red.


At the heart of the watch sector's success is a disciplined approach to innovation, says Maarten Pieters, director of the Watchmakers of Switzerland Training and Educational Program (WOSTEP) based in Neuchatel.

Discipline and innovation were the industry's very progenitors; in 16th century Geneva, the city's strict Calvinist elders banned citizens from wearing jewelry, among other pleasures, forcing the local jeweljewelerslers and goldsmiths to find a new craft.

The industry outgrew the city, expanding into a region now known as "Watch Valley", which winds about 200 kilometers (120 miles) from Geneva to Basel.

Over the next four centuries it consolidated its reputation for quality and innovation, traits that have helped it overcome one crisis after another and stay ahead of the crowd. The first wrist watch, quartz watch and water-resistant watch were all Swiss inventions.

"Companies prepare for the future," Pieters said in an interview in the school's kitchen overlooking lake Neuchatel. "They think about what is going to happen in the next 10 years."

They don't always get it right.

Caught off guard by the explosion of Japanese quartz watches on the market in the 1970s, about 60,000 jobs evaporated between 1970 and 1984 and nearly 1,000 firms shut up shop.

Lebanese immigrant Nicolas Hayek is widely regarded as saving the industry from cheap Asian imports by launching the colorful plastic Swatch watch in 1983.

"Something very bad happened in the 1970s. It was a lesson learnt," Pieters said.


Now, even with the franc about 30 percent stronger than when the financial crisis hit in 2008, demand for fine pieces is keeping the industry booming and propping up national trade figures.

It is Switzerland's third most important export sector. Its sales abroad rose 18 percent in the first quarter of 2012, helping to keep the overall fall in Swiss exports to just 0.5 percent in real terms.

By contrast, exports in the machinery and electrical engineering industries - the second most important sector - tumbled 10.5 percent, while exports in the paper and graphics industry plummeted 20 percent. Exports of goods accounted for some 35 percent of Swiss economic output in 2011.

Swatch has pledged to create 500 new jobs in Switzerland this year, while Richemont, the world's second largest luxury goods company, has said it plans to create up to 2,000 jobs over two years, but finding qualified staff in such numbers could prove a headache.

In 2011, the number of trainees enrolling at Switzerland's seven watchmaking schools, though up 9 percent to a new record, was still only 425. Only 330 qualified watchmakers graduated. And with Swiss unemployment at just 3.1 percent, compared with 10.9 percent in the euro zone, there is no untapped reservoir of likely local candidates.

Richemont said earlier this month it would invest 100 million francs in a training centre near Geneva. It also plans to recruit two-thirds of workers for its new Cartier jewelry production site from neighboring France.


The silence of deep concentration hangs over the WOSTEP workshop, where the students, clad in blue overalls, hone their precision skills, a watchmaker's loupe magnifying lens strapped to their eyes. With rows of tools lined up on the benches, the dusty workshop seems a world away from the glitzy watch fairs where their handiwork might one day command a prince's ransom.

Learning to produce some of the 130 complex components that make up a mechanical watch is all the more pressing now Swatch has decided to cut deliveries of parts.

Describing itself as the "supermarket" for components, Swatch has said it wants to force competitors to invest in their own production and choke off supplies to Asia, where they might be used to make fake Swiss products.

Some of Swatch's customers have taken legal action, saying the measures were jeopardizing their growth and threatening jobs. But WOSTEP's Pieters disagrees, arguing the decision will encourage brands to deepen their own watchmaking know-how.

"Do you think it would be normal for Ferrari to supply engines to Lamborghini?" he asked.

The move follows amendments to the laws on what constitutes a Swiss made product. The Swiss lower house of parliament has voted that 60 percent of the production and costs of industrial products should be in Switzerland, in a bid to stop foreign competitors free-riding on the country's reputation for quality with cheaper imitations.

The Federation of the Swiss Watch Industry (FH) backs more stringent rules, arguing the trademark is vital for securing jobs and preserving quality.

Despite record demand for Swiss watches, FH president Jean-Daniel Pasche says the industry cannot rest on its laurels, as the strong franc starts to bite.

"(Watch firms) are having to increase prices on the market, but this could be detrimental to competitiveness. Or they have to reduce margins, which is not positive for development. Today's margins are tomorrow's investments," he said.

But Pieters is confident Switzerland's customer service and know-how will keep the industry in pole position: "Everyone has a driving license, but there are only 24 driving Formula One."

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