The Unexpected Story of Swatch — PART 1 – Habilitate

Image credit: Booksworm / CC BY-SA 3.0

Earlier this year I wrote about the havoc wreaked among traditional watch-makers by the advent of quartz. It was a radical new technology that launched Japanese watchmakers to global dominance in the 1970s and ‘80s and decimated their Swiss mechanical counterparts. But not for long. The world’s most famous nation of horologists came up with a solution that would swing the watch-buying pendulum back in their favour.

Things looked grim for the Swiss watch business in the mid-1980s. By 1985, production of mechanical watches had nearly halved compared to what it was prior to quartz kicking off. At its lowest point, employment had fallen by around 70 percent. Something needed to be done, and quickly. 

Around this time, Switzerland’s two largest watch groups were SSIH, whose star brand was Omega, and ASUAG, the flagship of which was Longines. Back in 1977, they were the third and fourth biggest watch firms in the world respectively and together accounted for just over half a billion USD in sales. The rest of the Swiss market, however, was fragmented, consisting of hundreds of smaller brands making watches from parts created by thousands of suppliers. 

In the context of the quartz crisis, these businesses, big and small alike, all seemed like dominoes poised to tumble. It became clear that a complete restructuring of the industry was necessary in order to save it. So between 1981 and ’83 a series of relief packages from Swiss banks injected some SF550 million into the industry. They also called up a man named Dr Nicolas G. Hayek.

Nicolas G. Hayek
Image credit: Walter Rutishauser / CC BY-SA 4.0

Hayek was the head of Switzerland’s top consulting firm, Hayek Engineering, which he had started in Zurich in the 1960s. The Swiss banks hired him for no less a task than saving the country’s entire watch industry. And that is exactly what he did. 

In 1983 Hayek completed his plan, which was, simply put, to combine the country’s two biggest conglomerates, SSIH and ASUAG, into one. Moreover, the entirety of the production side of things would be centralised. This freed up all of the individual brands, who would previously have made their own movement, to focus their efforts entirely on designing and selling watches. 

The banks accepted the proposal and a newfound venture was born. It went by SMH, which in English stands for the Swiss Corporation for Microelectronics and Watchmaking. It included under its umbrella brands like Omega, Longines, Blancpain, Rado, Tissot, Hamilton, Breguet, Certina and more. Today, it’s known as the Swatch Group.

Image credit: cottonbro from Pexels

Looking at an individual Swatch, it’s strange to think that a timepiece as light, candy-coloured and —  for lack of a better phrase — insubstantial, could represent the tip of a Swiss watch-making iceberg (last year it still represented some 25% of the country’s watch market). Or, indeed, that it could be the white knight of an entire industry. 

To read about the actual watches that Swatch made and how they redefined the entire watch-making ecosystem, tune in later this week for Part 2 in the history of Swatch.

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