“Since the middle of the Eighties, Swiss watchmaking has been on an upward path”

The Swiss Watchmaking Industry Federation (FH) is based in Bienne and is the organisation that crowns the profession. Constituted as a professional association under private law, it has more than 500 members, or more than 90 % of all Swiss watch and clock makers. This means that the FH is an observatory of choice of developments in the sector. Its Chairman, Jean-Daniel Pasche, now gives us his impressions on another record year in this industry.

Christophe Roulet: The Swiss watchmaking industry has had a record year in 2006. What were the principal reasons for this exceptional growth?

Jean-Daniel Pasche, Chairman of the Swiss Watchmaking Industry Federation: Several factors explain this record year, the third consecutive year of two-figure growth. First of all, from a macroeconomic point of view, the traditional markets for luxury products in general, the United States, Europe and Asia, all grew simultaneously last year. To this should be added the wealth of Swiss watchmaking products, the result of investments in quality made by the major brands. The mechanical watches sector is indeed showing a lot of dynamism, in particular with regard to producing new models and research into materials that reduce the problems of friction.

There does not appear to have been anything like this almost euphoric period in the past. However, professionals agree in saying that this cannot continue indefinitely. What do you think?

Since the middle of the Eighties, Swiss watchmaking has been on an upward path. The industry has certainly known periods of consolidation, for example in 1996 when the dollar plunged to 1.10 CHF or 2003 during the SARS crisis. Nevertheless, in the medium and long term development remains mainly positive, especially if we consider the last three years, which have really been exceptional in all of the major markets, with the growth in strength of new destinations like China or Russia.

Does this mean that the luxury watchmaking industry is immune to economic crises?

While the environment has been extremely favourable in the last three years, as the export figures for watches and clocks show, these figures have certainly also taken advantage of the rise in the financial markets, a reflection of the major increase in purchasing power; this does not mean that the sector as a whole is immune to economic setbacks. It is possible that the top of the luxury segment alone might be able to claim this position.

As export statistics show, the luxury end of watchmaking is what is carrying the whole of the industry forward. A sector that is attracting an increasing number of brands. Last year’s growth was both in value and in volume. That means that the principal markets are sensitive to Swiss watchmaking products and not only the luxury end, as is clearly shown by Russia where there has been a clear increase right across the profession.

How do you see developments in 2007?

I have great confidence in the current financial year. Certainly, we cannot exclude negative factors such as a major downturn in the dollar or geopolitical events that may inhibit the flow of tourists. But on the whole, the way forward remains highly positive.

In view of the rates of growth, in particular at the luxury end, would you say that the Swiss watchmaking sector is becoming increasingly competitive in this sector?

It is true that for a number of years we have witnessed the appearance of new brands, essentially at the luxury end. On the other hand, the existing Houses are also tending to upgrade their time-keepers to this category of products. When markets are rising, it is clear that developments like this are easier. However, that is not to say that it is easy to impose a new brand in the profession, whatever the level envisaged, as competition is very strong.

Do you think that the phenomenon of consolidation observed around 2000 has ended?

The profession effectively experienced a wave of purchases at the end of the Nineties. Currently, I rather have the impression that the groups are in the process of digesting their acquisitions of these brands. A process that may take several years. Having said that, it may clearly be said that in absolute terms everything is for sale. Besides, it can be seen that the Houses have not lagged behind in terms of absorptions, essentially in the strategic field of sub-contracting. Having said that, I think that the double structure that is peculiar to Swiss watchmaking which is divided into major groups and small independent companies will continue to exist.

The impressive growth in the last few years has triggered bottlenecks both in procurement and in the recruitment of qualified staff. Do you think that this problem will last?

Indeed, this is a consequence of the growth in the last few years. With regard to the future, this will depend to a great extent on changes in the climate. But in the short term, this is a genuinely disturbing problem and we do not really know when we will solve it. ■

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