Apple’s design mastermind Jony Ive spoke in no uncertain terms when he described what the Apple Watch would mean for Switzerland: The old watch companies, he said, were doomed. (Actually, he used a more colorful term.) Bravado aside, Ive has a point. The Swiss watch industry has to be concerned about what a computer on the wrist means for its business. Even if it doesn’t spell the end for the luxury watch, Ive’s product makes it clear that we’re living in a new era for the timepiece and there’s no going back.
But there’s another new product on the market that could change how the Swiss watch industry operates, even more so than Apple can. It’s less glitzy than the Apple Watch, but this product has the potential to set off a quiet revolution. The device isn’t a cutting-edge piece of smart technology, or even a super-expensive luxury accessory: It’s a Swatch.
Last year, Swatch released a new model called Sistem51. Unlike most of the watches in the affordable Swiss watch company’s line, the Sistem51 is mechanical: Rather than using a battery, as in a quartz watch, it stores energy by using the motion of your wrist to wind it. Unlike any other Swiss mechanical, the Sistem51 is built entirely on a 65-foot-long automated assembly line, without any human intervention. Maybe most significantly, the Sistem51 costs just $150—a shockingly low price point for a mechanical watch that is 100 percent Swiss made. A decent Swiss mechanical with a reliable timekeeping mechanism inside it starts north of $500 (usually closer to $1,000), and prices quickly rise from there: an automatic TAG Heuer will run you over $2,000, a Rolex starts at about $5,000, and the high luxury watches—the likes of Patek Philippe, Jaeger-LeCoultre, or Vacheron Constantin—run up into five and six digits.
For all these reasons, Swatch’s new affordable mechanical is getting a lot more attention in the watch world than a Swatch normally would. Aficionados who usually focus on prestige brands have referred to it as “clearly one of the most important new watches of the last 10 years.” When Hodinkee, a blog with a strong following among young collectors, first got its hands on the new watch, the reviewer spoke in hushed tones to his readers: “Seriously guys, this could be a game-changer.” At its launch, Swatch described Sistem51 as “a provocation” to the industry at large. The notion of an affordable mechanical watch is a serious change for Swiss luxury watch companies, which generally operate in a bubble of escalating prices and high-end consumers willing to pay top dollar for the latest models.
But it’s not merely a provocation. Swatch is deeply committed to its new project. So far in 2015 it has added eight new models to its original four designs, doubling down on the initiative by offering dial designs that will likely appeal to a wider range of consumers. The second-generation dials and cases are more conservative than the four originals. Swatch has never shied away from loud, colorful styles, but here it’s playing to more traditional consumers. The company seems to want this watch to reach well beyond the normal Swatch buyers. It intends to make the Sistem51 not just a statement, but a staple.
For an industry that prizes tradition and consistency over change, the Sistem51’s technology really is revolutionary. The watch gets its name from the fact that it has only 51 components; a typical mechanical watch has more than 100, sometimes well past 300. It’s manufactured using clean-room conditions, so nothing can disturb its inner workings (known as the “movement”). While a normal mechanical watch requires a complicated process of fine adjustment by hand to make sure its timekeeping element (called the “escapement”) oscillates evenly, that’s all automated on the Sistem51: a laser regulates the escapement just once and then the watch gets closed up. It’s then hermetically sealed, meaning there are no after-sales repairs.
To some that might be a downside, as the watch can’t be fine-tuned over time for a longer life. Swatch would only tell me that the Sistem51 is expected to have a lifespan of “several years”—you’re not buying an heirloom. But the longevity is helped by an innovative movement construction. The Sistem51 uses a sectional design, with five modules that contain the main working parts of the movement all held together by a single screw. (More standard mechanical movements have about 30 screws.) The one-screw structure means less friction between moving parts and less lubrication—two things that significantly affect the lifespan of a mechanical watch.
Once it’s been all cased up on the assembly line, the Sistem51 can run for 90 hours on a single winding; typical mechanical watches have a 40-hour power reserve. For all the innovations in the watch’s design, Swatch applied for 17 new patents.
But hey, a watch is a watch, you might say. How could yet another mechanical one really be as innovative as Apple’s new wearable computer? To understand how transformative the Sistem51 could be, you need to appreciate what Swatch means to the watch world. If you grew up thinking of Swatch as a fun, brightly colored accessory sold in mall kiosks and airports, you’re only getting half the picture. In many ways, Swatch is the only reason that Switzerland is still making watches, and turning profits, today.
The Swatch was developed in the early 1980s, at a moment of existential crisis in the famed Swiss watch industry. Switzerland had been recognized for hundreds of years as a major producer of high-quality watches, clocks, and sophisticated mechanisms, but by the 1970s it was falling behind. Companies in the U.S., China, and Japan had found faster ways to mass-produce cheap watches that still had the basic functionality of Swiss ones. Even as Swiss engineers continued to develop new models and improve the engineering, their sophisticated timepieces couldn’t keep up.
The nail in the coffin was the introduction of the quartz watch. The first publicly available quartz wristwatch was the Astron, launched by the Japanese brand Seiko in 1969. If accuracy was the whole point of a watch, quartz obliterated mechanical: Even today, the most accurate mechanical watches keep time via a spiral-shaped spring that oscillates at 36,000 vibrations per hour; modern quartz watches use a small crystal that vibrates 32,678 times per second. The Astron initially cost about $1,250, making it almost the price of a small car, but the cost of quartz technology quickly dropped, and soon everyone was opting for mass-marketed quartz instead of outmoded Swiss mechanicals. Switzerland quickly felt the effects of the technological paradigm shift: A generations-old economy crumbled in just a few short years. By 1983, the number of Swiss watch companies had dropped from 1,600 to about 600; an industry that once employed 90,000 now employed 34,000.
The way that Switzerland survived the so-called quartz crisis was to reframe what it means to own a Swiss watch. If just about anything could tell excellent time now, then the choice to buy a Swiss watch had to be an emotional decision, not a functional one. The branding of Switzerland as the essence of precision craftsmanship became more important than ever before, even if the result of that craftsmanship was a watch that didn’t keep time as well as a Japanese quartz. You would wear a Swiss watch if it spoke to you, if it represented who you were to the world. What had always been a utilitarian product had to become an emblem. By wearing a Swiss watch you weren’t just keeping track of the time: You were buying into a culture of mechanical artistry and an age-old tradition of refinement. Wearing Swiss turned into a matter of taste, a sign of cultural capital, and, frequently, a display of actual capital, too.
The man behind this reframing was a Swiss-Lebanese management consultant named Nicolas G. Hayek. Although he had no prior experience in the watch industry, Hayek was hired to rescue two failing Swiss watch conglomerates in the early 1980s. Along with turning the businesses around and forming them into one group (which he would ultimately become the head of), Hayek separated the company’s movement engineering business from its brands, allowing the brands to focus on the design and marketing of their products as emblems of Swiss quality. This move shaped the industry profoundly for decades, but it may be less significant than his other bold stroke. Around the same time, Hayek obtained funding for a small, kooky side project. What if there was a quartz watch that was cheap and easy to produce, still had the cachet of being Swiss made, and was marketed as a fun accessory at a low price? It wouldn’t be your main watch; maybe you’d have a few of them, to wear in different situations, or just for a season, or even two at a time. (The name Swatch was a contraction of “second watch.”) Although the idea of a watch as fashion accessory seems beyond obvious today, it was still very much a novelty in the Swiss market at the time.
The first Swatch watches came out in 1983 and were an immediate success. They were produced on a fully automated assembly line and had only 51 components (a feature echoed by the Sistem51), whereas other quartz watches had close to 100. The watches cost 10 Swiss francs to produce and sold for 50 each. The company took off from there, producing one collection after another. The watches were good quality, affordable Swiss quartz pieces, but they were also marketed perfectly as fun, expressive, and eye-catching. They became a mass-market mainstay.
The effect on Switzerland’s watch industry was profound. The success of Swatch showed that the Swiss could do something new and get everyone talking. The profits from Swatch breathed new life into the Swiss industry and helped to finance Hayek’s other brands. Swatch also brought a broad new range of consumers into the fold, educating them about the “Swiss Made” label—which requires that a specific portion of a watch’s production be carried out in Switzerland—and providing an entry point into the market; eventually, some Swatch buyers would develop a taste for higher-value Swiss watches. If people today are still wearing Omega, Rolex, and Audemars Piguet watches that cost tens of thousands of dollars, that’s thanks in no small part to a plastic quartz with a multicolored dial.
Hayek eventually recognized the contributions of his side project by naming his conglomerate the Swatch Group. The company now owns 18 watch brands up and down the price spectrum and had gross sales of 9.219 billion Swiss francs ($9.6 billion) in 2014. Besides its brands (including Omega, which generates the most revenue of any of the 18, and the ultra-high-end Breguet) it also owns ETA, the top supplier of mechanical and quartz movements for the whole Swiss watch industry. So dominant is ETA’s hold on watch production in Switzerland that its clients even include the Swatch Group’s top competitors, like LVMH and the Richemont Group. (In fact, it’s thanks to ETA and Nivarox, another Swatch Group–owned supplier of components, that Swatch was able to perform the production and assembly of Sistem51 entirely in-house. No Swiss watch brand outside of the Swatch Group would have the infrastructure and know-how to make that happen at scale.)
Like the original Swatch watches, the Sistem51 is the kind of innovation that combines the allure of the new with comforting echoes of the past. Like its forebears, it’s an affordable watch that’s built by machine. And like the originals, this Swatch arrives at a moment when the Swiss industry is under assault by new technology and foreign competition. It’s too early to say whether Swatch can again rescue the Swiss industry, but its strategy seems sound. The Sistem51 isn’t just pouring old wine into new bottles: It’s a way to combat the increased interest in nonwatch wrist wear by reintroducing the Swiss mechanical timepiece to a wider base of consumers who couldn’t afford it before—and who might not be able to afford an Apple Watch either. But the goal isn’t to compete with Apple’s technological prowess: It’s to generate enthusiasm for Swiss craftsmanship on a much wider base. As an entry-level brand, Swatch has always been about drawing in potential watch buyers and functioning as a gateway drug to the Swatch Group’s higher-value offerings.
Apple has been withholding sales data on its watch but the numbers seem to be dwindling. Meanwhile, the Swatch Group’s half-year report earlier this month touted the Sistem51 as a “best seller,” responsible for “quintupled sales of its mechanical watches in the American market.” Swatch is perfectly positioned to teach more people than ever before about the beauty and the achievement of the mechanical watch. If the brand can get it right, this new version of a centuries-old technology stands to save, once again, the watch as we know it.