Breaking News: ETA May Not Be Delivering Movements In 2020, Possibly Crippling The Watch Industry
The last time this threat appeared on the horizon of the modern watch industry (around 15 years ago), it spurred an era of creativity, leading to many brands searching out alternatives to the ubiquitous ETA movements that had been powering the majority of mechanical watches since the late 1980s, the end of the quartz crisis.
In the early days of the so-called mechanical renaissance, less than a handful of brands manufactured their own movements. This meant that almost every watch brand bought movements either from a third-party supplier like ETA or from the few brands that manufactured movements and were willing to share for economies of scale.
Then came the moment in a booming period of recent watch history between 2002 and 2008 in which ETA attempted to stop delivery to brands outside the Swatch Group. Comco (Switzerland’s Competition Commission) stepped in to resolve that, decreeing the Swatch Group must continue delivering to ensure competition.
There ensued years of back and forth between the institutions and the powerful watch group, and finally, in 2013, an amicable settlement was reached between Comco and Swatch Group (the owner of ETA), which ensured further delivery until 2019.
Today, December 15, 2019, the Swiss press is reporting that the tug of war between Swatch Group and Comco is now back on the table – and could result in dire consequences for the entire industry as soon as 2020.
What’s going on?
Funny enough, this is not coming from the side of the Swatch Group’s ETA, which has meanwhile settled back into its profitable role as a provider of tried-and-tested movements to a grand percentage of existing watch brands producing mechanical watches.
The 2013 deal between the two called for ETA to deliver a little less to the market every year until the end of 2019, when Nick Hayek, CEO of Swatch Group AG, would once again be free to make his own decisions.
The basic idea was for ETA not to be the overwhelming market leader by that time (now), allowing ETA’s clients to be free to choose where it purchases ébauches.
The Comco commission is now petitioning to stop supply of ETA movements, with a decision to finalize set for the upcoming week. The reason behind all this is a poll Comco has been conducting with ETA’s clients over the last 18 months. Apparently, the results have only just come in – days before the end of 2019 and therefore days before the 2013 contract expires.
According to Grenchner Tagblatt, the local newspaper in Grenchen, where the majority of ETA’s factories are located, ETA sold 500,000 movements to Swatch Group competitors in 2019; in 2020 there may be no calibers leaving the Swatch Group’s workshops except in the group’s own watches – a situation that would mean certain doom to smaller brands depending on these deliveries for survival.
“The commission does not have the task of organizing the marketplace,” Hayek said to Grenchner Tagblatt. “If ETA is not allowed to deliver, that will not lead to more competition, but rather less.”
Hayek is correct. That could lead to absolute ruin for smaller brands and independent watchmakers depending on ETA movements as the basis for their work.
Larger brands, who have meanwhile adjusted to the whims of both Swatch Group/ETA and Comco, usually no longer depend solely upon ETA movements to power their watches, preferring to purchase ébauches from a variety of sources these days. While for them this will be an inconvenience leading to lower 2020 turnover and perhaps fewer individual watch models, it will not put them out of business.
Smaller brands, however, may not be able to weather this storm.