The quartz crisis

August 2, 2021By Bonetto Cinturini

Watches have been considered a luxury asset for centuries. They were reserved for the aristocracy and members of society’s élite, or used for functional purposes by the military and in other professions where measuring time was necessary. Watches, therefore, were either a work instrument or a sign of belonging to high circles.

Watches were a true form of art that were bequeathed from generation to generation.

At the start of the 1900s, the technology required to produce watches had improved notably, making them more accessible and more practical. With the onset of the First World War, the pocket watch was superseded by the more comfortable wristwatch.

During the Second World War, the Swiss watch industry grew staggeringly: because of the country’s neutrality, Swiss watchmakers could continue producing watches for the market while other countries were obliged to use their production lines to make watches for the military.

At the end of the war, wristwatches had become an essential accessory for every well-dressed businessman and every fashionable housewife. Half the watches worn globally were produced in Switzerland.

The Swiss monopoly

At the start of the 20th century and until well after the Second World War, 95% of all mechanical watches sold worldwide came from Switzerland.

There was practically no competition, and production was carried out in small state-controlled companies. Most of the work was done by hand and using rudimental machines. Already at that time Swiss watches were a synonym of perfection, craftsmanship and quality. Thousands of people were employed, directly or indirectly, by the watchmaking industry.

The Swiss watchmaking industry flourished until the early Seventies, but then an abrupt change occurred, bringing very serious consequences.

The 1970s and the introduction of quartz

The 1970s marked a period of transition for the watchmaking industry in general, and in particular that in Switzerland. On Christmas Day in 1969, the Japanese watch brand Seiko introduced to the market the first battery powered quartz wristwatch: the Astron.

This is how what is known as the Quartz Crisis started, a critical situation that struck the whole watchmaking industry and almost brought it to its knees. In 10 years the crisis caused almost two thirds of sector employees to be released and led to great fear about sector survival.

In addition to the fascination of new technology with a futuristic aspect, quartz watches quickly became popular among consumers because of their price, sturdiness and precision.

From being a mark of infallibility over centuries of history, the famous phrase Swiss Made suddenly became worthless.

Seiko production centres mushroomed, while the mechanical watches produced in Switzerland were considered too expensive. Even their precision was questioned. The traditional watch market, in particular the Swiss one, suffered a heavy blow.

A true industrial paradox occurred: even if one of the first quartz movements in the world had been produced by a consortium of Swiss watchmakers already at the start of the Seventies (Omega, Rolex and Patek Philippe at the time used what is known as the Beta 21 movement), at the end of the decade the Swiss watchmaking industry was practically on the edge of collapse.

The reaction to Swiss watches

The reaction of the Swiss watchmakers was not slow in coming. In 1970, Hamilton issued the Pulsar, which was quartz, but also digital instead of analogue. In 1974, Omega presented its Marine Chronometer, the first quartz watch with COSC (Contrôle Officiel Suisse des Chronomètres) certification. After only two years, the company also presented its Chrono-Quartz: the first analogue-digital chronograph with quartz movement.

The Swiss and world watchmaking industries, however, were in total panic. It was feared that the Quartz Crisis could mean the end of centuries of watchmaking history, a worry that was not unfounded. Seiko, in that particular historic period, had become the leading company: in 1977 it became the largest watch company in the world in terms of income (around $ 700 million), with a production of about eighteen million pieces. Seiko’s success forced the Swiss watchmaking industry to modernise.

Swatch, Swiss quality at a moderate price

The effort to save the Swiss watchmaking industry was guided by two men: Ernst Thomke and Nicolas G. Hayek. Thomke dealt with the restructuring of ASUAG, one of the largest groups in the Swiss watchmaking industry at the time. His work on rationalising, reorganising and reducing production costs brought the first glimmer of hope for the Swiss watchmaking industry since the start of the quartz crisis.

Some additional effort was needed, though.

At the beginning of the 1980s, the Swiss banks were worried about the country’s third most important industry, so they appointed the management consultant Nicolas George Hayek to analyse and help the apparently desperate situation.

Hayek’s plan involved two escape routes: the merge between the two biggest groups of the Swiss watchmaking industry, ASUAG and SSIH, to form what today is known as the Swatch Group, and the creation of a new watch collection that offered Swiss quality at a low price.

Hayek had quartz and automatic watches made with plastic cases and launched countless Swatch watches on the international markets: a marketing strategy that was provocative and unusual for the Swiss watchmaking industry.

Swatch watches were flat, lightweight, colourful and eccentric. They were in direct competition with Japanese watches, even as far as price was concerned. Swatch suddenly became a trendy accessory of the world pop culture, benefitting Swiss production which became overwhelmingly fashionable. Literally a stroke of genius.

For the Swiss it was the turning point in the quartz crisis. Between 1974 and 1983 Swiss watchmaking production had halved, going from 96 million to 45 million units. In 1985, however, just two years after the Swatch Group was created, production soared to 60 million units.

The great success of Swatch watches created the financial basis for relaunching the big traditional brands. The idea known as Hayek’s pyramid was born. Today, the Swatch Group also includes the brands Glashütte Original, Blancpain, Tissot, Certina and Hamilton. Nicolas G. Hayek died in 2010.

The Royal Oak by Audemars Piguet, a classic that has become a legend

The Royal Oak is one of the most famous watches of all time. But how did it become so successful in the panorama of luxury watches? And what made it become every collector’s dream? This extraordinary watch, created from the crisis and designed out of necessity in only one night, became a legend and saved Audemars Piguet from bankruptcy.

At the start of the 1970s, as already seen, all the mechanical watchmakers were facing a terrible situation: quartz movements were taking over.

Quartz watches had just been invented and were becoming more popular thanks to their durability, great precision and convenient price.

The watchmaker Audemars Piguet had been struck deeply by the quartz crisis. He realised that if he did not make a change, he would have to stop working because of the crash in sales. So he decided to take a risk and make a brave move by launching a completely new type of watch on the market: a luxury sports watch.

The creation of a myth

In 1971, on the eve of The Swiss Watch Show (now called Bazel World), Audemars Piguet sought out the help of the Geneva designer Gerald Genta, and commissioned the design of a steel sports watch that was completely new and waterproof.

Genta, who was born in 1931, had established himself with his previous work for Universal Genève, Omega and Patek Philippe.

With less than a day of forewarning, Genta started to work. In just one night, he designed for Audemars Piguet an innovative sports watch made completely of steel.

Taking inspiration from a helmet for underwater diving, Genta’s design presented a 39 mm case, visible screws on the octagonal bezel, and an integrated steel bracelet. Considering that the design was mainly inspired by a diving helmet, Audemars Piguet decided that even the name of the watch would have a nautical theme: Royal Oak, in fact, is the name of a fleet of 8 British Royal Navy ships (which in turn took their name from an ancient oak tree from the mid-1600s).

A lukewarm reaction

At a price of 3300 Swiss Francs ($ 3377 USD), the initial reaction to the Royal Oak was not what Audemars Piguet had hoped. It was considered to be too expensive by insiders. The idea of a luxury sports watch did not even persuade consumers immediately.

When it was launched on the market, the Royal Oak was more expensive than a gold Patek Philippe watch and 10 times more expensive than most of the steel Rolex wristwatches.

It took Audemars Piguet three years to sell his first 1,000 Royal Oak watches. After a while the public started appreciating the idea of the Royal Oak and was attracted by its unique design. The fact that many celebrities started wearing it contributed to its popularity. Just think that the first Royal Oak in absolute was bought by the Shah of Iran.

The reasons of success

The courageous decision of Audemars Piguet to create a watch that was different from any other started obtaining results, so saving him from bankruptcy.

Today the Royal Oak is Audemars Piguet’s flagship model. Different editions and versions have been made from when it appeared: there are models made of precious materials such as pink gold and white gold, models with chronograph and splendid perpetual calendars. There are even models that are bigger than the already considerably-sized original Royal Oak, for example the Royal Oak Offshore.

The continued success of the Royal Oak can be attributed to the impact it had on luxury watch history. It changed the watchmaking world and opened the way for luxury sports watches as we know them today. It is now normal for Swiss luxury watch producers – Omega, Patek Philippe and Jaeger-Lecoultre – to offer similar models, but the Royal Oak by Audemars Piguet was the first ever.

Other things that made the Royal Oak very successful were its unique aspect, its large size and its characteristic geometrical shape. Owning a Royal Oak, no matter whether the original model or the Offshore, Chronograph, Offshore Chronograph, Jumbo or Perpetual Calendar model, is a must for many collectors.

The Royal Oak redefined Fine Watchmaking, overturning the frameworks that had been consolidated over centuries of artisanal history. Before the Royal Oak, the price of a watch was defined essentially by the value of the metal used. From the Royal Oak onwards, the complexity of the design, the internal mechanisms and the finishes started being considered when defining the price of a watch.

The Royal Oak contributed to redefining the luxury watch market in the blackest moment of Swiss watchmaking.