Will smartwatches threaten Swiss watchmakers like quartz did?

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Smartwatches Pose a Potential Threat to Swiss Watchmakers, Echoing the Quartz Crisis

Smartwatches present a new technological challenge to the Swiss watch industry, reminiscent of the disruption caused by quartz watches in the 1970s. While many Swiss executives currently dismiss smartwatches as a threat, historical precedent and market projections suggest otherwise, particularly for lower and mid-range brands. The industry's past experience with quartz watches, which nearly decimated traditional watchmaking, serves as a cautionary tale for its current stance on smartwatches.
The Historical Shadow of Quartz Technology

In the 1970s, the Swiss watch industry faced an existential crisis when it underestimated the impact of quartz technology. This led to a significant decline in employment and the number of watch companies; the workforce dropped from approximately 90,000 in 1970 to just over 30,000 by 1984, and companies decreased from 1,600 to 600. This period, often referred to as the "quartz crisis," saw a mass migration of consumers towards cheaper and more reliable electronic timepieces.
Current Industry Sentiment and Market Projections

Despite the historical parallel, a significant portion of the Swiss watch industry appears complacent. A survey by Deloitte indicated that two-thirds of executives believe smartwatches pose no threat. However, market researchers offer a different perspective. Strategy Analytics forecasts global smartwatch sales to reach 1 million units this year and 7 million in 2014, while Sanford C. Bernstein projects Apple's iWatch could generate US$2.3 billion to US$5.7 billion in its first year. This indicates a burgeoning market that the industry cannot afford to ignore.
Differential Impact on Market Segments

The threat posed by smartwatches is not expected to be uniform across the Swiss watch market. High-end mechanical watches, often seen as luxury statements and collector's items, may continue to thrive. Analysts suggest that consumers who can afford a US$5,000 Rolex might also purchase a smartwatch as an addition rather than a replacement. The greatest risk, however, lies with low- and mid-range Swiss watch brands, specifically those in the US$200-400 price bracket, which are likely to face direct competition from smartwatches.
Resistance to Innovation and Emerging Adaptations

There are signs of resistance to innovation within the traditional Swiss watchmaking sector, with some dismissing smartwatches as a passing fad. This sentiment echoes the initial reaction to quartz watches. Historically, high-tech watches from companies like Microsoft, Fossil, and Citizen, which aimed to integrate information, were pulled from the market by 2008. However, some Swiss watchmakers are beginning to explore new technologies, such as Arny Kapshitzer's Hyetis Crossbow, a US$1,200 device that incorporates a camera and GPS, which he describes as the first Swiss smartwatch and believes represents the future of the industry.

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Will smartwatches threaten Swiss watchmakers like quartz did?

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