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The Quartz Crisis: The (Almost) End of the Watch Industry

Written by Robbie Hadley

Introduction

            As long as there have been artisans and craftsmen, there has been competition. In 1750 B.C. a Sumarian artisan by the name of Ea-nasir received a complaint on his low quality copper compared to that of the others in the ancient city of Ur. Many Roman artisans rushed to create and then improve purple dye and become fabulously wealthy from the nearly limitless coffers of the Roman elite. In the modern age, Google and Apple push each other to make cutting edge innovations to consumer technology in a quest for market domination.

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            However, one of the most interesting accounts of companies racing to achieve technology that was right on the brink of proliferation took place far in the background while the Cold War and the Space Race captivated the world’s attention. This is the little known story of the quartz crisis. This race to develop computerized timekeeping, and bring it to the mass market, brought many giants of luxury to their knees.

Early Timekeeping

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            For millennia, the improvements to tools for accurate timekeeping was a slow crawl. From our ancient ancestors who simply used the position of the sun in the sky, to early sundials in Egypt, and eventually mechanical clocks in 14th century Europe, the goal of accurately marking the current time was an inexact and rarely agreed upon task. No two cities had the same time and would set their clocks by solar noon, the time when the sun is directly overhead. This caused huge issues as rail lines started to make rapid mass transportation a reality for the first time in the 19th century. On a train journey from New York to Chicago, the conductor would have to keep track of the time, not just for those two cities, but also each city along the route which could be a few minutes to a half an hour off from each other. To further confuse things, the rail companies themselves set their own time that was independent of  all of the cities.

To keep up with these changes, miniaturized pocket watches were developed. Many modern watch brands can trace their origins to this time period when the demand for timepieces boomed. This confusing and clunky method of organizing the many time zones ambled along for many years, and was eventually unified in 1883 in America and across the rest of the globe the following year. This established the time zones roughly as they are today. However, this didn’t solve all of the issues surrounding the timing of trains. The imprecise ticking was the ticking of a time bomb.

In 1891 in the small town of Kipton, Ohio, just outside of Cleveland, two trains collided at full speed. Nine people died, most of them postal workers. The subsequent investigation revealed that a slow pocketwatch was to blame for the needless tragedy. The eastbound train’s conductor had a timepiece that was four minutes slow, causing them to be late and still on the tracks while another engine barreled toward them.

            This disaster led the locomotive industry to invest into ultra accurate timepieces. Webster Ball, a local jeweler and a watchmaker, was given the task. He succeeded and BALL watches became the railway standard as well as a luxury status symbol that persists to today with BALL watch company still using their status as Rail Standard timepieces in their marketing. The strict regulation of all of their pieces also inspired the Official Swiss Chronometer Testing Institute (COSC) to offer independent standardization which many luxury brands still use today.

            World War One saw a move from pocket watches to wrist watches. Their invention is often incorrectly attributed to Louis Cartier seeing military tanks from his upstairs room and inspiring him to design the now iconic Cartier Tank wristwatch. By the Second World War, watches were no longer just a luxury for the ultra wealthy, but were a tool for the everyman as the mass production of war goods brought their prices down significantly.

The First Digital Timepieces

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            Across the channel at Bletchley Park in the English countryside a group of scientists were trying to break the Nazi Enigma code. Alan Turing and many other brilliant scientists worked with brand new technology that allowed for machines to complete equations faster than the greatest mathematicians. These new computing machines helped win the war for the allies and would change the rest of human history. Computers quickly evolved from a singular code breaking tool to a few industrial machines. Then in the 1960’s the technology proliferated in nearly every sector. Although they were still not adopted by the general public because of its exorbitant cost and difficulty in usability. However, several executives and engineers in Japan thought this computerized technology could be used by everyone and started working on a world changing invention.

            For the two centuries before World War II, Switzerland had been the unchallenged behemoth of timepieces. A few American companies such as the aforementioned BALL watches and Timex had some distribution in the states, but it paled in comparison to the Swiss giants. However, the newest competition in innovation wouldn’t come from the Swiss establishment or the secondary, but still profitable, American market. It came from a region none of the competition had even considered, Japan.

            Although Seiko is a household name today, it didn’t have that position until the middle of the 20th century. It was established at the end of the 19th century and was a largely local success with limited foreign distribution. However, it did the same task as BALL by keeping railway time. The brand was also the primary supplier of timepieces for the Japanese military during the WWII,  infamously worn on the wrists of the pilots, including the feared kamikaze.

            In the post war period, their use as military tools translated into universal recognition in the country. Foreign soldiers who had come across the tools found the pieces to be well made and reliable which added to demand. When Tokyo hosted the 1964 Olympic Games, their branding finally brought the company to global prominence. Also as a first, Seiko had made some prototype quartz regulated full sized clocks which were used as backup timers in the marathon, a preview of the technology that would soon sweep the globe.

            In the background of all this, there had been some small steps in miniaturized computer watchmaking both in Japan and abroad. The American brand Elgin made one of the very first battery powered watches which sold under the Bulova Accutron line. The piece skeletonized its first design to allow all of the internals to be viewed, giving it the futuristic marketing term Spaceview. However, its design isn’t the one that would be picked up and mass produced the world over because the watch let off a low audible hum. The hum was also an integral part of the piece’s design as it kept time using a tuning fork that vibrates from the sound at a specific frequency, so there was no way to remove it.

            Although the hum was marketed as a futuristic feature, in practice, it was an annoyance for many consumers who probably thought that they had tinnitus until realizing the buzzing in their ear was from the timepiece on their wrist. It was a fun novelty, but not a new standard in timekeeping.

            The Accutron was a success of concept, but wasn’t the industry changing leap forward that Bulova had been hoping for. Using an audible hum and tuning fork wasn’t a feasible solution to digital timekeeping, so they searched for a new solution. Little did they know, Seiko already had one in mind and was on the verge of a breakthrough.

The Miracle of Quartz

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            As a mineral, Quartz has many properties that make it an oddity of nature and ideal for computerization. When quartz is etched into the shape of a tuning fork, similar to the one used in the Bulova logo, the fork shape crystal becomes the oscillator. When an electrical current travels through the quartz, it vibrates at precisely 32,768 vibrations per second. Miniaturized computers can be used to count these vibrations and keep time with accuracy that simply wasn’t possible before.

Although many different competitors were refining the technology, Seiko beat them all to market releasing the Seiko Quartz Astron on Christmas day 1969. Retailing at $1,250 (around $9,000 today,) it was a luxury product, but priced competitively to other luxury pieces. That being said, it was well on the higher end of the scale. For reference, the 1970 Rolex Submariner retailed for $250 for the stainless steel model ($2000 today) and the 18k gold model sold for $2000 ($15,000 today) placing the Astron as a mid range luxury product. Many even considered it good value as it was also cased in the same 18k gold of the higher end Submariner.

The piece was an instant success. Having a computerized wristwatch was a sign of wealth and status, and other brands quickly scrambled to release their own version of the new digital trend. Among these, one of the most popular was the Pulsar from American turned Swiss brand Hamilton. The Pulsar was one of the first watches with a digital display, utilizing LED lights that were only viewed when the button on the side was pressed. This futuristic design, coming both in stainless steel and in gold, was particularly successful appearing on the wrists of the rich and famous from Roger Moore’s James Bond in the 1973 classic Live and Let Die to sitting President of the United States, Gerald Ford.

Omega released their take on the quartz watch in 1974 with the Omega Marine Chronometer which bragged of its accuracy of no more than twelve seconds per year off of perfect time. They then followed it up with the Omega Chrono-Quartz as the first dual digital and analog chronograph just in time for the 1976 Montreal Olympic games. Even Rolex jumped on the quartz trend releasing their classic Oyster Perpetual as the Rolex Oysterquartz. However, luxury quartz watches were a bubble that was bursting underneath the entire Swiss Watch Industry.

Industrial Fallout

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The thing about technology is that it always seems to improve. While the first quartz movements were expensive and only accessible to wealthy consumers, the technology evolved at a breakneck pace. While mechanical movements were constructed by hand using skilled laborers, quartz movements became much more inexpensive and easier to mass produce with less human labor, further driving down their cost. Adding to this, the Liquid Crystal Display, or LCD, had solved battery issues. Other watches needed annual or semiannual battery changes, but the LCD panels were efficient enough to keep the display ticking for multiple years or even a full decade before a change was needed.

By the 1980’s, quartz watches weren’t a luxury anymore. Expensive luxury quartz watches from brands like Omega and Rolex were not only unfashionable, but associated with the cheap watches for mass consumption. Nobody wanted them. Dozens of brands with long and storied histories failed. Notably, the American giant Hamilton who had just a few years previously moved operations to Switzerland to raise their profile had utterly failed, selling their name to avoid completely vanishing from the industry. Elgin watches, founded in 1864, liquidated their company and went bankrupt.

Most devastatingly, Omega, a Swiss icon since 1848 and one of the most iconic brands in all of fashion, was on the brink of complete collapse. Banks refused to deliver bailout loans assuming they would never be able to pay them back. Even Seiko, who’s market cap had exploded due to their continuing market domination and had an incredible amount of cash on hand, decided against acquiring them at their neutered valuation, unsure if they would ever be profitable again.

A  few major players were able to avoid the worst effects of the crisis, although none were completely unaffected. Rolex’s unrivaled name recognition along with their hesitancy to embrace quartz technology on a large scale allowed them to weather the worst of the crisis. They doubled down on their commitment to classic mechanical timepieces as a luxury good which is still the status quo for modern luxury brands.

Some wondered if the industry that had been dominated by the Swiss for nearly two centuries would drift across the continents in Japan. Seiko had grown from a local success to a global sensation in a few short years and were bolstering their product line across the board. They introduced the Seiko 5 as a budget focused automatic line to capitalize on those who were hesitant to switch to computerized watches. They similarly invested heavily into their Grand Seiko line that was made to compete with the highest of Swiss luxury brands and products.

However, Seiko wasn’t the only Japanese brand capitalizing on this trend. Citizen watches had been operating in the country since the beginning of the 20th century, but used the market as an excuse to start ramping up production and investing in budget focused quartz watches. Also, the calculator company Casio introduced their own version of digital watches and saw instant success with unprecedented global market penetration. Casio calculator watches are still one of the most iconic symbols of the 1980’s and the constant companion for Marty McFly in the Back to the Future Series. There were many who were convinced that the age of Swiss watches were over.

Even the Swiss government was concerned since their economy, which was often touted as the strongest and one of the most stable in all of Europe, if not all of the world, was largely intertwined with the industry. They had survived two world wars, but it wasn’t clear if they would survive global competition. However, despite all of the devastation, there was a phoenix in the financial ashes of this crisis.

Swatch and Learn

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With Seiko declining to purchase Omega in 1983, the future of the company was grim. In a desperate bid to keep the company afloat, the two largest Swiss watch companies, both of whom owned dozens of popular brands, merged to attempt to salvage the floundering industry. They scoured the world for a CEO with the skills to take a series of hastily merged and failing companies back through the uncharted waters. Eventually, Nicolas Hayek was tasked with steering this Titanic away from the iceberg that it had already hit. Hayek himself is an incredibly interesting figure who could easily warrant his own video. His role in the eventual recovery of the company is referenced in business textbooks since he pulled unprecedented success from the jaws of defeat. His amazing success becomes less surprising when one sees that Hayek was uniquely certified for the position. He was trained in mathematics, chemistry, and physics and was the CEO of a successful Swiss engineering firm at the time. He had the economic chops as well as knowledge of Swiss culture and its workforce. He also had the technical know-how to make insightful decisions and save the legendary brands from utter collapse.

One of the first decisions was for Omega not to attempt to beat Seiko at their own game. Having Omega produce quartz watches when they were associated with budget pieces undercut the luxury image they had built. They would take Rolex’s lead and lean hard into mechanical pieces as artistic tools made by artisans and preserve their status as a luxury brand.

Lastly, and most importantly, they would create a new brand that would fill the roll of cheap everyday pieces for anyone to use. It would function as a second watch, so the name Swatch was picked. Swatch, in direct contrast to the higher end brands, would be plastic pieces that could be manufactured cheaply, have designs swapped regularly, and produced at a huge scale. They also used pop artists such as Kieth Haring to contribute to designs. Hayek himself could be seen in public wearing up to eight different Swatches all at once.

Swatch was enormously popular. Omega weathered the storm and slowly gained market cap back. Tissot acts as an entryway for new watch enthusiasts, especially touting their partnership with major cultural icons such as their exclusive advertising rights with the NBA. The other brands in the collective have freedom to operate as individuals in their design and marking, but with shared production to bring the prices down for everyone. To punctuate this massive change, the company rebranded as the Swatch Group, under which they still operate as one of the largest fashion collectives in the world. Hayek’s plan had succeeded more spectacularly than anyone dared to hope for. It also turned out particularly well for Hayek financially who had invested heavily in stock of the flailing company which made him a multibillionaire.

Success Through Crisis

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Although Swatch was the most public and likely the most impressive entity coming through the quartz crisis, they were far from the only success. One of the other unlikely successes came from a brand in the so-called Holy Trinity of luxury watches, Audemars Piguet. Having a space in the industry considered “High Horology” and offering boutique luxury products, quartz watches were not serious competition. Their market even floated above the level that Rolex and Omega sat as consumer luxury. Their customers were the old monied elite that rarely concerned themselves with fads and were incredibly slow to adopt new technologies until proven permanent. Even then, the technology had to fit into their established view of their luxury products for them to adopt it, and quartz did not fit in.

Even with their privileged position, they realized that they needed something to compete with the marketing buzz that Seiko was generating. In their quest to create buzz, they accidentally created one of the most iconic pieces that watchmaking has ever produced. Designer Gérald Genta created the luxury stainless steel sports watch with the 1972 release of the AP Royal Oak. This piece of modern classic art with exposed bolts, an integrated bracelet, and a blue textured dial was a luxury watch that was meant for the everyday. This was considered a big departure from their oeuvre of sophisticated dress watches. Demand for the piece immediately shot through the roof.

The importance of the Royal Oak really cannot be overstated. There have been very few times in any industry when a singular product has such an incredible impact. One of the few proper comparisons would be how the iPhone changed the market of smartphones and mobile technology overnight. Even today, the Royal Oak is the one of the best selling pieces and maintains a constant waitlist that all but the most privileged of clients must wait in, sometimes for upwards of a decade or more before being given the privilege of spending $50K on a single piece. AP has made dozens of alternate versions in different colors, with different complications, and composed of different materials. Each one sells out instantly at whatever price they decide to set it at. They may as well have been given a license to print money.  A recent version of this piece used the Marvel comic character Black Panther as a design focus. It was limited to 250 pieces and sold at retail for a quarter of a million dollars. The line sold out immediately.

This success had a knock-on effect in the rest of the industry. Along with making Genta the top designer in watchmaking, a role he would hold for the rest of his life until his passing in 2011, every company designed their own steel sports watch with an integrated bracelet and a blue dial. Most famously, Genta was tasked with designing a similar product for another member of the Holy Trinity, Patek Philippe. Genta trapped lightning in a bottle once again in 1976 with Patek Philippe Nautilus. Although the Royal Oak seemed like a once in a generation success, the Nautilus somehow managed to achieve this for the second time in four years. The demand for this product was just as overwhelming as the Royal Oak and both designs still command the same demand half a century later. A time period that was an unmitigated disaster for the vast majority of Swiss watch companies was one of the most successful for these two horological giants.

Watchmaking Today

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The quartz crisis changed the industry of watchmaking forever, but in another ironic twist, it saved it from a future disaster. The utility of smartwatches that integrate with smartphones could have signaled the end for traditional timepieces. However, that didn’t happen. In fact, there has been a resurgence in interest in traditional mechanical wristwatches. Smartwatches such as the Apple Watch have created a new generation of horological enthusiasts that have their entry point into the hobby as a smart watch. Mechanical watches are selling better than ever. Robust manufacturing facilities and the proliferation of off the shelf mechanical movements have created a cottage industry of microbrands that design watches for niche markets at competitive prices and release in limited quantities. Brands such as Monta, Boldr, and Zelos that started as small artisanal brands have risen to become big players in the marketplace.

In another stroke of irony, Seiko has pivoted almost entirely away from quartz movements. While other Japanese competitors such as Casio and Citizen traffic heavily in the space of consumer quartz watches, Seiko is more focused than ever on their mechanical movements. The aforementioned Seiko 5 line which they started in the 60’s is still running strong today and received a brand new design refresh in 2020 to start moving Seiko’s profile upmarket and away from their computerized competitors. This does not mean that Seiko has stopped innovating in watchmaking. In fact, they are responsible for one of the biggest innovations in horology since the quartz watch. Seiko released the Spring Drive movement in 1999 which is a combination of mechanical components and a quartz regulator to have an incredibly accurate watch with a perfect sweep of the second hand, harkening all the way back to the Bulova Accutron. If you are interested in this, it could almost certainly be its own mega/sideproject, so sound off in the comments if you want to see that.

The Swatch Group is still one of the major players in the industry and uses the number of powerful brands at its disposal to corner various portions of the watch market. One area of focus has been their development of the movement manufacturer ETA which was part of the merger back in 1983. Along with being one of the top distributors of watch movements from Switzerland, it also is constantly innovating to make better movements for their in-house brands. One of their recent advancements adapted some of their most popular movements to stretch the power reserve on their watches to 80 hours, allowing a watch to be put in the box on Friday evening and picked up on Monday morning running on time, ready for use.

Hamilton may have failed in the 70’s but they were also revived in Hayek’s saving of the industry as part of the Swatch group. They straddle the border between the consumer and enthusiast market and use that position to bring in newcomers to the hobby. They are particularly close with Hollywood productions seeing their timepieces in many enormous blockbusters from Interstellar to Avengers. In stark contrast to the glitz glam of Hollywood, they still produce many of the classics made for the US military in World War II and Vietnam.

More so than nearly any time in the past, the world of horology is open to enthusiasts from every price range from pragmatists looking to tell the time quickly, to master artisans who have worked for generations to refine pieces of functional art. Hundreds of brands from all over the world contribute designs to fit certain niches or push boundaries of analog technology. The old stalwarts are ticking away as regularly as any of their timepieces, slowly improving these mostly superfluous, but still delightful everyday tools. It is an industry that has something to offer for nearly everyone, aiding in a task that everyone does every single day, glancing down to check the time.

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