Even as the booming Swiss watch industry soars to new heights, many watch manufacturers remain nervous about 2012. That's because the Swatch Group is getting ready to ratchet down its supplies of movements to third-party manufacturers by 12 percent this year as it tries to keep up with exploding demand for its own brands, such as Omega.
The Swatch Group's wholly-owned subsidiary, ETA, currently supplies about 80 percent of the movements for Swiss watches. While some of the industry's biggest players, including TAG Heuer, Frederique Constantin, Corum, Carl Bucherer, and Hublot, have recently beefed up in-house production, less well capitalized firms are at high risk to disruptions in their supply chain.
Quality Swiss alternatives aren't readily available and profit margins will likely get squeezed as some will be forced to invest tens of millions of dollars on creating and producing their own movements. Others are scrambling to create and produce more of their own movements. Some smaller niche brands may band together to create a common movement but others may be forced to shut down, sell themselves, or even turn to cheaper non-Swiss movements from Japan or China.
We'll continue to watch this story closely as it develops. What are your thoughts?