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Inside Job

Is ‘made in-house’ the ultimate mark of a quality watch?

Many watch brands have spent the last decade trying to bring manufacturing in-house. The more manufacturing is done inside their factory walls, the better, for several reasons.

One is the availability of quality parts. Several years ago, the Swatch Group moved to limit and eventually terminate supplies of movements and other components to companies outside the group.

With the group accounting for some three quarters of movements made in Switzerland at the peak of demand, this had far-reaching implications for the industry.

Wrangling over the legality of the move across the years has delayed the Swatch Group’s plans, but its action served as a catalyst to accelerate watch brands setting up in-house manufacture – which would likely have resulted anyway, but over a much longer period.

Another reason: Making movements in-house is lucrative in the long run for larger brands because it gives the maker greater control over costs. Also, a watch with an in-house movement is considered a premium product, with a correspondingly higher price tag. Jaeger-LeCoultre, for instance, is a good example of a watchmaker that has been successful in making high-quality movements on a large scale.
And, because the Swiss watch industry has enjoyed an unparalleled boom in the last decade – the value of watch exports last year set an all-time record – more and more brands have the critical mass needed to go in-house.

That said, making movements in-house can be detrimental for companies that are too small. Take H. Moser & Cie, a maker of timepieces well-liked by collectors. Now in the midst of a corporate turnaround, it had made almost entire movements in-house since its founding. But that not only led to issues of reliability, but it also led to what business-news agency Bloomberg reported as the evaporation of the 100 million Swiss francs its then owner invested.

You see, like any mechanical product, movements need to be produced on a reasonably large scale for high levels of reliability and consistency. At the start, when quantities are still small, in-house movements typically have teething problems. Fortunately, many of the “new” movements being introduced now are not entirely new but, rather, based on developments of the last couple of years.

While Jaeger-LeCoultre and H. Moser are on different ends of the volume spectrum, both are regarded as being true in-house movement makers. But for many other brands, the definition of an in-house movement is murky. Many are part of big groups – the two largest are Richemont and the Swatch Group, with LVMH some way behind – and often enjoy economies of scale, since a key benefit of conglomeration is synergies across divisions.

Richemont, for instance, shares intellectual capital among brands, and there are many technical similarities between movements across brands in the group – think of it as different novels all written by the same author. Two examples: a single reset hammer for the chronograph, and a Magic Lever automatic winding mechanism. The latter, simple, robust and efficient, was developed by Seiko in the late 1960s.

Still, in-house movements are less common, and their exclusivity makes them a big draw for most buyers. But in some cases, watches with in-house movements are arguably less desirable, since the supply of such watches is limited by the manufacturer’s ability to make them.

For example, the Patek Philippe Reference 5070 chronograph, powered by a Lemania movement obtained from the Swatch Group, is sought after by collectors. But its successor, the Reference 5170, has not enjoyed the same response, though its in-house movement is technically superior.

Another example can be found in the chronograph. Twenty years ago, it was likely powered by a Valjoux 7750 – the best-selling mechanical chronograph movement in history – at the low to mid-range, while, at the high end, the choice was the Lemania 2310 or Frederic Piguet 1185.

Between them, they probably accounted for up to three quarters of mechanical chronographs made. Today, the Valjoux is less common, while the latter two are rare. Despite such examples, there’s no denying that increasing vertical integration in the industry has made watches more diverse and interesting.