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Good Times for the Asia-Pacific Watch Industry

Tuesday, November 29th, 2011

Although watches make style statements, increasingly they have started facing competition from a less related device, the mobile phone. Most youngsters depend on their phones for time and feel a watch on their wrist is not so cool. However, the watch industry in the Asia-Pacific region is fast-growing and there is stiff competition among nations.

The WorldWatchReport, an exclusive market research study that deciphers the demand related to 25 luxury watch brands as expressed by consumers located in 10 key markets, reveals that nearly 1 out of 3 searches for luxury watch brands is performed in the BRIC markets. China has emerged as the second largest market for luxury watch-making brands behind the USA. The study includes an analysis of hundreds of millions of searches as well as the official brands’ presence on Facebook and YouTube.

In the nation of India, a limited number of consumers can afford the luxury brands mentioned above. However, Titan and HMT are household watch names in India. Until fairly recently, watches manufactured by Hindustan Machine Tools (HMT) adorned nearly every Indian wrist. Yet the increase in sophistication among buyers and sellers and the maturing economy in India are set to launch watch companies here into the big league of watch manufacturers. Harish Bhat, chief operating officer of Titan Industries Ltd (watches), and also the secretary general of All India Federation of Horological Industries (AIFHI), has said, “We will see a boom in high-end watches over the next five years.”

In order for this to happen, the creation of a global manufacturing hub in India for watches and watch components is very important. China enjoys this facility already, although its competitive advantage is diminishing. The Indian government has to give priority under its manufacturing policy, introduce new technologies, and bring manufacturing and ancillary units near each other in specially-created hubs. The Indian watch market can be spruced up by the introduction of a GST which will make the market easer to serve by organized players in the wrist watch industry. Rationalization of some duties like import and excise duties on high-value jewelrylike watches, and the much lower excise duties on economy watches will further develop the market, opines Bhat.

The high-end watches segment in India is currently impaired by high import duties. The AIFHI is striving to bring down import duties for high-value jewelry watches like that of other jewel-based items. The luxury watch sector also faces problems in availability of premium retailing space. Moreover, the Weights and Measures Act stipulates certain conditions for packaging in watches, even though they are sold in the open and not in boxes. Customers are even allowed to try them on before buying. This ‘unfair’ Act imposed upon the watch industry thus leads to higher excise duties. Like the luxury automobiles segment, high-end watches will also witness an upswing over the next five years. It is expected that the number of upper-middle class and upper class households in India will boom and so will the sales of fashion and luxury watches, as have the sales of other lifestyle accessories.

The market for premium and luxury watches including watches priced above Rs. 10,000 (US$200) will get a fivefold boost between 2011 and 2016. This scenario occurred in China some years back and is expected to happen in India.

It is imperative for private manufacturers to set up hubs to produce parts and accessories which are now being imported from China and the Far East. The manufacture of watchcases and watch dials can be undertaken in India. But other parts like high-end leather bracelets, batteries and complex mechanical/automatic movements may still require outside help in technology.

If the Indian government could establish hubs for watch manufacturing, offer land and infrastructure support along with financial benefits, then India could easily become the global hub for manufacturing of non-Swiss watches by 2025.

As Chinese manufacturing is becoming more expensive, watch manufacturers are looking for other pastures like Vietnam and it is the right time for India to enter the fray and position itself advantageously. In India, watch penetration is less than 40 percent, and many people own just one watch, with multiple watch ownership being less than 5 percent. However the growth in the watch market over the past five years has been quite remarkable and more people in metros nowadays own multiple watches. Such trends need to be positively encouraged by more investments and by launching marketing initiatives. Over 60 international brands are catering to the high-end watch market in India with huge marketing and retailing investments. The market will grow fast as is proved by the increase in Indian celebrity models endorsing international brands and the airing of more advertisements in print and TV. This is sure to lure away Indian buyers from the Singapore and Dubai watch markets.

In China, the Chinese Clock and Watch Manufacturing Industry encompasses manufacturers of watches, clocks and other timing instruments such as chronometers. This industry also houses manufacturers of watch and clock parts and time switches with watch movements or synchronous motors. Other associated companies manufacture watch and clock components like straps, springs, wheels, hands, dials, and cases.

The time devices manufactured here can be segregated into the following classifications: clocks for specific purposes and other timepieces; high-end watches and clocks; low-end watches and clocks; and mid-end watches and clocks.

Shenzhen Fiyta Holdings Ltd., Ebohr Luxuries International Ltd., Zhuhai Gree Rossini Watch Industry Ltd., Tianwang Electronics (Shenzhen) Company and Zhuhai SMH Watchmaking Co., Ltd. are major watch manufacturers in China.

The manufacturing activities include making of clock and watch parts; quartz clocks, mechanical clocks, and clocks for special purposes; instrument panel clocks; quartz oscillators; time switches and also wrist watches, pocket watches, stop watches and watches for special purposes. The Chinese watch industry is very large compared to the Indian scene. They operate nearly 500 manufacturing units located in and around Shenzhen. This huge scale helps the Chinese industry supply watches to the entire global market.

Tianjin Sea-Gull ranks among a few Chinese manufacturers who specialize in mechanical and automatic movements such as a double tourbillon.

Although the Chinese scenario seems robust, it does not, however, have large and powerful brands like the Titan, Fastrack, Maxima and Sonata of India. The Chinese market does not have huge brands and is more fragmented.

In Japan, the watch industry bloomed in the first half of the twentieth century. Seiko watches manufactured by Hattori & Co set the ball rolling for competition in this industry. In the 1960s Seiko entered the world market by synergizing the American mass production system and the Swiss precision production system.

Seiko picked some Swiss high-precision watches and tried to produce them en masse using imported machine tools. The company faced problems as the parts were not interchangeable and the assembly ran on traditional lines until the end of the Second World War.

Later on, by hiring production engineers who had graduated from Japanese engineering institutions, and with the help of research organizations like the Department of Precision Engineering of the University of Tokyo, Seiko could finally implement a fully hybrid production system. There the hybrid system of mass production combined with manufacturing of semi-handcrafted, quality products was standardized. The large-scale production in the United States and the industrial organization with division of production was combined with the system of using highly skilled workers as in Switzerland to arrive at the hybrid system by Hattori for making the Seiko watches.

The Swiss technologies adopted by Hattori covered product characteristics such as movement type and parts with a focus on launching high-quality watches. But the difference lay in the fact that Hattori picked select models which were manufactured by the mass production system. It involved standardized products with interchangeable parts mass-produced by machines. The reference models adopted by Seiko were high-precision Swiss watches like Longines, some models of which were mass-produced.

Japanese manufacturers were restricted to few models and did not make any artistic effort in either watches or wall clocks. It was deemed not worth the while, and in order to make money in Japan it was imperative to stick to few models and produce them in great quantities, felt manufacturers.

After revolutionizing the watch industry with its quartz watches, Japanese watchmakers are now producing watches in the US$1,000 to $5,000 price range. These are characterized by high levels of reliability and mechanical sophistication and style. However, they are priced lower than Swiss watches. But the Japanese still have to market their creations aggressively to capture and retain their share of the global luxury watch market.


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