The quartz crisis

Around 1970 the Swiss industry was large and almost wholly mechanical. Pierre-Yves Donzé counts its exports of watches and movements rising from 24.2 million pieces in 1950 to a peak of 84.4 million in 1974, and cites the employers’ census for about 89,000 watch jobs in 1970.^5, 6

Quartz itself came out of a research race described in The electric and quartz revolution: the Swiss industry founded a shared laboratory, the Centre Electronique Horloger (CEH), in Neuchâtel in 1962, and Seiko’s Suwa Seikosha began its quartz project in 1959. Both brought quartz wristwatch prototypes to the Neuchâtel Observatory competition of 1967.^{1, 2, 7, 10}

The observatory trials registered the change. A CEH researcher records his laboratory’s prototypes in 1967 far ahead of every mechanical entry; Grand Seiko says Swiss quartz watches took the top three wristwatch places at Geneva in 1968, above Seiko’s mechanical movements in fourth to tenth, and SJX writes that Neuchâtel did not run its contest again after 1967.^{10, 11, 12}

The old rules were ending at the same moment. The federal watch statute, which had controlled firms, prices and exports of parts, expired at the end of 1971, and the Historical Dictionary of Switzerland notes that the cartel’s ébauche trust had neglected electronic watches.^13, 14

Quartz reached the shops as a luxury. Seiko put the gold Quartz Astron on sale in Tokyo in December 1969 at 450,000 yen; the CEH’s Beta 21 went on sale at the Basel fair on 10 April 1970 under the names of Swiss brands. The Astron has its own page.^{1, 2, 10, 15}

Electronics companies then entered the trade. Hamilton’s Pulsar, with a red light-emitting-diode display, went on sale in 1972 at $2,100; liquid-crystal displays followed from 1972 and 1973; and chip makers such as Texas Instruments, Fairchild, National Semiconductor and Intel, through Microma, began making watches.^{3, 17, 18, 19}

Prices fell steeply. Texas Instruments sold a digital watch for about $20 and then about $10, in 1975 and 1976 by Wikipedia’s dates or 1976 by the Computer History Museum’s; a study Donzé cites puts the average cost of making a quartz watch in Japan at about 52,000 yen in 1973 and under 6,000 yen in 1980.^3, 4, 19

Japanese makers took up quartz at scale: Seiko’s LCD watch of 1973, Citizen’s quartz watch of the same year and Casio’s Casiotron of 1974, built on its calculator chips. Seiko says it opened much of its quartz patent portfolio to other makers.^{15, 20, 21, 22}

Hong Kong became the assembly floor. Its factories began putting electronic watches together in 1974 and 1975 from imported chips and displays; by 1976 it made 4 million quartz watches, second to Japan, its registered watch factories rose from 237 in 1975 to 1,187 in 1980, and by 1978 it exported more electronic watches than anywhere else.^{4, 23, 24}

The Swiss industry went into recession in 1975 after decades of growth. Donzé counts its exports falling from 84.4 million pieces in 1974 to an average of 31.3 million a year in 1982 to 1984, and swissinfo reports the Swiss share of American watch imports falling from 83 per cent in 1970 to under 59 per cent in 1975.^5, 25

Swiss watch employment fell by about two-thirds, though the counts differ: about 89,000 in 1970 and 33,000 in 1985 in the employers’ census Donzé cites; about 90,000 and 1,500 firms at the end of the 1960s and 30,000 and 500 to 600 firms in 1985 by swissinfo; fewer than 47,000 already by 1980 in Donzé’s book; 70,000 in the mid-1960s and 30,000 to 35,000 in the 1980s by the Historical Dictionary.^{5, 6, 7, 25}

The Swiss product changed. Federation of the Swiss Watch Industry figures Donzé gives show 79 per cent of the 47.1 million watches and movements exported in 1980 still mechanical, and 81 per cent of the 37.4 million exported in 1985 quartz.⁶

Switzerland lost its place at the head of the trade. SRF’s school service puts its share of the world’s watch output at 44 per cent at the end of the 1960s and 13 per cent fifteen years later, and Donzé counts Japanese production ahead of Swiss exports by value from 1981 to 1985.^{6, 26, 27}

The watch regions were hit hardest. The Historical Dictionary calls the watchmaking arc of the Jura a stricken region and records federal aid, the Bonny decree, drawn up in 1978 for regions hit by the crisis of 1975; Grenchen, a town of ébauche factories, fell from 20,051 inhabitants in 1970 to 16,800 in 1980.^{7, 28, 29}

The two big Swiss groups, SSIH and ASUAG, came near insolvency; the Historical Dictionary records that Swiss banks put more than 900 million francs into them between 1981 and 1983.^8, 30

Why it went so far is argued over. The Swatch Group names recession and cheap Asian quartz watches; Stephen Foskett argues the crisis was mainly economic, driven by the rising franc, with quartz an accelerant; Donzé, and the historian writing in swissinfo, argue that quartz was not the root cause and that Swiss production methods were already losing to Japanese ones.^{8, 25, 27, 31, 32}

The crisis ends in a rescue. In 1983 SSIH and ASUAG merged on a plan the banks had commissioned from Hayek Engineering, and the plastic quartz Swatch went into production; that story, SMH and the Swatch Group, is told in Crisis, consolidation and the groups.^{8, 30, 33}

Hong Kong overproduced. Electronic watches were 68 per cent of its watch exports by value in 1980 and 95 per cent in 1990, and overproduction brought price cuts and factory closures in the mid-1980s.^4, 23

The Swiss mechanical watch survived by moving up. Donzé argues that the Swiss industry answered quartz by moving its brands towards luxury, and records Swiss watch exports worth 4.9 billion dollars in 1990 and 11.5 billion in 2009 while Japanese production fell; that turn is The mechanical revival and the independents.^6, 34

Research was regrouped too. The Historical Dictionary records that in 1984 Neuchâtel’s research bodies, the CEH among them, merged into the Swiss Centre for Electronics and Microtechnology (CSEM).⁷