Divya Manian

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Swatch’s Now is Android’s Future?

This weekend, I chanced upon this article on the woes of Swatch’s rivals in the New York Times. It is an interesting read throughout.

What is interesting is Swatch provides most of the mechanical movements for its rivals and is now cutting back and possibly end supplying them. Here are some interesting quotes from the article:

Mr. Stas acknowledged that it would have been nearly impossible for him to start out in watchmaking 23 years ago without access to Swatch’s production platform.

Swatch’s revenue last year of 6.44 billion Swiss francs, or about $6.95 billion, makes it by far the world’s largest watchmaker. The company insists that its goal is not to strangle competitors. And it argues that its withdrawal will require rivals to raise their spending on manufacturing, thereby strengthening the quality and competitiveness of the Swiss watch sector as a whole.

Thanks to Swatch, “there is no other industry with such cheap entry costs,” said Jean-Claude Biver, who spent 12 years on Swatch’s executive committee before becoming chairman of Hublot, which is now part of LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods company and one of Swatch’s main rivals.

As I was reading the article, it became really hard for me not to draw the comparison to Android, and the subsequent acquisition of Motorola Mobility by Google. The CEO of Swatch mentions:

“In no other industry do you have one company supply all the critical parts to the people who then compete directly with it,” Nick Hayek, Swatch’s chief executive, said in an interview this year.

Clearly he has not heard of Android.

I am not suggesting Google will do this, just that there are very obvious incentives to do so. What I would like to know is how mobile manufacturers are hedging their risks. As one ex-Swatch executive said:

“This whole battle is the result of people completely underestimating the risk that at some stage Swatch could cut off rivals, which is a legitimate decision to make in a free market,”