Was looking to buy a new watch when I stumbled upon this fascinating history of Japanese watchmaking and how they unseated the Swiss. Many lessons in Industrial policy for us here.
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At the turn of the century the Americans dominated mass watchmaking and the Swiss were the preeminent purveyors of Haute Horlogerie. Japan had begin to modernize and had imported 700,000 clocks. 2/n
With insatiable demand for clcoks, the Japanese focused on import substitution and blindly "replicated" (copied) American timepieces. By 1922 Japan was making 1.2 million clocks in over 20 clock factories. These were exported as far west as Bombay.3/n
As more Japanese started wearing pocket watches they again grew dependent on imports as the fine machining required for small pocket watches was not something clock makers were adept at.
Their watches were not as thin/accurate/reliable as Swiss/American makers. 4/n
Their watches were not as thin/accurate/reliable as Swiss/American makers. 4/n
US watchmakers were also aided by the several unequal treaties favoring US that the Japanese were forced to sign (American Free Trade anyone:)) and US watches streamed in to Japan. This treaty lapsed in 1899. 5/n
After the expiry of the treaties, Japanese Govt embarked on a full fledged import substitution program for watches using - the now much reviled policy tool - Tariffs :). Tariff on imported watches were hiked from 5% to 40%. Similar tariffs were imposed on other goods. 6/n
Enter Hattori Kintaro, who started as a watch repairman and became a clock maker as well as an importer/trader of Swiss/US watches. Protected from Imports, his clocks took 48% of the domestic market and his watches 85% of the domestic market.7/n
He focused on replicating simple Swiss watches with mass manufactured movements. He hired university students to disassemble Swiss watches and then put them together to "learn" Swiss watchmaking finesse. 8/n
He still had to import raw watch parts from Switzerland which provided 69% of the components that Japanese watchmakers needed. This import of movements and assembly within Japan was called Chablonnage. Some people call it "screwdrivering" when Indians do it:). 9/n
In 1935, Hattori's watch factory became the single largest watch factory in the world. The Swiss seeing their markets being taken over "cartelised" themselves and stopped exporting movement. Swiss Govt stepped in to ensure that watch parts and machine tools were not exported.10/n
Chablonnage was now illegal. Swiss makers now enjoyed high profits and 50% global market share for the next decade. WW2 decimated the US watchmakers as they devoted themselves to war materiel while the "neutral" Swiss flooded the market with cheap watches 11/n
Hattori was made of sterner stuff. He copied Swiss machine tools and methods during trips to Europe and exploited loopholes in the Swiss system to get parts that he needed. He split his factories in to Daini Seikosha and Suwa Seikosha and made them compete with each other.12/n
For years watchmakers had assembled in Switzerland annually for the Swiss Chronometer Trials conducted by the Observatories at Neuchatel and Geneva. These trials which ranked the accuracy of watch movements were dominated by the Swiss like Omega, Longines, GP, Zenith etc.13/n
Both Daini and Suwa Seikosha participated in these trials in the 1960s and performed miserably initially.
Non Swiss makers had never done well at these trials. But by 1967 the Japanese were dominating these trials scoring 2nd and 3rd rank after Omega. 14/n
Non Swiss makers had never done well at these trials. But by 1967 the Japanese were dominating these trials scoring 2nd and 3rd rank after Omega. 14/n
A jittery Neuchatel cancelled these trials next year but Geneva continued to conduct them. In 1968, the Japanese swept the mechanical movement category taking the top ten ranks with their movements. Shocked, Geneva Observatory cancelled these trials after 1968. 15/n
Starting as an assembler of Swiss movements under chablonnage in 1920s, deprived of tools and technology in the 1930s by Swiss cartelisation, Hattori's company had beaten the Swiss at their own game in 1968. 16/n
Daini and Suwa Seikosha would become what we now know of today as the Seiko Watch Company and bring Swiss watchmakers to the edge of extinction with their quartz onslaught in the decades to follow.17/n
Seiko's story is a euphemism for how countries industrialize. Starting at the bottom of the food chain and working upwards inch by bloody inch, begging, borrowing, stealing and using every weapon in their arsenal from tariffs to export subsidies with single minded focus. END
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