Feature: The Anatomy of Swiss watchmaking

Forget Area 51, forget the recipe for Coca Cola; the Swiss watch industry holds some of the best-kept secrets in the entire world. In a business worth over £14 billion, image and reputation are everything, and one false move could spell disaster—yet we know so little about the companies that make up its core. Join us as we scrub up, don our surgical gloves and choose our scalpel as we delve deep into the anatomy of Swiss watchmaking and reveal just what it is that really makes it tick.

Perhaps the biggest keeper of secrets is the most famous watchmaker of all: Rolex. The Swiss giant has no shareholders, owns the majority of its distribution network and has a security system to rival Fort Knox (complete with fingerprint scanning), only opening its doors to the very few and very privileged. How does such a big company (and manufacturer of some 750,000 watches per year) keep its cards so close to its chest? Simple: it's a private, non-profit organisation, and along with its charitable donations (of which there are many), there also comes a veil of secrecy and silence. With no public interest, there's no need to share anything.

But that's not enough to keep every secret from leaking: independence, however, is. In 2004, Rolex bought Aegler SA (the company behind Rolex's movements since the very beginning), completing a half-century long absorption of all its subcontractors. Now Rolex controls virtually all of its production and design, to the extent of housing its own laboratory and foundry internally. It's an airtight seal.

Did You Know? Over half of Swiss watch exports by volume are made from steel, which is to be expected. Following on, however, and making up over a quarter of all Swiss watch exports, are watches made from 'other materials' such as ceramics and carbon fibre. 'Other metals' is close behind, with precious metals making up barely 6% of the total volume (yet making up 45% in value).

This brings us on to the subject of the 'in-house' movement. As we've seen, Rolex's movements only really became in-house in 2004, and a look into the practices of other famous watchmakers reveals something interesting: that the use of movements made by external manufacturers is actually a historical trend. Patek Philippe, for example, was still using Lemania 2310 chronograph movements until 2009, albeit heavily modified and re-finished. Lemania is owned by Swatch, and its movements appear in both Omega and Breguet watches.

Swatch also owns the manufacturer Frederic Piguet, which furnishes Blancpain (also part of the Swatch stable) with movements. F. Piguet supplies companies outside of the Swatch Group as well, giving Audemars Piguet's Royal Oak Chronograph its calibre 1185. Audemars Piguet also uses movements from Jaeger-LeCoultre (of which it owns a 40% share), a company that has a strong history of supplying calibres to Cartier, Vacheron Constantin and Patek Philippe, among others. And so the circle is complete, scratching only at the surface of the true historical practice of movement sharing. Despite what people might say about the use of in-house movements, external sourcing is a tradition as old as watchmaking itself.

Did You Know? By value, the biggest consumer in the world for Swiss watchmaking is Hong Kong, devouring over a fifth of the market share at £2.9 billion. Unsurprisingly, the USA is second on the list at 10%, with China, France and Germany trailing behind at 8%, 6% and 5% respectively. These five countries buy just over half the Swiss watch export for the entire world.

So if the convention of developing movements in-house is not what we thought, what about the making of components by hand? There is a lot of romanticism surrounding the traditionally manufactured watch, but to make as many a year as they do, most watchmakers employ a more modern sort of watchmaker. Mechanised production has been used in watchmaking since 1876, when Longines' technical director Jacques David saw a way to industrialise an otherwise cottage industry. When mechanical watches were the sole form of timekeeping, the incentive to produce cheaper, better watches was very high.

Today, CNC milling machines do the hard work, grinding and shaping components from the largest to the smallest, etching away at billets of steel, brass and nickel with fast-moving robotic arms that follow digital instructions to the millimetre. This leaves the artisanal practices of old limited to the final finishing and assembly. The result is faster production, higher tolerances and tighter consistency, benefits shared across all manufacturing industries that have adopted robotic automation into their fabrication processes. The atelier is actually now a production line, where man and machine work together in symbiotic harmony.

Did You Know? The watch industry makes up over 10% of Swiss exports, and is valued at over £14 billion. By volume, China receives the majority of Swiss watch exports at 662 million units a year, almost doubling Hong Kong's figure of 354 million. By comparison, the fake watch market is estimated to make up £1 billion of the £500 billion global counterfeiting industry.

At least, regardless of who makes the movement and how the components are manufactured, a watch with 'Swiss Made' or similar on it will be one hundred percent born and bred in Switzerland, won't it? Well—no. Up until recently, the criteria for labelling a watch as 'Swiss Made' was stipulated as having half the watch (by value) made in Switzerland. In 2013, that figure went up to 60%, driving the majority percentage to Swiss-biased manufacture. A Swiss watch must also have its movement assembled, cased and inspected in Switzerland, but as the Swiss Franc rises against the dollar, more non-Swiss parts can be used while keeping the 'Swiss Made' moniker.

Should all these revelations be a shock to us watch buyers? Of course not. Swiss watchmaking relies on its reputation, balancing the protection of sensitive information and cost-saving production methods against the image of its brand. Since quartz technology transformed the mechanical watch from a necessity to a luxury (after nearly killing it off altogether), the industry had to break new ground to define a need for its product, and as demands rise and technology improves, practices evolve, most often for the better. It can be difficult to embrace change, but hey, without it we'd still be wearing our watches on a chain. And that’s what's really inside the Swiss watch, and always has been: business sense, practical development and the spirit to do better.

Did You Know? After the quartz crisis of the 1970s—which brought the Swiss mechanical watch industry to its knees—it took until 2001 for the value of Swiss mechanical watches sold to exceed that of quartz watches. Now, Swiss mechanical watches more than triple the sales of quartz, with the value sold per year increasing by £7 billion since 2001.