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07 October 2014

Who's afraid of the Apple Watch?  

Swiss watchmakers are playing down any threat to their business from the Apple Watch, dismissing a high-tech gadget as a serious competitor to upscale luxury watches.

In fact, they argue that it could, in fact, make wearing a watch fashionable again, especially among young consumers.

According to a recent survey by Deloitte, 44% of watchmaking firm executives believe smartwatches represent an important trend in the industry. In terms of threats, though, they are more worried about soft demand in markets such as China and the eurozone.

The rise of smartwatches appears unlikely to repeat the devastation to the Swiss watchmaking industry wreaked by the advent of quartz watches in the 1980s. That ultimately led to a remarkable turnaround, at least for the survivors, who positioned their products either as upscale status symbols or economy-priced pop-culture icons.

The Apple Watch does not appear to employ especially sophisticated technology, and European watchmakers already have the capability to emulate it. Instead they seem to be playing a waiting game. If smartwatches catch on, the Europeans can enter the market with ultra-luxurious versions and/or cheaper competitors. If the Apple Watch flops, they will save on the development cost.

The iPhone brutally ended Nokia’s dominance of the cellphone market, but this may be a different story. Smartwatches are attempting to revive a market that has been widely abandoned by young people.

Starting in the 1980s, the global consumer brand Swatch enticed millions of young people to wear their stylish and economical wristwatches. When older and wealthier, they often invested in deluxe, precision crafted timepieces from Rolex and its competitors.

That’s why the Apple Watch matters to Swiss watchmakers. If young people can be enticed to start wearing watches, the makers of upscale watches might ultimately be the biggest beneficiaries.