Upgrade Time: The Future Face of Watchmaking

Since the first Apple Watch came out in 2015, traditional watch manufacturers – with Swiss watchmakers to the fore – have had to factor in growing demand for smart devices featuring innovative design, integrated technology and smart applications, while also considering their market and brand positioning. Today, with global economic activity having all but ground to a halt on account of the Covid-19 pandemic, the heavily retail-reliant watchmaking industry has suffered hugely as a result. Indeed, the sundry lockdowns and social-distancing measures have forced the closure of many watch-manufacturing bases, while the suspension or postponement of major international watch and clock exhibitions has further disrupted the sector.

Advancing with the Times

Taking something of an historical perspective, the world’s first quartz watch prototype (the CEH 1020 Beta 1) debuted at the Centre Electronique Horloger (CEH) in the 1960s and was seen as outdoing mechanical watches in terms of chronometer control, anti-magnetic performance, accuracy of timing and price, achievements which ushered in a surge in demand for quartz watches. Nicolas George Hayek, founder of the Swatch Group, introduced a collection of iconic quartz watches at affordable prices in 1983, successfully increasing the acceptance of electronic watches among traditional watchmakers and consumers.

With smartphones increasingly ubiquitous, many modern consumers – particularly those in younger age groups – find them all but essential. Similarly, those smartwatches with information processing capabilities have become increasingly popular, making it ever more important for watch functions and values to keep abreast of changing consumer preferences.

From luxury items – initially designed with timekeeping, accuracy, complicated mechanisms and premium materials very much in mind – watches have evolved into daily necessities featuring a variety of ostentatious functions. This is thanks, in no small part, to the growing popularity of quartz and electronic timepieces. Today, smartwatches with multiple connectivity functions are taking over as fashion items. With that in mind, it is believed that the watchmaking industry can continue to thrive if new smart products can be rolled out to capture the mainstream market.

In order to gain a deeper understanding of the changes to Hong Kong’s watchmaking scene during the pandemic (especially the ways in which the industry has been using smart technology to drive its post-Covid recovery), HKTDC Research recently sat down with Paul Yuen, Director of the Federation of Hong Kong Watch Trades & Industries' Industry Division and a Director of Dayton Industrial.

It is now widely acknowledged that the pandemic has greatly changed modern life and made working and learning from home the new normal across the world. This has seen the watch market come to be dominated by local consumers, with holiday shoppers having all but disappeared due to the travel restrictions. Fewer social activities have also resulted in changes to the demand for timepieces. According to the latest forecast by Gartner, a world leader in IT research, global end-user spending on wearable devices will reach US$81.5 billion by 2021, an increase of more than 18% compared to the US$69 billion recorded for 2020.

Maintaining that smart devices and digital gadgets will continue to thrive and lead the industry’s recovery in the post-Covid era and beyond, Yuen said: “During the pandemic, many of our friends in the industry, like us, devoted a lot of resources to developing unique functions for smartwatches, such as body movement and vital signs monitoring, global positioning systems, temperature measurement and weather forecasting. As the public is also much more health-conscious than before, digital fitness and sports activities have become increasingly popular. These changes in consumer behaviour have opened wide vistas for innovative watch and clock manufacturers.”

Comprehensive Product Range Conducive to Continuity

Hong Kong, of course, has long been one of the world’s leading watch and clock exporters. The diverse range of timepieces it offers include analogue, digital, metal, plastic, fashion, classic, practical, jewellery models, as well as sports watches and many other varieties. In 2020, in value terms, Hong Kong was the world’s second-largest exporter of complete watches (after Switzerland) and the third-largest exporter of complete clocks (trailing only mainland China and Germany). In quantity terms, however, Hong Kong is the undisputed world leader. Its largest single category in this regard is battery-powered wristwatches, which accounted for more than 40% of the sector’s total export value in 2020.

Backed by numerous ancillary sectors, the Hong Kong watch and clock industry exports a variety of timepiece parts and components, including assembled movements, cases, dials and straps, as well as parts for watch bands and cases. With the exception of movements and other core component (such as quartz crystals and integrated circuits that need to be imported). Hong Kong’s watch assembling companies can easily find supplies of high-quality parts and components. Given that the electronics industry is Hong Kong’s largest export earner, with a diversity of materials thus readily available, the sector is capable of satisfying the needs of a wide range of product developers, designers and customers when it comes to creating and refining smartwatches.

Over the years, Hong Kong’s watch and clock companies have shifted from a focus on original equipment manufacturing (OEM) and original design manufacturing (ODM) to original brand manufacturing (OBM) business. Though most OEM and ODM players have already relocated many of their labour-intensive processes to the mainland and other Southeast Asian countries with lower labour costs, a considerable number of OBM manufacturers continue to produce higher-value own-branded products from their Hong Kong bases.

As buyers are increasingly quality-conscious, more and more watch manufacturers are seeking to boost consumer confidence in their quality management via third-party certification. The Hong Kong Watch Manufacturers Association Limited (HKWMA), meanwhile, has set up the Watch & Clock Design Depository Centre as a means of enhancing intellectual property protection within the industry. As well as allowing watch and clock designers to house their creations on site, the Centre also provides independent certification services for duration-in-record of copyright, allowing designers to establish and maintain copyright in litigious situations.

Overall, the remit of the Centre is to provide a comprehensive range of support services to the industry, including independent quality testing and analysis services. At present, it offers more than 50 testing services relating to international and Swiss standards, many of which were previously unavailable locally. Funded by the Innovation and Technology Fund and managed jointly by the Hong Kong Productivity Council and the HKWMA, the Centre has already secured ISO 17025 certification.

To further raise the design standard and quality of Hong Kong watches and clocks, while encouraging innovative design and promoting locally-produced timepieces to the wider world, the HKTDC , in association with the HKWMA and the Federation of Hong Kong Watch Trades & Industry, co-organises the Hong Kong Watch & Clock Design Competition for young designers on an annual basis. Response to the recent 37th edition of the event was, as ever, enthusiastic, with some 140 entries received, which was taken as a sure sign that the local watchmaking industry is in good health.

Opportunities for Innovators Amid the Crisis

It is fair to say, though, that the pandemic has been one of the most disruptive events of recent history, forcing many sectors to transform in a bid to secure positive business outcomes. The new post-outbreak world, meanwhile, is increasingly characterised by disruptive innovation, with various aspects of everyday life and commercial activity being constantly redefined.

Irrespective of how the pandemic continues to unfold, Yuen believes that with the reopening of the global economy, coupled with the ubiquity of digitalisation and automation, smart production and smart products are set to become mainstream. Detailing his thinking, he said: “Many traditional industries, including watchmaking, should prepare for business and product digitalisation and get ready for smart transformation. Simultaneously, they should also look to make the best of big data analytics and those digital channels that are gaining in terms of both popularity and maturity. They should also be well-prepared to embrace evolving business patterns at any moment.”

For his part, Yuen sees a real opportunity to redefine traditional products and appeal to new consumers through the incorporation of innovative technology. Outlining his vision, he said: “By utilising new business formats, watch and clock products of superior craftsmanship and that incorporate smart technology could take many different forms. They could, for instance, have applications with regard to diabetes patients, many of whom suffer from foot ulcers on account of footwear-related pressure and subsequent high temperatures. In this instance, health watches, equipped with advanced wireless communication technology, would be able to detect and measure the sole pressure and skin temperature of shoe-wearing feet and warn of any risks.

“It is also possible to design theft-proof watches that deter employees from stealing things in their trust, as well as injury-prevention watches that promote occupational health and safety by monitoring manual labourers and those engaged in repetitive tasks. At the same time, sports watches can be designed to link to various vital-sign monitoring devices and to smart sports equipment, such as electric bicycles. We can also adopt green development concepts and come up with environmentally-friendly watches that can use hybrid energy and be made from renewable materials.”

Although the pandemic has caused suffering on a truly global scale, Yuen believes that it may also, ultimately, deliver some benefits, saying: “The outbreak may yet lead to changes for the better as it prompts people into action, overturns norms and challenges the status quo, ushering in a more innovative and sustainable era. It may also enable us to adopt a more resilient stance in the future.

“In many ways, the watch and clock sector is ideally positioned to track the ever-changing times. It is, therefore, only appropriate that the industry should adapt to the changing times by raising its capabilities with regards to cross-over collaborations, while attracting new customers on the demand side and driving upgrade and transformation on the supply side. Inevitably, this will help it take the initiative at a time when the global economy and the related supply chains are undergoing adjustment. It will also see it switch from being a participant in market assimilation to taking on the role of an adaptive leader. This will not only help the industry navigate its way out of the pandemic, but will also quicken the establishment of new development patterns and directions.”