Can Swiss Watchmakers Take Down the Apple Watch 2?

By Markets Fool.com


Image source: Apple.

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The great Swiss watchmaking tradition dates back to the 1400s, so the industry's general dismissal of smartwatches as a passing fad shouldn't come as surprise. They probably heard the same thing about Casio calculator watches in the '80s.

As smartwatch shipments are expected to explode in the coming years, a number of Swiss watchmakers, like LVMH's Tag Heuer and Swatch Group's Tissot, have slowly waded their way into this budding industry. And with the overall smartwatch market expanding, and industry leader Apple preparing its second-generation smartwatch, the Swiss watchmaking establishment is quietly preparing to further its own presence in this space.

Industry interest
Recently, at the Baselworld watch industry fair, members of the Swiss watchmaking elite gathered to discuss, among other things, smartwatches -- a topic the industry has approached with a mix of skepticism and interest. According to reports, though, the sands are slowly shifting in this typically sleepy space, and a number of major industry leaders have loudly broadcast their intentions to vie for a larger share of this growth market.

Image source: Tag Heuer.

Speaking about his company's growth plans to expand deeper into the smartwatch space, LVMH's Tag Heuer CEO Jean-Claude Biver told Reuters: "We totally underestimated demand, we were too cautious... Next year, we'll have a real collection, a new version with six to eight models."

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The LVMH subsidiary CEO also noted: "Nobody knows what will happen with smartwatches. Of course, we could just watch this train from afar to see where it goes, but I prefer to be on board." Similarly, Swatch Group's Tissot also used Baselworld to preview the company's first smartwatch, which it named the Tissot Smart Touch.

LVMH's Tag Heuer reportedly hopes to sell somewhere between 40,000 and 50,000 smartwatches this year, far greater than its initial smartwatch production. Similarly, Swatch's Tissot said it believes the company can sell between 20,000 and 40,000 units of its smartwatch. Both numbers lie well below the estimated 11.6 million smartwatches that research firm IDC estimated Apple shipped in 2015. However, for an industry that, at one time rejected the competitive threat posed by smartwatches, interest from players like LVMH's Tag Heuer and Swatch Group's Tissot clearly signals that thinking among the Swiss watchmaking establishment has indeed begun to shift.

A threat to the Apple Watch?
Though the Swatch Group subsidiary's website frustratingly lacks any information on the Smart Touch at the moment, commentary from Baselworld by Tissot's CEO demonstrates the Smart Touch was designed as a watch first, and a piece of technology second. As its CEO Francois Thiebaud stated, "Other smartwatches are miniature smartphones on the wrist, while our product's first purpose is to indicate the time." I'm not necessarily sure that such a strategy will play well in gaining mass-market adoption, but especially considering the shipment estimates above, it seems more likely that Swiss watchmakers like Swatch's Tissot and LVMH's Tag Heuer intend for their smartwatches to perhaps retain old customers rather than attract new ones.

Looking at the LVMH Tag Heuer Connected smartwatch that launched late last year, the device falls well short of the technological capabilities of the Apple Watch, or other Android-wear devices, and that's to be expected. The rarified air of the Swiss watchmaking establishment is about as far away from Silicon Valley, both geographically and technologically speaking, that the products powered by the tech elite should be expected to outperform their European counterparts.

However, the user willing to spend well over $1,000 for a smartwatch likely isn't motivated by technology alone. As such, it seems to me that these Swiss smartwatches are more likely to keep Swiss watch enthusiasts within the market for Swiss watches, rather than to outright steal market share from the likes of Apple.

The article Can Swiss Watchmakers Take Down the Apple Watch 2? originally appeared on Fool.com.

Andrew Tonner owns shares of Apple. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.