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DCF and vIndustry oaluation pverview arameters PPage 55age 55 I Points of view from EY’s global sector Challenges of the Swiss watch industry specialists and outside experts Watches are one of the iconic products made in Yet it is Apple and its smartwatch that have been the Switzerland, and watchmaking is a key industry for talk of the town. Could the Silicon Valley wreak havoc the country, with nearly 60,000 people employed in on the Watch Valley(s) and could the industry relive 2013. The Swiss watchmaking industry is currently the existential threats of yesteryear? Experts and facing macro-economic and market challenges that would-be experts have discussed at length the are likely to last after 2015 and will be changing the success of the Apple Watch and its future iterations, Amaury Bonnaire industry durably. and we do not pretend to have a clearer view. We do however have an opinion: this challenges the industry w Executive Director, TAS — Geneva By the numbers … to step up its game and is likely to favor those Last year, Switzerland shipped nearly 30 million products that are distinctive, at the expense of the ervie v watches. Mechanical watches, typically the most less exceptional. try o valuable, represented approximately 25% of the Indus volume but almost 80% in value. The industry 现在几点 (Xiàn zài jī diăn) [What time is it] remains among the top three export sectors for the Hong Kong and mainland China have been leading Swiss economy (the export value of watches was the growth story, and while they remain the main CHF22.2b in 2014, compared to gross exports of markets of Swiss exporters, they have shown signs of CHF107.6b in 2014 for Switzerland as a whole). The stalling that are another challenge to the industry. A industry rode a very strong rebound after the dip in recent trade agreement between China and 2009 (13% CAGR over 2009–2013). But Swiss watch Switzerland has been a positive sign. But distributors exports have seen decelerating growth (+1.9% in are looking at historically high inventories, and some 1 2014, same in 2013). Recent trends are a challenge watchmakers have announced price cuts (Panerai, to the Swiss exporters and magnify some of the Patek Philippe for prices in HKD). While the evolutions that were already at play. underlying global trends are favorable, and emerging Time does not stand still for Swiss watchmakers. wealth in other parts of Asia and the world are a Innovation is at the heart of the craft, with new significant opportunity, it is yet unclear which products, new markets, new forms and metals, and markets can provide a second wind to the industry. new industrial processes constantly being embraced. This has profound implications, as the level of 1 Sources: Fédération de l’industrie horlogère suisse, Bundesamt für Statistik The luxury and cosmetics financial factbook 2015

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