Coronageddon? Unlike the industry lapdogs known as Hodinkee, we’ve been flagging the calamitous impact of the Chinese coronavirus on Swiss watch exports. In 2019, the Asian market accounted for roughly half of all Swiss watch exports. For all intents and purposes, that market is dead. (We’ll get back to that.) On the other side of the coin, the Apple Watch supply chain is moribund. Here’s a forecast of Apple Watch exports from TrendForce . . .
Product assembly of smart watches, smart bracelets, and TWS Bluetooth earphones primarily takes place in Guangdong, Jiangsu, and Zhejiang. In spite of the projected mid-February work resumption date, work stoppages, labor shortages, and material shortages can bring about a decline in 1Q20 production volume, with deferred releases of new products originally scheduled for 1H20 release . . .
Bottom line: everything’s going to be OK “if the outbreak does not persist in 2Q20.” What are the odds? The chart shows smartwatch shipments down 16% in Q1. The ongoing epidemic and the cascade effect of parts and labor shortages will pump up that stat pronto. NPR:
The dire labor shortages have been even more worrying. China’s factories normally ramp up production right after the Lunar New Year, but this year few workers have returned. Most of China’s migrant workers, who number some 300 million, remain cloistered in sealed-off villages and towns. Those who do manage to leave find themselves barred from renting places to stay near their workplaces by landlords fearful of travelers.
My local Apple Store is already low on AirPods – Apple stores usually keep a two to three-week supply. Unless Apple can ramp-up their Taiwan Apple Watch factory fast, an Apple Watch drought is on its way.
Meanwhile, let’s reality check the importance of the ailing Asian market to Swiss watchmakers. Here’s a photo gallery of A. Lange & Söhne’s Asian boutiques (multiple boutiques in some locations).
One word: rent. Two words: consumer confidence. Eleven words: it’s the same deal (or lack thereof) for other Swiss manufacturers. Back to one: Coronageddon.
Maybe I’m being alarmist. How badly can the Swiss watch industry be doing if Vacheron Constantin is spending millions opening a new New York City boutique? But if I don’t raise the alarm, who will?
Every so often, Harley Davidson is made by the financial press to deliver a public apology along the lines of, “We regret to say our business model is to sell Midwestern retirees loud, slow road bikes, often at a loss, so that we may then sell logo-embossed saddle bags at 400% markup. Further, we acknowledge that at some point everybody who saw Easy Rider in theaters will die.”
I may have missed it: were Swiss watchmakers and other high-end luxury brands ever similarly taken to task for their reliance on a nouveau riche Asian demographic that neighbors high-density tenement housing and open-air exotic live-bushmeat bazaars? Evidently this whole enterprise risk-management concept only goes so far.
I’d be less worried about Apple, on the assumption that they could develop a new supply chain faster than users in their core markets can disengage from the iMessage ecosystem.
[…] course, all of this means very little right now. Coronageddon has pulled the rug from under the entire Asian market, which accounted for half of all Swiss […]