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Gross sales of smartwatches, together with Apple’s best-selling model, have leveled off and now not pose a big risk to the costlier a part of the Swiss watch trade, in line with Morgan Stanley.
That is as a result of the Swiss watch sector has considerably refocused on high-end merchandise over the previous decade, elevating costs for prime watches to offset an general decline in volumes, analysts led by Edouard Aubin mentioned in a report.
When the Apple Watch launched in 2015, it was seen as an existential risk to an trade that could not compete with the array of well being and wellness options that smartwatches can provide.
Smartwatches nonetheless outpace the Swiss watch market by a large margin, with Apple promoting extra in 1 / 4 than the Swiss trade does in a yr. Nonetheless, volumes are beginning to decline for the primary time because the launch of the Apple Watch, with smartwatch unit gross sales falling 17% year-on-year within the fourth quarter of 2022 and Apple items falling.
“General, going ahead, we consider that the incremental unfavourable impression of smartwatches on the Swiss watch trade will now be comparatively insignificant, apart from manufacturers resembling Tissot and Rado,” Morgan Stanley analysts mentioned.
The Swiss watch trade’s compound annual progress charge is more likely to step by step converge in direction of round 7% over time, reflecting the posh private items sector, they added.
A very good yr
The trade loved its greatest yr ever in 2022 when it comes to worth, pushed by a resurgence in demand for mechanical watches, notably within the US, with complete exports rising 11.8% to CHF 24.8 billion ($28 billion ).
Morgan Stanley expects the quantity of Swiss watch exports to rise by as much as a million items this yr, though many of the progress will come from the Swatch Group’s MoonSwatch – the extremely profitable collaboration – between the Omega and Swatch manufacturers. Morgan Stanley expects about 1.8 million MoonSwatches to be bought in 2023, up from a million in 2022.
Now priced at round CHF 270, the MoonSwatch breaks the cycle of declining volumes for cheaper Swiss quartz watches.
Whereas the variety of mechanical watches exported has decreased by 2.1 million items since 2014, the contraction of quartz watches is far more extreme. 10.7 million fewer Swiss quartz watches have been exported in 2022 than in 2014, Morgan Stanley estimates.