Swiss Luxury Watchmakers Put Diamonds on Inside to Stand Out

March 16 (Bloomberg) -- Swiss watchmaker Hublot, owned by LVMH Moet Hennessy Louis Vuitton SA, is turning to "Magic Gold" to help boost sales. Elliott Gotkine reports from the Baselworld watch fair. (Source: Bloomberg)

Luxury watchmakers aren’t content to cover timepieces with diamonds and gold -- now they’re adding precious materials to inner workings as well.

Swiss companies including Omega and Hublot are replacing traditional gold and steel with hi-tech alloys and ceramic composites. Patek Philippe SA, the 173-year-old Geneva brand whose watches have sold for as much as 17 million Swiss francs ($18.4 million) at auction, is making components out of silicon to improve accuracy and performance, while Ulysse Nardin SA is coating some parts with diamonds.

The experiments are paying off for watchmakers and buyers. Manufacturers can reduce the content of the most expensive materials with alloys and composites as costs climb, while owners find the watches more accurate, durable and lighter.

“There is something of a revolution,” in watchmaking, said Jon Cox, head of Swiss research at Kepler Capital Markets in Zurich. “They’re starting to look under the bonnet of the watches, looking at the movements, looking at silicon, looking at other types of materials.”

Patek showcased the so-called reference 7140, an ultra-thin ladies timepiece in pink gold encrusted with more than 90 diamonds that includes a perpetual calendar function, at this year’s Baselworld watch fair. The model, which will retail for 82,000 francs, incorporates silicon, as does a complicated timepiece for men also being introduced this year.

Closing the Gap

“There was a big gap between what we could calculate and draw and what we could produce,” said Thierry Stern, Patek’s president in an interview at Baselworld. “Today with silicon we can realize and give life to those parts.”

The material helps watchmakers grapple with a loss of power from friction in a watch’s movement, or internal mechanism, avoiding the need for lubrication and boosting accuracy. Rolex SA, Omega and Hublot, owned by LVMH Moet Hennessy Louis Vuitton SA (MC), have been developing gold alloys that are more durable and resist scratches.

Gold blends may bring additional benefits by helping watchmakers cope better with spiraling prices for precious metals, according to Cox. The price of gold has climbed 19 percent in the past year, cutting into watchmakers’ profitability.

Silicon Parts

Patek plans to expand its use of silicon to about 90 percent of annual output in 10 years from a fifth at present, according to Stern. It also expects to produce watches that are more accurate than a type of complicated timepiece known as a tourbillon. Valued for their precision, tourbillons compensate for the effect of gravity on a watch’s mechanism by means of a rotating cage inside the case. Prices for such piece can reach hundreds of thousands of francs.

“Silicon continues to raise the bar for Patek versus pretty much any other competitor,” Cox said. “The watch industry is about standing out from the crowd and if you can improve the performance of a watch that’s bound to help sales.”

Rolex also has been experimenting with alternative materials, using ceramics and alloys and decorating the dials of some models with a new gold alloy to highlight the crystal structure of the precious metal.

Ulysse Nardin’s Freak timepiece in 2001 was the first watch with a silicon escapement, the heart of a watch. The industry took another step forward in 2005, when a collaboration involving Patek Philippe and research bodies including the Neuchatel, Switzerland-based CSEM led to the creation of a key watch part made out of a silicon material called silinvar. Swatch Group AG and Rolex SA also participated in the research into silicon.

Ceramic-Gold Mix

Swatch’s Breguet and Omega brands now use silicon in some of their timepieces. Omega watches using silicon parts, accounting for about half of the watchmaker’s output, carry a four-year warranty because of their reliability and accuracy.

The brand unveiled a watch encased in an alloy of gold and ceramic at this year’s Baselworld. Dubbed Ceragold, the material increases the durability of timepieces because of ceramic’s hardness and improves a watch’s aesthetic, according to the Swatch (UHR) brand.

The maker of the watches worn by astronauts during the Apollo 11 lunar landing in 1969 is already using an alloy called Liquidmetal that can be molded like plastic. Omega plans to use Ceragold in its Seamaster Planet Ocean range of timepieces, which will retail for as much as 25,200 francs.

“The aim is not just to make new materials, it’s to use new materials to make a better product,” said Stephen Urquhart, Omega’s president.

Hublot, owned by LVMH Moet Hennessy Louis Vuitton SA, is producing some signature Big Bang watches with its patented Magic Gold. Jointly developed with the Swiss Federal Institute of Technology Lausanne, the alloy is scratch-resistant and more than twice as hard as standard gold, according to Hublot. It can only be marked by diamond.

The technology used to develop Magic Gold also can be applied to other metals including silver and platinum, and Hublot has already used the process to make an aluminum alloy.

“No innovation, no future,” said Jean-Claude Biver, chairman of the brand set up in 1980. “We only can survive if every year we bring new innovation, new creativity, either in the technology or sometimes in the materials.”

To contact the reporter on this story: Dermot Doherty in Geneva, Switzerland, via ddoherty9@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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Photographer: Gianluca Colla/Bloomberg

A "Reference 5940" wristwatch, manufactured by Patek Philippe SA, sits on display during the Baselworld watch fair in Basel.

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Photographer: Gianluca Colla/Bloomberg

A "Reference 5940" wristwatch, manufactured by Patek Philippe SA, sits on display during the Baselworld watch fair in Basel. Close

A "Reference 5940" wristwatch, manufactured by Patek Philippe SA, sits on display during the Baselworld watch fair in Basel.

Photographer: Gianluca Colla/Bloomberg

A "Seamaster Planet Ocean", chronograph wristwatch in ceragold, manufactured by Omega, a unit of Swatch Group AG, is arranged for a photograph during the Baselworld watch fair in Basel. Close

A "Seamaster Planet Ocean", chronograph wristwatch in ceragold, manufactured by Omega, a unit of Swatch Group AG, is... Read More

Photographer: Gianluca Colla/Bloomberg

Patek Philippe SA Chairman Thierry Stern. Close

Patek Philippe SA Chairman Thierry Stern.

Photographer: Gianluca Colla/Bloomberg

Hublot SA Chairman Jean-Claude Biver. Close

Hublot SA Chairman Jean-Claude Biver.

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