Inside the IWC Factory

As customers demand ever more complicated wristwatches, Swiss watchmakers like IWC combine traditional craftsmanship and modern technology

(This story has been updated to correct an error in the fourth paragraph.)

Rare is the Swiss watch that's entirely handmade. On a recent tour of the factory of the International Watch Co. in Schaffhausen, Switzerland, one of the most surprising revelations was to see that modern watchmaking relies on computer-controlled robots as much as it does on loupe-wearing craftsmen. The most difficult parts of assembling a watch are still done by hand, but to achieve the ever more complicated watches that wealthy buyers demand, high-tech cutting machines are needed for the tedious work of milling meter-long slabs of steel or titanium into watch cases and other components.

IWC, as the company is known, is one of the world's most prestigious watchmakers. Founded in 1868 by American F.A. Jones, who wanted to combine modern industrialized techniques with traditional Swiss craftsmanship, the company manufactures more than 30 different models, such as the Portofino, Portuguese, Da Vinci, and Aquatimer, ranging in price from $2,400 to more than $1 million.

Today, IWC is owned by international luxury conglomerate Cie. Financière Richemont (CFRHF), which acquired it in 2000. Richemont also owns luxury watchmakers Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, A. Lange & Söhne, Officine Panerai, Baume & Mercier, and Montblanc.

IWC employs more than 300 people at its headquarters on the banks of the Rhine River near the German border. During World War II the factory narrowly escaped destruction when an American bomb mistakenly crashed through the rafters but failed to detonate. IWC has expanded the factory since then, and the current structure is a mix of glass and brick, where watchmakers are crowded into central workshops surrounded by windows so the tour groups don't disturb them. With the exception of hands, dials, and bracelets, every component of the watch is made here, from milling the cases to assembling the movements.

Grande Complications

Upstairs, an elite squad of five master craftsmen deals with the most expensive watches, IWC's Grande Complications. These have calendars that adjust for leap years and can chime out the time. Here, Hans Ruedi Fischer, a 62-year-old veteran who worked for more than 40 years at IWC, recently passed the baton to Hans Joerg Kittlas, 35, a 15-year veteran at IWC. The craftsmen need about five weeks to build one of these watches, which can cost 200,000 euros (approximately $270,000) or more. IWC makes 50 Grande Complication watches a year, and each one is assembled, disassembled, and reassembled during the process.

The difference in prices reflects not only the type of metals that go into a watch but also the number of "complications." In watchmaking a complication is any function that goes beyond the simple telling of time, such as a calendar or a moon-phase feature. A watch that has three or more complications is called a grande complication. The more complications a watch has, the more expensive it is. The most expensive watch ever sold was a 1933 Patek Philippe pocket watch made for American financier Henry Graves Jr. that had 24 complications; it sold for $11 million to an anonymous collector at Sotheby's (BID) in 1999.

One watch has an even higher price tag—a 201-carat Chopard—although it remains unsold at $25 million.

As aficionados know, the engine of a watch is called a "movement." IWC makes movements with as many as 750 tiny components. By comparison, an ordinary quartz movement has few moving parts and standard self-winding automatic movements typically have at least 130. Workshop manager Christian Bresser's team of 30 watchmakers is in charge of assembling movements such as the Calibre 5000, which can store enough power to run seven days. After 168 hours, the movement, which is used in IWC's Portuguese watches, stops automatically to keep some tension in the spring so it rewinds better.

The Calibre 5000 is one of the largest automatic movements in the industry, and the Portuguese starts at about $9,000 in stainless steel.

One speck of dust can ruin a movement, and IWC filters the air in an antechamber before one can enter the workshops. The watchmakers sit in front of ergonomic shoulder-height tables so they don't need to crouch as they work with tiny parts.

Chinese Market Grows

Testing watches before they are sold is crucial, and each watch is individually tested to run at least 10 days. Among the trials, IWC submerges its watches in near-boiling water to see if any condensation appears in the cases. Automatic self-winding watches, which typically lose or gain a few minutes each month, can only gain seven seconds a day.

Like many luxury companies, IWC has high hopes for China. In 2008, Hong Kong surpassed the U.S. as the biggest market for luxury watches, as the booming Chinese economy led new millionaires to travel to Hong Kong to buy watches and avoid China's luxury taxes. The U.S. was the hardest-hit market last year. However, Georges Kern, IWC's CEO, sees new potential in the U.S.

"IWC is a brand which responds to the American market," Kern says. "The United States is a luxury market that's not quite mature yet. If you look at the sales of the watch industry to GDP, it's still small. You have regions that don't have that luxury culture. There's potential where there is money."

Still, IWC has only two boutiques in the U.S., in Beverly Hills and Las Vegas, but numerous locations across Asia in Hong Kong, Beijing, Shanghai, Macao, and Taiwan.

Kern and parent company Richemont are in for the long haul. "IWC has been here for over 140 years, and we will be there for the next decades," says the 45-year-old French-German son of a jeweler. "We have to have a long-term view on things, and not to panic. You will always have crises and boom phases. That's what we're paid for. We deal with a million problems every day."

Click here to take an interactive tour of the IWC factory.

Click here to view some of the world's most expensive watches.