OF CITIZEN WATCH - Watch Around

STORYHISTORYHIS 63
THE SWISS ORIGINS
OF CITIZEN WATCH
MIH La Chaux-de-Fonds
As the main rivals of the Swiss watch industry, the
Japanese continue to be viewed as fierce competitors
prepared to use all possible means to achieve
their ambition of surpassing Swiss watchmakers,
including industrial espionage. The Japanese
watch industry was indeed born from the transfer
of technology, but with the active participation of
Swiss watchmaking circles, as is vividly illustrated
by the example of Citizen Watch Co., founded in
Tokyo in 1930.
The first watches were introduced in Japan during
the 1860s. Until the late 19th century, watchmaking
was completely dominated by Swiss traders in
Yokohama, such as François Perregaux (1861),
James Favre-Brandt (1863), Siber-Brennwald
(1865) and Colomb & Cie (1875). They imported
Pierre-Yves
Donzé
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HISTORYHISTORYH
Photos Citizen
The Citizen brand launched in 1918 by Rodolphe Schmid, who employed 200 people in his Tokyo factory by the late
1920s, gave rise to the Citizen Watch Co. in 1930.
Swiss watches and sold them to Japanese businessmen
who handled their distribution throughout
the country.
Protectionism encourages chablonnage. Watch
sales grew significantly with industrialisation and the
development of railways : the number of units
imported rose from 47,000 in 1880 to 145,000 in
1900. This boom encouraged several Swiss watch
merchants to seek independence from Swiss
importers by producing watches themselves. It was
in this context that the Seiko watch factory was set
up in 1892. Its founder was a watch merchant
named Kintaro Hattori, who worked with the Swiss
importers in Yokohama. He succeeded in producing
his own pocket-watches during the 1890s with the
help of engineers trained at the watchmaking school
in Le Locle and using machine tools imported from
Switzerland and the United States. However, the
watches made in Japan were much more expensive
than their imported counterparts. To protect his own
watches, Hattori, who had good political connections,
instigated successive rises in Japanese customs
duties. Import taxes on gold watches jumped
from 5% prior to 1899 to 50% in 1906.
The Swiss importers of Yokohama reacted to these
protectionist policies by turning to chablonnage,
which consisted of importing kits of unassembled
parts that were less prohibitively taxed and then
making up the watches in workshops on Japanese
territory. Hattori also purchased some of these
parts. Chablonnage gained considerable momentum
between the two world wars. Movements
accounted for 31% of the total volume of Swiss
horological exports to Japan between 1900 and
1915, rising to 42 % between 1915 and 1925
and 81% from 1925 to 1940. This strategy was
severely criticised in Switzerland because it transplanted
the industry’s activities to other countries.
It nevertheless remained the essential channel for
the transfer of technology.
Industrial transplantation causes alarm.
Tavannes Watch was one of the key players in this
development. Its watches were successively
assembled and cased up by two small Japanese
manufacturers. The first was the company founded
in Tokyo in 1914 by Kono Shohei and headed by a
former technical director of Hattori. It assembled
Tavannes Watch kits, sold under the Pacific brand
name. After this company was bought up by the
Matsumura alarm clock company, the Tavannes
Watch importer in Japan, Takara Trading, continued
making watches from imported kits until its factory
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ISTORYHISTORYH
was destroyed by fire in 1933. The activities of
Tavannes Watch in Japan caused a great deal of
alarm within the Swiss watch industry in the early
1930s, since it seemed to have planned on setting
up a movement factory there in 1932. Rolex wrote
to the Federal Office for Industry, Crafts and Trades
and Labour (OFIAMT), expressing strong opposition:
“Once a movement factory is established in
Japan by a Swiss company as large as the one in
question, we can say goodbye forever to Swiss articles
for the East and the Far East. After a few years
these [Japanese-made] models will spread around
the world.” While the statement was undoubtedly
exaggerated, it certainly reflected the extreme concern
aroused by industrial transplantation.
Citizen’s Swiss foundations. Nonetheless, that is
exactly what occurred with the development of the
business of an important watch dealer who settled
in Yokohama during the 1890s. Rodolphe Schmid
was born in Neuchâtel in 1871, and in 1894 moved
to Yokohama, where he soon asserted himself as
one of the main watch merchants. By the following
year, he was the city’s third largest watch importer,
with more than 20,000 units. He also owned a factory
in Neuchâtel, which was renamed Cassardes
Watch in 1903.
Directly affected by the protectionist customs
duties, Schmid transferred part of his activities to
Japan. He began importing kits of parts that he then
had assembled in a small workshop he owned in
Yokohama. In order to keep this trade supplied with
components, his family created a watchcase factory,
Jobin & Cie., in Neuchâtel in 1908. In 1913, a
new step in the transfer process was taken with the
production of cases in Japan. Schmid’s Japanese
factory, which was relocated to Tokyo in 1912,
enjoyed strong growth. He adopted new brand
names for his watches, including Japan Watch
(1909) as well as Gunjin Tokei (1910), for a model
intended for the army. Finally, in 1918, he opted for
the Citizen brand name. His workforce grew from
about 30 in 1913 to 110 in 1920, and to around 200
by 1928. By then, his company was the country’s
second largest watch manufacturer, behind Seiko.
Schmid’s factory gave rise to the Citizen Watch Co.
in 1930. This Japanese watch company was born
from the merger between Schmid and the Shokosha
workshop, which had been founded in Tokyo by a
jeweller and aspiring watchmaker, Kamekichi
Yamasaki. Financial troubles had however driven
Yamasaki’s company to bankruptcy in the late
1920s.
Citizen Watch was founded with a share capital of
200,000 yen divided into 20,000 shares. Schmid
would have liked to acquire half the capital but was
unable to – probably for political reasons, since foreign
businessmen were encountering increasing
hostility in Japan during the 1930s. Acquiring only
a minor stake of 1.5%, Schmid nevertheless indirectly
controlled the new company through the
managers of his own factory.
Principal shareholders of Citizen Watch Co., 1930
Name Activity Shares (number) Shares (%)
Shinji Nakajima Manager, R. Schmid & Co, Tokyo 2,449 12.2
Kanamori Masutaro Watch wholesaler, Yokohama 2,200 11.0
Kosaburo Nakajima – 2,125 10.6
Osawa Co Watch trading company, Kyoto 1,854 9.3
Kura Kawamura Employee of a watch wholesaler, Tokyo 1,045 5.2
Kamekichi Yamasaki Founder of the Shokosha company, Tokyo 715 3.6
Oscar Abegg Director, R. Schmid & Co, Tokyo 684 3.4
Eimatsu Tsurumaki – 620 3.1
Nakajima Co Trading company, Tokyo 543 2.7
Kanamori Masusaburo – 543 2.7
Small shareholders (100 individuals) 7222 36.2
Total 20,000 100.0
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EX
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Capital structure. Shareholders in Citizen Watch
came from two different milieus. First of all, there
was a group of Schmid’s employees, headed by
his marketing director, Shinji Nakajima. Born in
1864, Nakajima had worked for several companies
and travelled around the United States before joining
Schmid in 1897. He was the first to take the
reins of Citizen. Two other major shareholders,
also called Nakajima and officially domiciled in
Tokyo, were possibly relatives. There was also one
Swiss among the shareholders, Oscar Abegg,
director of the Tokyo factory and Schmid’s representative
in Japan during his frequent absences
from the country. The other main group of shareholders
was composed of Japanese watch
merchants, who invested in the company at
Nakajima’s request. Osawa Co. acquired a fairly
substantial stake, while four other trading companies
also invested in the new firm : Nakajima,
Furutani, Okasei and Izumiya Clock.
Citizen Watch began operations in 1930. Initially,
the Citizen workers merely assembled stocks of
parts for Shokosha. But these proved hard to sell
and the company ran into difficulties. Operating at
a loss until 1933, it was kept alive by the Yasuda
Bank. Citizen Watch also faced worker discontent,
MPL
A
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The Citizen Group currently employs 18,000 people, mainly
in watchmaking, electronics, machine-tools and jewellery.
expressed by a strike in 1933. In the end, it was the
development and marketing of wristwatches that
enabled it to improve its situation, thanks to cooperation
with Schmid.
Technical assistance. Schmid’s involvement with
Citizen was to prove essential in terms of technical
assistance. He imported machine tools in 1933 and
had an engineer in Geneva draw up plans for new calibres
the following year. This partnership was reinforced
by the Star Shokai company, which Citizen had
acquired in 1932. This firm had been founded in 1926
by Schmid, Nakajima and Suzuki to import Swiss
Mido watches to Japan. The three wristwatches
developed by Citizen up until the end of World War II
(1931, 1935 and 1941) are in fact all copies of Mido
products. The technical assistance provided by
Schmid thus enabled Citizen to improve its position
during the mid-1930s. It built a new factory in 1934
and began exporting its products to China from 1936
onwards. In 1939, Citizen produced almost 248,000
watches, corresponding to 15% of national production.
It was still far behind Hattori and its 1.3 million
units, but well ahead of imported watches, which were
down to fewer than 50,000 units since 1930.
Rodolphe Schmid ceased his activities in Japan
in the mid-1930s and returned to Switzerland,
probably to Geneva, where his firm had been
established as a marketing company since the
1920s. He nonetheless remained firmly attached
to Citizen, subscribing to the various share capital
increases of the Japanese company during the
war and still appearing on the 1948 list of shareholders.
Technology transfer. The history of Citizen is a
classic example of a watch industry born from a
technology transfer process. After the war, it
embarked on international expansion built on
cooperation with foreign companies, including the
American firm Bulova for the production of tuningfork
watches (1960), the Swiss firm Méroz for
watch jewels (1963), and the French firm Lip for
electrical watches (1964). It also set up various
production sites around the world (India, Mexico,
South Korea, Hong Kong, Germany).
Chablonnage not only promoted the emergence of
watch companies in Japan, but also in the United
States, Russia and Italy. It was an attempt to fight
this new competition and to maintain production in
Switzerland that led the Swiss watch industry to
create a cartel in the 1930s, known as the “watchmaking
statute” (statut horloger). And that will be
the subject of an article in the next issue. •
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