Sea-Gull’s new factory

February 2012

“With our new factory, we can supply a quarter of the planet and one half of China.”

The Chinese are like big kids, always in a hurry to build the framework of what we might call “Modern China”. With more or less competency, they produce everything, from vuvuzelas to space stations. The problem is that things are moving way too fast and, if the production is not rigorously controlled, the locomotive derails (quick, bury the wagons!).
Clearly then, there is no time for invention, making it impossible to catch up with the West and its overflowing creativity. This situation is even more flagrant in watchmaking since the dominant Swiss industry has no need to create joint ventures with Chinese watchmakers in order to sell its products in this fabulous new market. “It is an incredible luxury,” remarked a German friend, who is an engineer at Shanghai Volkswagen, as he went on to explain the difficulties in assembling their high-tech cars in China without any technology transfer…
Having said that, what should we think about Sea-Gull, the oldest Chinese watch brand, dating back to 1955, with its 100 per cent manufacture and which is capable of constructing double tourbillons? Does it have any more time to create and invent, given that it belongs to the richest bank in the world—the Chinese state? The government, in fact, just provided Sea-Gull with a large new factory that we had the privilege to visit. Can Sea-Gull spread its wings to become a future Swatch Group, Chinese style? These and other questions were answered by the company’s delightful 32-year old deputy general manager, Aries Lee.

Sea-Gull's new factory Aries Lee

Europa Star: Such a large factory for such small watches… Did they give the neighbouring Airbus facility to you?

Aries Lee: (with a smile) Believe it or not, we already have plans to expand! But since we moved in last August, we have discovered a number of drawbacks such as the fact that the transport shuttles for our 3,000 employees cost the tidy sum of 8 million yuan per year [CHF 1.14 million].

ES: What are the advantages, then, of leaving the city for the industrial zone?

AL: As a state-owned company, we did not have a choice. We must follow the strategy of the government, which has made the industrial zone of Tianjin the third largest economic centre in the country, attracting many foreign enterprises. Here, we enjoy substantial fiscal benefits. The land is practically free, and the buildings, costing 300 million yuan [CHF 43 million] will be amortised in four or five years, since the watch market is in expansion.

ES: In expansion? In 2009, you announced the sale of 300,000 watches yet, in 2010, you are talking about 200,000?

AL: That is because, in 2009, we also distributed quartz watches that were supplied by a manufacturer in Hong Kong. That relationship, however, has ended, and we now only manufacture mechanical watches and movements. The quartz sector is too low-end and is not profitable. Very importantly, it is also not good for our brand image, so we abandoned it. As for the production of calibres in 2010, it reached 3.7 million pieces.

ES: Given the size of the factory, this number seems a bit low…

AL: By exploiting our new capacity for production, we will have the potential of supplying one half of the Chinese market and one quarter of the global market. In the next few years, we will adopt a new strategy, first by going public on the stock exchange in order to increase our liquidity, and then by dividing the enterprise into two independent sectors. On the one hand will be the movement supplier, and on the other hand, the Sea-Gull manufacture will move upmarket.

Sea-Gull's new factory

ES: What is the purpose of your cooperation with the Swiss manufacturer, Alfex, located in the canton of Ticino?

AL: We supply them movement parts that they assemble in their own way, and that they resell, perhaps under the label “Swiss Made”.

ES: Do you also export your tourbillons?

AL: We supply mechanical movements to many markets, especially Europe, the United States and Africa. We used to export a few tourbillons, but now we have stopped altogether. The tourbillon is an added-value product that we reserve for our own timepieces.

ES: Your watches are elegant but extremely classic in design. Will they be able to attract a younger clientele, whose tastes generally run more modern?

AL: In China, at the height of its 56-year old history, Sea-Gull is considered to be an “old” enterprise, and our retro design is called “museum style”. It is true that we do not have “fashion” models for young consumers, but this will be coming. Last month, we went to Switzerland and talked with some watch designers who used to work for Tissot, and they have agreed to design for our brand.

ES: Will this future collection indicate that the designs are Swiss?

AL: Yes, since our goal is to become a brand with global reach. Currently, we are recognised as a good Chinese enterprise by the Chinese themselves. In the future, however, we will export more of our brand.

ES: And yet “China Made” watches, even the good quality pieces, suffer from a bad reputation. How do you convince the world otherwise?

AL: Our market is peculiar. We do very little advertising and our sales are still high. This happens uniquely by word of mouth. If you make a good product at a reasonable price, one day, the public will come. Just think that in 2003-2004, our turnover did not even reach 1 million yuan. Compare that with 2010, when our sales topped 220 million yuan. The growth has been enormous, but it is still not enough.


ES: Are you setting your sights on the Swiss watch market?

AL: The Swiss are the masters and we are the students. We make no pretensions about competing with Swiss watchmaking. One day, though, we believe that there will be a place for us in the global market. For many people, we can offer an alternative at a more affordable price. This is not a war. Just look at the situation in Switzerland. There are so many brands, each with its own style, and all are coping well in this environment.

ES: Do you think, however, that overseas—especially during this period of economic turmoil—China’s financial power is disconcerting to people? Is it understandable that the Swiss watch industry, which nearly disappeared thirty years ago because of the invasion of Japanese quartz watches, thus remains on the defensive?

AL: What can we claim in the face of more than 200 years of excellence in Swiss watchmaking? We do not have the ability to confront them in the top-of-the-range segment. I know many Chinese who love Swiss watches, but not their prices. In any case, I would say that competition is always a healthy thing. Perhaps some Swiss brands will have to improve their value for money. Our tourbillons, for example, are sold at one-tenth of the price.

ES: That is true, but many claim that the precision is not comparable… Do you have some type of certification?

AL: We offer something better than a certificate, and that is a ten-year guarantee, which includes all maintenance and repairs. This is important for a tourbillon because it is a sensitive mechanism. Wearing our watches, the owner can partake in sports activities, something that is unthinkable for a Swiss tourbillon. For the latter, the owner would be advised that this type of activity is very bad for such a delicate and precise calibre.

ES: Looking at the brand’s museum in the entrance hall, we saw an ultra-thin mechanical movement in a rather thick case. Is this a scoop?

AL: Yes. It is the prototype of a manual-winding mechanical movement that is only 2.5 mm in thickness. And, we are preparing an automatic version as well. They will be placed in an ultra-thin case and will enter the market in 2012. We are also innovating in terms of material, with the introduction of silicon and its exceptional mechanical properties.

ES: As a watch aficionado yourself, what brand do you admire the most?

AL: In fact, it is not Swiss but rather German—A. Lange & Söhne. I think their collection is super elegant yet discreetly refined. In a few years, with two or three hundred employees for a production of around 5,000 watches per year, the brand has moved to the top. This is an example for Sea-Gull.

ES: You see, people have been correct to be worried about you… So what is your strategy in terms of expansion?

AL: (laughs) In China, this year, we opened 25 monobrand boutiques in addition to the existing 20. We are aiming to have 200 stores by the end of 2015. Then, we will start to look overseas, beginning with Asia.


ES: What is your opinion of your Chinese competitors, namely FIYTA, Ebohr, and Beijing Watch, among others?

AL: It is difficult to make a comparison. They are all privately owned, while we are under state control. The main difference, however, is that Sea-Gull is an authentic manufacture. We produce 100 per cent of our watches, from A to Z. Our competitors are simple assemblers who are supplied movements, bracelets, hands, and dials. They do not have the capacity to produce their own movements.

ES: But, isn’t Beijing a real manufacture?

AL: Yes, it is, and a rather good one in the top-of-the-range segment, but their volumes are too limited to consider them as a competitor.

ES: In fact, your position is similar to the Swatch Group and its suppliers, except that—unfortunately for you—FIYTA and Ebohr prefer to use movements supplied by Seiko and Citizen

AL: Henceforth, not only do they purchase our tourbillons, but also our mechanical calibres. Why? Because, following the various disasters to hit Japan, Seiko and Miyota can no longer guarantee the volumes that FIYTA and Ebohr require. These brands thus have come back to us because they must “safeguard” their market. For its part, Sea-Gull is absolutely not affected by the Japanese problems since we do not depend on any outside supplier, except, of course, for raw materials. This is our opportunity to convince them to buy from us.

Source: Europa Star December - January 2012 Magazine Issue