History of Watch Making

Now a days, when you say "fine watches", the Swiss immediately come to mind. This hasn't always been the case, both the English and the Americans were once considered leaders in the watch field. The development of the American watch industry was one of the symbols of America's emergence from an agricultural country to an industrial power.

Watches before 1850: The English and Swiss Rule Supreme
Although the English aren't famous for watchmaking now, from around 1650 until around 1850 they made the highest quality, most accurate watches in the world. The English watches tended to be bulky and not very fashionable, but the plain style matched the "puritan" ethic of England. The Swiss, on the other hand, had a flair for the fashions that were desired by the rest of Europe and the world. The Swiss made a very wide range of watches, from cheap junk to very high quality complicated watches, although few were as accurate as the English. Both of these two major watch centers made watches in small batches by small companies with a lot of hand work. Both of these countries dumped their cheapest junk onto the American market.

1850s: The Founding of the American Watch Industry
Starting around 1850, the Americans pioneered the use of automated machines to mass produced high quality watches with interchangeable parts. This became known as the "American System of Manufacturing." By the 1860s-1870s the American watch companies had proved that this system could make watches that were every bit as good as all but the best watches that were made by hand. They were also able to make watches that were cheaper than all but the cheapest hand made watches.

1870s: American Watch Companies Are The State Of The Art
By the mid 1870s, the Swiss noticed a significant drop off in sales to the American market. To find out why, they sent a representative to the 1876 Centennial Exposition in Philadelphia. There, the Swiss saw Waltham's automated screw making machine and were shocked by what it could do. A spool of wire was fed into one end of the completely automated machine, and a steady stream of perfectly formed screws the size of pin heads were delivered out the other end. Similar quality watch screws simply could not be made by the hand controlled machines the Swiss used.
It wasn't just screw making that the American's had perfected. Almost every part of a watch had a specially designed machine that could make parts faster, more accurately and with less labor than anything the Swiss or English could do.
By the early 1880s, the Swiss and English were pretty much run out of the American market. The English just kind of folded up shop and stuck to the high end ship chronometers needed by the many ships of the huge British Empire. They also made over priced junk that could only be sold at home. The English reacted to both the growing Swiss and American watch industries by lobbying the parliament for higher tariffs and restricting imports. The Swiss, on the other hand, reacted by adapting to the new market.

1880s: The Swiss Respond
Before the 1880s, the Swiss watch industry was made up of cottages in little villages where only a few parts of a watch movement or watch case were made. Those parts would then be assembled in other small shops. Each watch had to be hand tweaked to account for the differences between the parts. A difference in one part would often require that the other parts that it touched to have to be adapted.
After seeing the American System of Manufacturing, the Swiss reorganized into centralized factories, with a fair amount of automation. These factories were very small compared to American companies and they still weren't as automated. They did, however, make enough improvements that they could make knock offs of American watches ("Swiss Fakes") and also to keep from losing the rest of the world's markets.
One drawback to the American System of Manufacturing is that each part required a machine to make it, so complicated watches such as minute repeaters, chronographs and very high end watches were not practical to make. Sometimes American companies would "cheat" and simply make these watches with semi-automated means similar to the Swiss, but the quantity was limited and by the 1890s, most American watch companies had stopped making them. The American watches were very high quality, but also very simple.

1900s: The Power of Competitive Markets
While the American companies had dabbled in foreign markets in the 1870's and 1880's, for the most part, they were quite happy to limit themselves to the US and Canadian markets. Americans, in general, were quite isolationist, and Elgin and Waltham were generally selling everything their factories could produce.
By around 1900, the Swiss technology had pretty much caught up with the Americans. One big difference was that the Swiss had many companies involved in the making of a watch. There were a bunch of companies that would make "movements in the gray" (ebauche), and these movements would be sold to other companies that would finish them off and sell them. Other companies would specialize in things like chronograph attachments, watch dials, mainsprings or tools. With so many Swiss companies each doing only a part of the manufacture, as a whole, the Swiss were able to produce everything from very cheap watches, to watches of the highest quality.
The American market, in contrast, was effectively a duopoly of Waltham and Elgin, with several smaller companies trying to survive in niche markets. All of these companies produced everything but the watch case. A factory that builds everything has certain advantages, such as it is easier to coordinate, but having one factory that did everything from making jewels, to making dials, to sales and promotion also had draw backs. If a Swiss company was having problems with the quality or quantity of, say, the dials, they would change suppliers. If an American company couldn't make dials, they were stuck. A new Swiss company could enter the market fairly easily, but the American "watch trust" made distributors and Jewelers leery of accepting a new brand of watch and risk loosing their supply of Elgins and Walthams.

1920s: The Return of the Swiss
The Swiss were early adopters of the wrist watch, and after WWI, they made significant inroads into the US market. Of the American watch companies, only Elgin, Hamilton and the company was to become Timex really successfully made the switch to wrist watches. Waltham held on, but due to poor management, they failed to invest in the newer equipment that was needed to make the smaller watches. The dozen or so other American watch companies either merged, were bought out and moved to other countries or shut down.
After the market crash of 1929, watches became a luxury that most people could put off buying. All the watch companies suffered, but those that hadn't switched to wrist watch production couldn't recover. During the 1930s, watch companies all over the world just kind of hung on.
During WWII, the American watch companies sunk a great deal of their remaining capital into converting to war production. Bomb "fuses" (timers), specialized navigation timers, and ship chronographs were all new designs which required new equipment. The Swiss, being "neutral", were allowed back into the American market in a big way and when the war ended, the American watch companies were in a world of hurt. They had lost a large chunk of their home market, they had no foreign markets, and they needed time to retool back to watch production. The American public, on the other hand, was flush with money that they couldn't spend while the war was on, and the Swiss were all too willing to supply them with watches.

1950s: The Swiss Take Charge
By the 1950s, the Swiss had perfected machine made complicated wrist watches such as chronographs, automatic winding watches, and day-date watches. The Americans had never produced these kinds of watches (in any real numbers), they weren't making much money and they had exhausted their reserves. None of them were able to make the transition from simple watches to the complicated ones that were in demand in the late 1950s and 1960s.
Like the English, the American watch companies reacted to the growing Swiss market share by lobbying congress for higher tariffs and restricting imports. They also tried to get more military contracts, but even the Korean war didn't help much. I have a wonderful article from Elgin whining to congress about how there "needs to be a parity of price at the borders" and "We need a tariff on Swiss watches and a subsidized export market." And to think, Elgin was in much better shape than most.
The only American watch company that survived was Timex, which made cheap, "disposable" watches. While they were looked down on by the elite watch makers, they were at least turning a profit. By making the watches "disposable", Timex was able to do things like completely seal the watch case. This meant that it couldn't be opened to be repaired, but it also wouldn't let dust in. The Timex also lacked any jewels, which meant that it would wear out after a while, but it was also more rugged that way. A sharp knock would often break the jewels in an expensive watch, but a Timex could "Take a Licking, And Keep On Ticking!"
The other American company of note was Bulova, which up until the 1950s had imported their movements from Switzerland. In the 1960s, they created the revolutionary electronic "Accutron" watch. This watch used a tuning fork to keep time instead of a rotating balance wheel, and the result was an incredibly accurate watch. The Accutron became the high end watch from the early 1960s until the early 1970s when the quartz watch took over.

1970s: The Quartz Age
In the 1970s, the Swiss took another shock when the Japanese perfected the quartz watch, but like the shock from the "American System of Manufacturing", they adapted and recovered.
Today, you can still buy watches with the great American names of Waltham, Elgin, and Hamilton, but none of these watches are made in the USA. Many watch companies license these names, and little attention is paid to their quality. They probably aren't any worse than many other brand names that you can pick up at Target or Wallmart, but they have nothing to do with their once great past.

from http://elginwatches.org/history/short_history.html