In the year of 2021, Panerai found themselves in the spotlight of the Watch Industry media, and for all the wrong reasons. Spearheaded by a widely read article on Perezcope.com, an outcry ensued alleging that Panerai’s in-house movements are not in-house, and “everything appears to be rather for show than for anything else”. Drawing inspiration from Watch Advisor’s recent documentary tour of Panerai Neuchatel and various other resources, this article explores the allegations surrounding Panerai’s In-House movements and their level of production.
A new era of transparency at Panerai Neuchâtel
In 2014, Panerai opened its new Manufacture in Neuchâtel, a significantly larger building of 10,000 square metres housing approximately 250 employees, with greater resources than the previous Manufacture opened in 2002. Being among some of the companies owned by the Richemont Group that boast exclusivity and vertical integration in their production (Jaeger-LeCoultre, A. Lange & Söhne, Vacheron Constantin…), Panerai have also been on a quest to supply their watches completely designed and developed at their Manufacture.
Over the years, Panerai have announced new “in-house” calibres (P.2002 was the first of many in 2005), which have been encouraging steps towards realising vertical integration. However, various opinions in the media surfaced alleging that Panerai had outsourced the production of the in-house calibres, cases and various other parts…
The marketing content driven by Panerai in recent years has frequently focused on their military history and brand ambassadors/influencers rather than displaying their high level of engineering, test work and quality control. Although the former marketing strategies have been beneficial in reaching new demographics and expanding their target audience, allegations and questions into their production could not be quelled due to Panerai being relatively quiet on their production processes. Thus, as word has spread in recent years about the alleged lack of “In-House” movements, Panerai have been subject to criticism with no means to defend themselves.
It may have been a mistake that Panerai did not focus on marketing strategies surrounding transparency in the creation and production of their watches. The more a luxury brand can tell you about its production processes, the more value it can demonstrate to justify its prices. You could almost argue that transparency doesn’t simply add value - it is the value.
However, in an encouraging push of transparency, Panerai Neuchâtel now offer comprehensive tours of its manufacture, in an effort to debunk allegations surrounding the complete outsourcing of production for Panerai watches and its movements. If this would be of interest to you, get in touch with your local Panerai Boutique to see if they can send an application on your behalf.
As Panerai open their doors to allow guided tours of their facility, it is a step in the right direction regarding the brand’s transparency and relationship with the end-user - regardless of whether they prove to be in-house or not.
Do Panerai completely outsource the production of their cases?
No, is the short answer. It was rumoured that Panerai completely outsourced its creation of cases and that “nobody has seen any cases being produced there”. However, an insightful video tour of the production of cases and movements by WatchAdvisor suggests otherwise.
The COO of Panerai, Jerome Cavadini, explains “We produce thousands of cases here every year”, with subsequent shots showing many Luminor Due eSteel cases in production. It is known that the production of Gold cases do not occur at Panerai Neuchâtel for security and resource reasons, and are built at Donzé-Baume. More on Donzé-Baume soon…
An area of 800 square metres on the ground floor of the building is devoted to machines of the latest generation, by means of which Panerai’s technical experts can transform the initial raw materials into cases, bridges, plates and other components. As Panerai continually look to innovate in their production and machinery efforts, I’m sure the capacity of producing cases will increase each year. I wouldn’t be dismayed that they haven’t reached that stage yet; if a manufacture rushes too quickly to facilitate 100% production, there is a risk of diminishing quality.
The example shown below is a raw bar of “eSteel” (95% recycled) which will be used to create many aspects of the watch, including the bezel, case, caseback and further parts for the movement.
Do Panerai outsource the production of their movements?
Under the ownership of the Richemont Group as of 1997, the move to in-house calibres at Panerai was an eventuality that finally came to fruition in 2005, having first opened the doors to its Neuchatel production facility 3 years earlier. Given its history of hand-winding, the P.2002 (a name commemorating the beginning of its development in Neuchâtel) featured hours, minutes, and small seconds, as well as a GMT complication, date display, and power reserve indication. It was rumoured that Richemont-owned ValFleurier (Movement manufacturer) heavily contributed to the production of the P.2002, but it remains exclusive to Panerai and entirely executed by them.
“2002 was the year in which the project was launched to supply Panerai watches with movements entirely designed and developed at the Manufacture in Neuchâtel.” — Panerai.com
Some years ago now, Panerai traditionally used the prefix OP to identify externally sourced base calibres (Ébauche) with Panerai modifications. A good example from recent history would be the following series OPIII, OPVIII, OP IX, OP XV, OP XXII and the OP XXVI, all using the Valjoux 7750-P1 as a base (see picture below). This was never frowned upon due to the transparency of where these Panerai movements drew inspiration from. Furthermore, the Valjoux 7750-P1 is a high-quality, reliable movement, used by many brands. Many “in-house” calibres we see in the watch market today do not match the quality of the iconic Ébauche movements that have carried the Swiss watch industry for decades - Just because a movement is in-house, does not necessarily mean it is better quality than some Ébauche movements.
Today, there is strong evidence that the machinery, engineering and watchmaking capabilities within Neuchâtel Manufacture can facilitate the design and production of thousands of Panerai watches and movements from start to finish, every year. However, it is unlikely that 100% of production of every component occurs at Neuchâtel, due to:
- The limited production capacity of Neuchâtel with a small workforce
- Evidence from other brands, such as Audemars Piguet, also sourcing components from third parties.
- The high-quality and secure capabilities of Richemont-owned companies such as Donzé-Baume being able to take on exclusive production without compromising the quality of parts.
- Panerai themselves explaining that vertical integration is a project - an ongoing journey - that cannot be rushed.
With this being said, it is good to see proof that Panerai are producing many parts, components and movements within Neuchâtel. The pictures below are screengrabs from WatchAdvisor’s tour of Neuchâtel, showing various stages of production.
Exploring the manufactural nature of the Swiss watch industry
It is important to note that very few brands have the rare ability to design, produce and execute every single watch and component in one location. For example, Jaeger-LeCoultre (owned by Richemont Group) claim to be completely in-house. Perhaps they are in-house due to having a 25,000 square metre manufacture facility of 1300+ employees strong, in comparison to Panerai’s 10,000 square metre manufacture of 250 employees.
Specialising in the manufacture of watch cases (development, production and assembly of cases), Donzé-Baume works mainly for the Richemont group’s brands (to name a few Piaget, IWC, Vacheron Constantin and Roger Dubois), for which it supplies components, cases and movements. Donzé-Baume has a long history as a case and bracelet maker which goes back to 1868. For many years, they produced cases for Omega. In 2007, Donzé-Baume was taken over by Richemont. In addition, everything possible has been done to protect deliveries and movements of basic materials such as gold and diamonds, as well as finished timepieces. It is therefore logical to benefit from the strong capabilities and security of Donzé-Baume’s superior manufacturing facilities. Although many brands use Donzé-Baume, some sort of vertical integration is still possible due to having exclusive supply lines within the manufacture.
“Watchmaking at this level is no longer a cottage industry, but one defined by boardrooms and an increasingly complex and incestuous intermingling of luxury brands that confuses even the most seasoned collectors and watch aficionados.” — Zach Kazan, Worn and Wound
At Baselworld 2017, enthusiasts of both Tudor and Breitling thought that each brand had produced something special and “in-house”. Tudor released the Black Bay Chronograph and Breitling introduced a new 3-Hand movement. Instead, a secret alliance was soon discovered: Tudor’s Chrono had a Breitling movement, and Breitling’s 3-hand movement was actually Tudor’s… The Tudor Calibre MT5813 is based on the Breitling B01 and the B20 is based on the Tudor Calibre MT5612.
While it’s tempting to think of “in-house” and “not in-house” as two entirely different things, in reality it is a spectrum, with value added by different specialists at different stages of the production process. For example, the Audemars Piguet calibre 3120 is widely regarded as “in-house”, but various components, such as the wheels and pinions, are provided (finished!) from a third-party supplier.
This spectrum makes it very difficult to truly define “in-house”. But the lack of an agreed-upon definition hasn’t stopped this term from becoming a major part of the watch market’s demands, and thus has become an increasing pressure from watch brands to market as such.
“Anyone who has observed the watch community of late will have noted the special esteem given to watches with movements of in-house manufacture. Over the years I have seen this shift from a mood of slight preference (all else being equal), to one of outright acerbic prejudice… A brand is not taken seriously unless it is a part of the in-house elite.” — Carlos Perez, Timezone. Date: 2000.
Let me give you one more example of an “in-house” movement. TAG Heuer proudly announced their in-house Calibre 1887 in 2009, only for its similarities to Seiko's 6S37 to be quickly noted. It turns out TAG Heuer bought the European manufacturing rights to the movement, so “technically” the movement was manufactured in TAG Heuer's house. Although the spirit of the phrase was certainly not adhered to. Therefore, the label of “in-house” does not inherently add value. Transparency adds value.
Is it important that Panerai should be literally in-house in every aspect of production?
The short answer is no, because it’s illogical and unnecessary.
Gone are the days of idealising small, family brands with watchmakers hand-crafting in-house watches and movements in a Swiss cottage. Today, innovation in Haute Horlogerie is spearheaded by precise machinery and high-tech engineering, and it does not matter where the machines that produce these watches, parts and movements are located.
Patek Philippe, one of the closest examples of an independent “Swiss cottage” watch brand, are highly revered for their excellence in watchmaking prowess. They also opened a new building in 2010 in Plan-Les-Ouates, dedicated to manufacturing watch movements using high-tech machinery. They remained “in-house”, though technically they were not “in-house” - more “in-city”. Since then, Patek have spent 5 years and 600 million Swiss francs building a new HQ.
I do not believe that Panerai have been secretly and deceptively outsourcing certain cases and parts within the Richemont Group to cut costs and trick their customers; I do believe that Panerai simply have no choice but to outsource production in order to meet growing demand and remain profitable. It is evident from the tour of Neuchâtel Manufacture that Panerai are working hard to optimise production and processes in-house where they can, but it is simply impossible to try and do so completely.
As an end-user, it is a rare privilege to know that your watch and its movement is exclusive to that brand, who are making good progress towards literal vertical integration. Panerai is a brand that historically did not create any of its own movements or cases, so the measured evolution of its own production and innovation is admirable. Fast-forward to 2022, and Panerai now face criticism for arguably being too evolutionary, pioneering futuristic, diverse and innovative designs, materials and movements within the Swiss watch industry. “The grass is always greener on the other side…”
Complaints were valid about Panerai failing to be transparent in the outsourcing of some of the parts of their in-house movements, and the water remains murky on the definition of “in-house” in the broader watch industry. You could argue that Panerai are truly “in-group”, being under one company (Richemont), and have a genuine goal of vertical integration. However, if they were to “lick the boots” of the individuals making shallow demands for them to be fully in-house, they face many barriers but I will highlight two:
1. Hundreds of millions of Swiss Francs would be required to build a new manufacture facility to then fill it with enough machines and processes to facilitate production.
2. An alarming scarcity of qualified watchmakers means that hiring enough employees to be labelled as ‘in-house’ would be a near-impossible task.
In conclusion, it is owed to us, as customers and enthusiasts of these luxury brands, to receive transparent and truthful information regarding the manufacturing processes and sourcing of materials required to make the watches that we subsequently invest in. As we have been quick to call out any dodgy marketing strategies or questionable labellings of “in-house” movements, let’s hope that it has cultivated a new era of transparency, with brands inviting their customers to journey with them in the evolution of their production and its finished products. As Panerai quote themselves, it is a project, and one that should not be rushed:
“The Panerai Manufacture can itself produce the majority of the original components of the movements of its watches. Continuous technical updating and the use of increasingly advanced equipment enables the Panerai Manufacture to achieve a remarkably high and continually growing level of vertical integration.” — Panerai.com
