TAG Heuer Invades Apple’s Turf With Silicon Valley Office

(Bloomberg) -- TAG Heuer is opening an office in Silicon Valley, marking the first time a big Swiss watchmaker has expanded into the cradle of the U.S. technology sector and cementing its smartwatch alliance with Google and Intel Corp.

The office, which opened Nov. 1 and is located on Intel's campus in Santa Clara, California, will house about a dozen research and development employees, according to Chief Executive Officer Jean-Claude Biver. TAG Heuer also hired Intel's Tom Foldesi to lead its smartwatch program, tasked with setting up labs and product teams.

The move shows how the Swiss have battled back against Apple Inc.'s encroachment into the market for fancy timepieces. TAG Heuer sold out all of the 60,000 smartwatches it produced this year, at $1,500 a pop. The LVMH unit plans to sell some 150,000 pieces of an advanced smartwatch that should go on sale in April.

“We want to have our finger on the pulse,” Biver said in an interview. “In Switzerland, we're where everything is happening in the traditional watchmaking industry. We believe in the future of connected watches, so we have to go where they're being developed.”

The Silicon Valley office also makes it easier to recruit smartwatch specialists and be close to startups that the company might acquire, he added.

“It's a logical step,” said Rene Weber, an analyst at Bank Vontobel AG. “TAG Heuer is a small player in terms of units, but it's the leading Swiss smartwatch producer and clearly holds the leading position in the high-end smartwatch category.”

Early concerns that the Apple Watch's arrival in 2014 would threaten the Swiss watch industry as a whole didn't materialize, though it has hurt sales of lower-priced timepieces. Brands such as Montblanc and TAG Heuer went on the offensive by introducing electronic functions of their own. TAG Heuer's model gives consumers the option of paying a fee to trade it in for a mechanical version once it's out of date.

“The connected watch will definitely be a permanent part of the TAG Heuer brand,” Biver said. The label is selling a $9,900 18-carat rose gold version of its smartwatch for the Christmas season and is working on offering a collection with various sizes, materials and price segments.

The announcement comes just two months after Apple discontinued its $17,000 18-karat gold version of the Apple Watch. Failing to gain much of a foothold in the luxury watch segment, Apple has now pushed more into fitness functions. Still, Apple was the second-best selling watch brand in the world by revenue last year, behind Rolex, Chief Executive Officer Tim Cook said in September.

Foldesi will report to Guy Semon, TAG Heuer's head of research and development. He previously held various executive positions at Intel, where he also helped develop wearables.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net. To contact the editors responsible for this story: Matthew Boyle at mboyle20@bloomberg.net, Phil Serafino