Patek’s new production facility tripling production quantities?

[aa909]

We know Patek completed their new massive production facility in 2020. Do we know what their target production quantities will be? Hearing 3x+ which would approach 200K pieces per year.

[HMHM]

TS would need to be dead for at least 50 years before that ever happens!

[aa909]

Originally Posted by HMHM

TS would need to be dead for at least 50 years before that ever happens!

They spent >$600 Million to build the facility, it has 1.5 million square feet of manufacturing space and 10+ floors. They’ve got to make a return on that kind of investment, and what are the plans for that massive facility other than to make a lot more watches per year?

[byow]

Originally Posted by aa909

They spent >$600 Million to build the facility, it has 1.5 million square feet of manufacturing space and 10+ floors. They’ve got to make a return on that kind of investment, and what are the plans for that massive facility other than to make a lot more watches per year?

Actually, the PP6 building is not only a facility. During the visit of that building, "PP" explained that the main goal was to have a place where the different departments would work together while having enough room for each of them.

They have for example a huge conference room where they can present their watches, an immense "dining space", terraces and several private salons, among other spaces.

[Ichiran]

Originally Posted by aa909

Do we know what their target production quantities will be? Hearing 3x+ which would approach 200K pieces per year.

Where did you hear from?

This is completely different from what TS said to the Peak Magazine (https://www.thepeakmagazine.com.sg/f...tion-building/)
"Patek Philippe has also filed for the Minergie-P label, a voluntary and incredibly stringent environmental standard given to buildings with low energy usage. Despite the expansion, Patek Philippe’s president Thierry Stern has reasserted that the watchmaker will not be increasing its volume of timepieces, which currently stands at slightly below 62,000 pieces annually."

[aa909]

Originally Posted by byow

Actually, the PP6 building is not only a facility. During the visit of that building, "PP" explained that the main goal was to have a place where the different departments would work together while having enough room for each of them.

They have for example a huge conference room where they can present their watches, an immense "dining space", terraces and several private salons, among other spaces.

Thanks for the clarification, but companies like Patek don't invest $600M for office space. There's only 2 reasons they invested this much money in a massive facility: (1) improve manufacturing efficiencies to increase margins (2) expand production capacity

Originally Posted by Ichiran

Where did you hear from?

This is completely different from what TS said to the Peak Magazine (https://www.thepeakmagazine.com.sg/f...tion-building/)
"Patek Philippe has also filed for the Minergie-P label, a voluntary and incredibly stringent environmental standard given to buildings with low energy usage. Despite the expansion, Patek Philippe’s president Thierry Stern has reasserted that the watchmaker will not be increasing its volume of timepieces, which currently stands at slightly below 62,000 pieces annually."

it's not confirmed, but it's being discussed on a couple of watch blogs I follow. I was hoping folks here may have more info.

The author doesn't quote TS regarding the production capacity, but he does contradicts himself in the article you shared:

"the forward-thinking Stern anticipates the new building to be the guiding light for the brand for the next three decades as it expands its increasingly complex production capabilities."

[newonos]

Not an expert here, but remember, PP is a private company. I would agree with all OP sentiments on margin or production if PP were public, or owned by a public co. And hey, despite TS public comments he could be right. On other hand it is possible there are other considerations with this building... a little brass and glass to cement a legacy, and for future production.

[Ichiran]

Originally Posted by aa909

it's not confirmed, but it's being discussed on a couple of watch blogs I follow. I was hoping folks here may have more info.

The author doesn't quote TS regarding the production capacity, but he does contradicts himself in the article you shared:

"the forward-thinking Stern anticipates the new building to be the guiding light for the brand for the next three decades as it expands its increasingly complex production capabilities."

Can you please copy and paste the links or extracts of these watch blogs here?

I think you should have underlined the word "complex" above. I read it as "complex production capabilities" and don't see any contradictions. There is no other way to interpret "despite the expansion, Patek Philippe’s president Thierry Stern has reasserted that the watchmaker will not be increasing its volume of timepieces".

Hoping to see your watch blogs or other sources here.

[uniqueMR]

Thierry Stern/Patek Philippe will NEVER increase production.
Currently max at 62-66k per year.

He even noted to decrease production, if needed, just to preserve value and rarity. (Oct 2022)

[HMHM]

Originally Posted by aa909

They spent >$600 Million to build the facility, it has 1.5 million square feet of manufacturing space and 10+ floors. They’ve got to make a return on that kind of investment, and what are the plans for that massive facility other than to make a lot more watches per year?

It’s not that they won’t increase production over a LONG period of time. Let’s say over 20 years the current production will perhaps increase from 60k to 75k, to keep up with increasing demand from an increasing population. But to triple production to 180k just because of the opening of the new factory is not in line with the philosophy of the Sterns and this has been demonstrated multiple times across all the interviews he gave throughout the years. Also I think one of the interviews he did mention that the new factory is meant for training staff and to improve the quality of their finishing to keep the standard of Patek Philippe.

https://www.gq-magazine.co.uk/watche...tern-interview

I believe this article encapsulates TS thinking about production and why they will never chase high volume like Rolex.

[byow]

Originally Posted by aa909

Thanks for the clarification, but companies like Patek don't invest $600M for office space. There's only 2 reasons they invested this much money in a massive facility: (1) improve manufacturing efficiencies to increase margins (2) expand production capacity

I thought you wanted information, which I provided from what "PP" directly told me.

You are now referring to your opinion.

Information vs opinion is not the same level of conversation, and I do not intend to challenge your opinion on this.

[Russell996]

Originally Posted by aa909

We know Patek completed their new massive production facility in 2020. Do we know what their target production quantities will be? Hearing 3x+ which would approach 200K pieces per year.

They are on record stating the new facility isn't for increased production.

[Ubiquitous1984]

Originally Posted by uniqueMR

Thierry Stern/Patek Philippe will NEVER increase production.
Currently max at 62-66k per year.

He even noted to decrease production, if needed, just to preserve value and rarity. (Oct 2022)

You can’t get any clearer than that. And as a collector it’s music to my ears.

[Vasco]

Originally Posted by aa909

We know Patek completed their new massive production facility in 2020. Do we know what their target production quantities will be? Hearing 3x+ which would approach 200K pieces per year.

I believe that nobody knows except TS himself (with Mr Peny, etc...).

You can expand a building, this doesn't mean the volumes will follow.

First, you can rise prices (they've been increasing quite strongly in the last 10 years). PP has a good pricing power. They know that many clients look at PP as an investment with good value keeping. Hence, they know that they must preserve that (i.e. accept a limited loss on the long run).

They have many facilities for different parts of the watches, hence they needed to regroup those workplaces.

They have invested time and effort in developping the Rare Handcrafts knowledge, apprenticeship, training, etc...

They invested CHF.500 in the building but CHF.100 in other areas and new fields are part of this.

They created their "TV room", exhibition rooms and TS stated that a part of the building are "closed" right now.

I believe that PP could decide to go to 70 maybe 80K pieces max in the 20 next years. But, again, nobody knows.

If customers base increases by 20% in the next 20 years and the qualified workforce increases as well, the quality should remain equal in theory. Remember the covid period has brought many new clients to watches in general and Patek in particular, of which a part will stay on the longer run, even if maybe another part will leave.

Remember also that maybe 10 years ago, rare handcrafts weren't really "in" but Patek (especially during their London and New York exhibitions) pushed to develop them. It requires time and means that will allow selling high priced pieces.

Back then, it was a time when watch companies faced high difficulties with hiring trained new watch makers. PP has implemented its own training program to be sure not to be lacking of technicians in several "niche" fields.

So, volume isn't everything and especially as long as training (hence quality of the output) is in line with the volumes.

When they ended their 1997 new building, I'm not sure they x3 their production since ?

However, we never know how many new clients (with the financial means) will come in the next decades. But increasing volumes isn't necessarily with lower quality as long as you have anticipated the workforce training.

Prices, on the other hand, have quite strongly increased meanwhile.

[fsprow]

I am always impressed when someone says they know a company’s business plan better than the owner of the company.

[Russell996]

Originally Posted by fsprow

I am always impressed when someone says they know a company’s business plan better than the owner of the company.

This.

[aa909]

Originally Posted by newonos

Not an expert here, but remember, PP is a private company. I would agree with all OP sentiments on margin or production if PP were public, or owned by a public co. And hey, despite TS public comments he could be right. On other hand it is possible there are other considerations with this building... a little brass and glass to cement a legacy, and for future production.

Good points, however private companies have shareholders and board of directors that they have to answer to (ask me how I know LOL), so investing $600M in a project like this still needs to have an ROI.

So if Patek isn't going to significantly increase production then the remaining scenario is to increase price. I think the recent move to PM Nautilus (which has superior margins) may be part of the plan.

[aa909]

Originally Posted by fsprow

I am always impressed when someone says they know a company’s business plan better than the owner of the company.

We're just speculating here. I personally find it fascinating that they invested over $600 million in this new production facility so I'm trying to unpack Patek's plans. This may not interest you, which is fine, but I thought other's would have some insights regarding how Patek plans to generate additional revenue / profits from this massive investment. As I noted in my post above, if they're not going to increase production in a meaningful way, then it will likely fall on price increases to pay for the new facility, and the move to the new 5811 etc is likely part of the execution.

[macrowatch]

Originally Posted by aa909

Good points, however private companies have shareholders and board of directors that they have to answer to (ask me how I know LOL), so investing $600M in a project like this still needs to have an ROI.

So if Patek isn't going to significantly increase production then the remaining scenario is to increase price. I think the recent move to PM Nautilus (which has superior margins) may be part of the plan.

I have a private company with a shareholder of one that re-insures my collection. Board meetings are super quick, and despite negative ROI since inception, somehow still in existence!

The new buidling is super nice for client visits, worth it on that grounds alone IMHO as a watch lover/brand admirer (though not necessarily max profit perceptoin).

My own pure speculation would be that I'm sure they may increase volume by something in the small 4 digits range, but I'm guessing what they really needed was closer vertical integration of complication parts under one literal roof rather than the desperate buildings spread out. Can kind of see what AP is doing in the valley by comparison to bring things physically closer together, consolidating vendors, etc.

And of course, WFM must be kind of lame to be able to see prototypes, so nice to have a beautiful building as CEO/owner to come to every day. Can't put a price on that! Oh wait...I guess you can. good thing he owns the whole shebang!

[Mattt]

Originally Posted by Ichiran

This is completely different from what TS said to the Peak Magazine (https://www.thepeakmagazine.com.sg/f...tion-building/)
"Patek Philippe has also filed for the Minergie-P label, a voluntary and incredibly stringent environmental standard given to buildings with low energy usage. Despite the expansion, Patek Philippe’s president Thierry Stern has reasserted that the watchmaker will not be increasing its volume of timepieces, which currently stands at slightly below 62,000 pieces annually."

Is this the same TS that said no 5711 replacement this year?

[aa909]

Originally Posted by Mattt

Is this the same TS that said no 5711 replacement this year?

It's also the same TS who took over the company in 2010 when production was 40,000 pieces, then increased it to about 55,000 pieces in 2017 and then to 65,000 in 2020

but yeah, no more increases... for now

[Ichiran]

Originally Posted by Mattt

Is this the same TS that said no 5711 replacement this year?

When did he said that? Source please?

I quote an article from Feb 2021:
"Stopping the Nautilus was an important decision, but we have a plan. The replacement to the Ref. 5711 will be quite major. It will be better than the Ref. 5711.

But I will not say today in what metal or if it will be in steel. It will be something else, very close, and logical.

It is like Christmas. You don’t want to know your gift before it’s Christmas, do you?"

Source NYT article:
https://www.nytimes.com/2021/02/10/f...rry-stern.html

TS already talked about the replacement to the 5711 since Feb 2021.

And there are a lot of discussions here in TRF on the possible metal and reference number of the replacement since then (the earliest thread i saw on 6711 was created in Mar 2021). People discussed this topic because of anticipation... Didn't you see these threads?

[Mattt]

Originally Posted by Ichiran

When did he said that? Source please?

I quote an article from Feb 2021:
"Stopping the Nautilus was an important decision, but we have a plan. The replacement to the Ref. 5711 will be quite major. It will be better than the Ref. 5711.

But I will not say today in what metal or if it will be in steel. It will be something else, very close, and logical.

It is like Christmas. You don’t want to know your gift before it’s Christmas, do you?"

Source NYT article:
https://www.nytimes.com/2021/02/10/f...rry-stern.html

TS already talked about the replacement to the 5711 since Feb 2021.

And there are a lot of discussions here in TRF on the possible metal and reference number of the replacement since then (the earliest thread i saw on 6711 was created in Mar 2021). People discussed this topic because of anticipation... Didn't you see these threads?

This is an interview dated April 2022.

https://youtu.be/5uXf6TaJgKM?t=1039

"I don't want to be mono-product, this is also why I stopped 5711, we fabricated enough and we have to preserve the value of the watch for my customers, and one of the way to do so is to stop production...."

"there is something else coming, definitely, but not now"

6 months later, 5711 replacement.

[Ichiran]

Originally Posted by Mattt

This is an interview dated April 2022.

https://youtu.be/5uXf6TaJgKM?t=1039

"I don't want to be mono-product, this is also why I stopped 5711, we fabricated enough and we have to preserve the value of the watch for my customers, and one of the way to do so is to stop production...."

"there is something else coming, definitely, but not now"

6 months later, 5711 replacement.

I watched this video and he only said there is a new animation of the Nautilus after he stopped the 5711 production. He never understood why Nautilus was so popular and he wants customers to pay attention to the other fabulous Patek.

He said "not now" but he also said he want to show the other new 2022 models first where he pointed to the 5326 and 5226. He didn't say there is no Nautilus replacement this year.

Let's recollect:
TS did previously announce the discontinuation of the 5711 in Feb 2021. The 5811 came 20 months later.

[Partekular]

If every PP watch sold is serviced every five years they would need to expand the service department big time. It must be a huge high margin profit centre.

It might also be that PP are introducing massive new robot machinery to reduce dependency on and increasingly short supply of watch makers…. Just a thought!

[rolexpatek363]

Originally Posted by aa909

I personally find it fascinating that they invested over $600 million in this new production facility

They'll write-off the cost against tax.

[JC180]

Just echoing the sentiments here, the building will retain asset value and they've divested of another substantial building close by that Rolex now own or lease which means they have consolidated their operations somewhat and continue to do so. I've just returned from the factory and can tell you it is immense and deeply impressive on a number of levels. The older factory was due an upgrade and in fact the old factory is undergoing a refurbishment. There is an abundance of space in the new factory and it is far from complete although largely operational.

They needed this premises, new innovation requires many designers the R&D dept has 175 staff for example and new technology means they need the space to work. There are new and state of the art CNC machines in every department and pressurised environments for jewel setting and finishing.

The old building felt dated and cramped in comparison. The update is not merely to increase production it's a statement and future proofs the innovation and manufacturing ability of PP for decades.

The top floor canteen and VIP dining, lounge and terrace areas are an equal to any 5 star hotel worldwide.

[JR16]

Originally Posted by fsprow

I am always impressed when someone says they know a company’s business plan better than the owner of the company.

My thoughts exactly!
How long has PP been around? People here really think those running the company are dummies and that they know better? Nobody here knows what the future holds- only time will tell!


Sent from my iPhone using Tapatalk Pro

[Gebbeth]

A new facility does not always mean increased output. It could just be a brand new spanking facility where most of the production will now reside (as well as, new engineering and business spaces).

Also, I don't think any company wants to immediately 3x production. Imagine and manufacturing operation increasing production of anything 3x?!?! That's almost unheard of for precision instrumentation let alone luxury watches, many of which require hand building and hand decorating and hand finishing.

I don't think it's possible even if Patek wanted to do it.

[fspfsp]

You can have the biggest facility in the world, but where are you getting the watchmakers to expand production that much? Patek isn’t going automated…