AP takes majority of Inhotec to secure supply amid 39% US tariff
Bottom Line Impact
AP's control of Inhotec can offset 50-100 bps of margin pressure and strengthen allocation-driven pricing power, positioning the brand to defend revenue and brand equity while competitors face greater supply and tariff stress.
Key Facts
5- Majority stake acquired in Inhotec; financial terms undisclosed; Inhotec to remain autonomous and multi-client while receiving AP strategic and financial support
- US tariff on Swiss imports at 39% took effect on Aug 7, creating immediate import cost pressure for brands with 15-20% US exposure by value
- Scenario math: if AP absorbs the tariff on 20% of sales, blended gross margin could compress by 60-120 bps; passing through 50% could cut US sell-out volumes by 10-20% over 3-6 months
- Vertical integration benchmarks suggest 10-20% lead-time reduction and 50-100 bps scrap-rate improvement within 6-12 months after S&OP and capex alignment
- Industry context: secondary market prices remain 20-30% below peak for key luxury references, signaling tighter primary market sell-through into H2
Time Horizons
Executive Summary
Audemars Piguet has acquired a majority stake in Swiss precision maker Inhotec, preserving the supplier's autonomy while locking in critical component capacity and know-how. The move strengthens AP's industrial independence just as a 39% US tariff and softer global luxury demand raise margin and supply risks for the Swiss watch sector.
Actionable Insights
Immediate Actions (Next 30-90 days)
Set a three-scenario US pricing and allocation plan with 0, 50, and 100% tariff pass-through, and pre-commit to reallocate 5-10% of 2025 supply toward Middle East and SE Asia if US sell-out drops below threshold
Rationale: Scenario discipline protects margin while keeping global scarcity and waitlist health intact amid tariff-induced demand volatility
Role affected:CEO, Audemars Piguet
Urgency level:immediate
Integrate S&OP and quality systems with Inhotec within 90 days, prioritize top 20 parts by shortage risk, and implement dual-sourcing or safety-stock buffers where verticalization is not immediate
Rationale: Focus on the highest-risk components yields quickest service-level and scrap-rate gains while de-risking launches
Role affected:COO-Chief Industrial Officer, Audemars Piguet
Urgency level:immediate
Short-term Actions (6-12 months)
Ringfence Inhotec capex with ROI gates targeting 50-100 bps COGS savings and 10-20% lead-time reduction within 12 months; hedge USD-CHF to offset tariff-driven margin compression by 30-50 bps
Rationale: Quantified industrial ROI plus FX hedging can offset a majority of tariff headwinds at blended margin level
Role affected:CFO, Audemars Piguet
Urgency level:short-term
Publish a neutrality charter and offer 12-24 month capacity reservations with SLA-backed on-time delivery targets to top 5 clients; introduce a price-hold mechanism for 12 months in exchange for volume commitments
Rationale: Preempt client churn and lock multi-year revenue while scaling under AP ownership
Role affected:CEO, Inhotec
Urgency level:short-term
Risks & Opportunities
Primary Risks
- Client attrition at Inhotec if competitors fear AP-first allocation, leading to 10-20% external revenue loss
- Tariff escalation or broader US enforcement reduces AP US volume by 15-30% if pass-through is limited
- Integration friction delays targeted lead-time and yield benefits by 6-9 months
Primary Opportunities
- Win share from less integrated rivals via superior delivery reliability and tighter allocation management
- Monetize Inhotec growth with multi-year contracts and premium SLAs, lifting utilization by 5-10 points
- Accelerate limited editions and boutique-only drops with 15-20% faster prototyping-to-launch cycles