What happened
On 25 December 1969, Seiko launched the Astron, the world's first commercial quartz wristwatch, at retail equivalent to a small car. Within 5 years quartz movement costs collapsed; by 1975 a Casio quartz could be made for $5 and retail at $30, vastly outperforming any mechanical watch on accuracy. The Swiss industry, focused on mechanical-only production at high cost, was systematically outcompeted on price and accuracy. Brands closed, employment collapsed, and many famous Swiss names went bankrupt or were absorbed.
The damage
Swiss watch employment dropped from ~90,000 in 1970 to ~28,000 by 1984. Hundreds of small Swiss makers, particularly in La Chaux-de-Fonds and Le Locle, closed. ETA, the Swiss movement consortium, consolidated drastically. Even high-end brands suffered: Universal Genève collapsed; Hamilton was sold to SMH (later Swatch Group); Heuer was acquired by TAG; Vacheron Constantin nearly went bankrupt. The 1971-1981 period is the worst decade in Swiss watchmaking since the 19th century.
The Swatch turnaround
In 1983, Nicholas Hayek (with Ernst Thomke) launched Swatch: a cheap, plastic, fashion-led quartz watch made in Switzerland at price points that could compete with Japanese imports. Critically, Swatch's commercial success funded the consolidation of failing Swiss makers into what became Swatch Group: Omega, Longines, Tissot, Rado, Hamilton, ETA, all under one parent. This consolidation created the structure that allowed the surviving brands to reposition mechanical watchmaking as luxury rather than utility.
What it left behind
The mechanical watch survived only at the luxury tier. Below CHF 500, quartz dominates and always will. Above CHF 5,000, mechanical recovered through the 1990s-2000s as collectors valued craftsmanship over accuracy. The middle (CHF 500-5,000) became contested by both. The crisis fundamentally restructured the industry: pre-crisis, mechanical was the default; post-crisis, mechanical is a deliberate luxury choice. See wiki: quartz crisis.