Following the result of the Brexit referendum in which the UK voted to leave the European Union, a slowdown in the consumer electronics market is imminent. It may still be very early days yet, but both Samsung and LG have already spoken out about “heightened uncertainty” damaging consumer spending in the region and negatively affecting South Korean exports.
Regardless of where the chips may eventually fall, the uncertainty the Brexit decision has brought about will damage the consumer electronics industry in both the UK and Europe in the short term. There is simply no precedent for what to do from here and, unfortunately for both businesses and consumers, uncertainty is the enemy here.
Unfortunately for both businesses and consumers, uncertainty is the enemy here.
When a population faces uncertainty regarding jobs, borders, trade, immigration and so on, the first thing they do is prepare for the worst. And that means less spending on items deemed non-essential: that includes consumer electronics like smartphones and tablets. But it’s not just consumers that will be playing it safe.
Samsung and LG speak out
An unnamed LG executive told The Korea Times today that “there are possibilities that more European consumers may tighten their belts in spending for consumer products,” noting that “the biggest worry is that the Brexit may dent consumer and business confidence.”
The biggest worry is that the Brexit may dent consumer and business confidence.
Samsung has also spoken out, siding with an analysis from Moody’s Investors Service that “heightened uncertainty during negotiations over new arrangements between the UK and EU will likely dent investment inflows… weighing on its growth prospects.” The unnamed Samsung source also noted that if the Euro falls it will affect Samsung’s business in the European market.
While neither LG nor Samsung are likely to suffer significantly as a result of Brexit, at least in the long term, both will be hesitant to invest heavily in either the EU or the UK until the dust has settled. New trade agreements and business contracts need to be drawn up, but none of that can take place until the UK’s position is a known entity.
An uncertain future
But it’s not just about whether or not the UK will actually leave, but what the UK will look like if it does. If the UK or some part of it does leave the EU (Scotland and Northern Ireland may now hold their own Leave/Remain referendums), the EU will also need redefining without parts of the stability of the UK in it. With several other anti-EU countries declaring a need for a referendum of their own, the instability in Europe may last for years and years.
In the meantime, consumers will, perhaps wisely, be spending less on consumer electronics. While it’s too early to say how badly the European consumer electronics industry will be affected, Brexit has manifold ramifications we have not even begun to consider. This latest report may only concern comments from South Korean manufacturers but the same kind of hesitancy in the face of uncertainty will likely prevail at other major OEMs as well.
What are your thoughts on Brexit? If you’re in the EU or UK, are you feeling less inclined to buy a new gadget?