Samsung CEO warns of ‘lagging’ growth and pledges reform after the Note 7 recall debacle

Samsung Electronics has warned of "lagging" growth in its key markets with the chief executive Kwon Oh-hyun pledging reforms to avoid a repeat of the "expensive" Note 7 smartphone recall debacle.

In his annual speech to staff Monday, Kwon flagged potential headwinds to the South Korean technology giant's business in the coming year.

"Growth in our target markets is lagging, and political and economic uncertainties have increased due to changes in policies and exchange rates," Kwon told employees at the company's headquarters.

SeongJoon Cho | Bloomberg | Getty Images

The co-CEO, who is also vice-chairman of Samsung, addressed the Note 7 issue which saw the smartphone "phablet" catch fire ending in a recall and discontinuation of the device. Samsung has so far taken a $5 billion hit in relation to the scandal and the company is now looking to move beyond the issue.

"After the expensive lesson learned last year, let us make all necessary reforms. First, we will maintain the basics of product competitiveness. Quality has been the cornerstone of our success that we must not compromise. We will restore top quality standards through improved processes and strengthened testing," Kwon said.

The CEO explained that Samsung's competitors have "grown stronger through bold investments" in new areas such as artificial intelligence. He urged employees to help the company boost "technological innovation" to stay ahead.

"It will take the collective efforts of all employees to overcome the daunting challenges ahead of us. Let's leverage our full set of capabilities as a company to confidently and definitively rise above these challenges," Kwon said.