Collaborative Creation and Profits—Progress with Corporate Strategy
Establishment of Stable, High Profit Structure
May 28, 2007

Kazuo Furukawa
Hitachi, Ltd.

Collaborative Creation and Profits—Progress with Corporate Strategy
May 28, 2007

Contents
1. Overview of Progress in Establishing a Structurethat Consistently Generates High Profits
2. Establishing a High-Profit Structure and Growth
Strategies
3. Strengthening the Management Infrastructure
4. Summary
Copyright © 2007, Hitachi, Ltd., All rights reserved.

2Collaborative Creation and Profits—Progress with Corporate Strategy
May 28, 2007

Contents
1. Overview of Progress in Establishing a Structurethat Consistently Generates High Profits
2. Establishing a High-Profit Structure and Growth
Strategies
3. Strengthening the Management Infrastructure
4. Summary
Copyright © 2007, Hitachi, Ltd., All rights reserved.

3

1-1. Numerical Targets

Building of Stable, High Profit Structure
Fiscal 2009: Consolidated Operating Margin of 5%

D/E Ratio: 0.8 or below(including minority interests — FY2006: 0.76)

Copyright © 2007, Hitachi, Ltd., All rights reserved.

4

1-2. Basic Policy
Basic Management Policy “Collaborative Creation and Profits”
Rigorous focus on market-oriented approach and profit creation

Goal
Establishment of stable, high profit structure

Key Initiatives
1. High profitability through rigorously FIV-based management
2. Building of stable, high profit structure
3. Evolution to group management for high profitability
4. Innovation by collaborative creation
Copyright © 2007, Hitachi, Ltd., All rights reserved.

51-3. Improvement of Main Businesses with Negative FIVBusiness

Major Achievements

Ongoing Initiatives

Power
Systems

Completed MidAmerican
EPC (Engineering,
Procurement, andConstruction) Project in
the U.S.; leveraging
experience• Strengthened business and practiced more
stringent risk management spearheaded bySupervisory Office for Power Systems• Introduced advanced verification systems• Established framework to manage projects in eachoverseas region

Achieved profitability on
operating income basis in
FY2006 4Q• Formulated investment strategy for focusing onlarge screens• Bolstered lineup of attractive products (including
iVDR-compatible products, etc.)• Establishing 5-base global operating framework• Fostering collaborative creation with Matsushita
Electric Industrial Co., Ltd.

Shipped industry’s first
1.0TB 3.5-inch HDD• Strengthening management further• Strengthening competitiveness with newtechnologies and products• Bolstering production capacity andcompetitiveness– Structural reforms accompanying large-scale
operational integration• Expanding strategic alliances with partners

Flat-panel
TVs

Hard Disk
DrivesCopyright © 2007, Hitachi, Ltd., All rights reserved.

6

1-4. Progress with FIV Management
Ratio of Positive FIV Business Groups and Companies
FY2002

FY2006
Positive

32％

40％

60％

68％

Negative• Steady decrease in number of negative FIV business groups andcompanies in the 5-year period from FY2002 through FY2006• April 2007: Appointed a Hitachi Executive Vice President
responsible for monitoring and risk management
for each infrastructure business
Copyright © 2007, Hitachi, Ltd., All rights reserved.

71-5. Establishment of Stable, High Profit Structure

Priority Areas
Social Innovation BusinessSocial Infrastructure
Business

Industrial Infrastructure
Business

Life Infrastructure
Business

Power Systems
Railway Systems
Government Systems

Automotive Equipment
Systems
Industrial Systems
Financial Systems

Urban Systems
Home ICT Systems
Medical Systems

Information Infrastructure Business
IT Platforms

System Solutions

Infrastructure Technology/Products

Semiconductors
Materials
Motors / Inverters

PanelsHard Disk Drives

Copyright © 2007, Hitachi, Ltd., All rights reserved.

8

1-6. Growth of the Social Innovation Business (1)Sales of Nuclear Power Business in Japan

136

100

Preventive
maintenance, etc.
New plants

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008FY2009FY2010* Oval shows the index when sales in fiscal year 2005 are assumed to be 100.

Global Growth of the Social Infrastructure Business and Industrial Infrastructure BusinessIndustrial Infrastructure
Business
114%

Social Infrastructure Business
123%
145%

109%
Other

Other
Asia
China

Asia

EuropeEurope

China

North
America

North
America
FY2006

FY2007

FY2008FY2006

FY2007

FY2008* Oval shows YoY growth
Copyright © 2007, Hitachi, Ltd., All rights reserved.

91-6. Growth of the Social Innovation Business (2)Shifting management resources• Share of investing cash flows in Social Innovation Business field
FY2005

FY200645%
55%

Infrastructure
Technology/Products

49%

51%

FY200734%
66%

Social Innovation Business

51% (FY2006) Æ 66% (FY2007)* Large investment projects:
Establishment of nuclear power companies with GE, etc.
Copyright © 2007, Hitachi, Ltd., All rights reserved. 10

1-7. Earnings structure in FY2006 and FY2009(yen)

FY2006

FY2009500 billion

SocialInfrastructure
Business
Life Infrastructure
Business

SocialInfrastructure
Business
Life
Infrastructure
Business

OperatingincomeInfrastructure
Technology/Products
Business

Infrastructure
Technology/Products
Business
Information
Infrastructure
Business

Information
Infrastructure
Business

182.5 billion

Industrial Infrastructure
Business

Industrial Infrastructure
Business00

Revenues

10 trillion(yen)* Each unit is posted in order of profitability

Copyright © 2007, Hitachi, Ltd., All rights reserved. 11

Collaborative Creation and Profits—Progress with Corporate Strategy
May 28, 2007

Contents
1. Overview of Progress in Establishing a Structurethat Consistently Generates High Profits
2. Establishing a High-Profit Structure and Growth
Strategies
3. Strengthening the Management Infrastructure
4. Conclusion
Copyright © 2007, Hitachi, Ltd., All rights reserved. 12

2-1. Improving Businesses with Negative FIV [1]Flat-panel TV Business (1)• Operating income in fiscal 2007
• Positive FIV in fiscal 2008

Optimal business portfolio mix in terms of products and regions
centered on plasma TVs

Stabilize earnings in flat-panel TV business
Product strategies
y Established investment strategy that focuses resources on high-profit
large-screen products (50 inches and over)y Released model compatible with iVDRs (removable HDDs), an evolutionary
step in TVs with built-in HDDs (April 2007)
y Focusing investment on flat-panel TVs (Fine tune management resources）

Building a global operating frameworkassembly
assembly
assemblyy Complete 5-base worldwide
Mexico Plant
Gifu Plant
Czech Plant
production framework;
From summer
previously 3 plants and2007
promoting SCM built
assembly China Plant
around these 5 bases
Miyazaki Plant
y Plasma panel production capacity
Malaysia Plant
manufacturing(Establishment of 4.0 million
From springassembly
panelsunit/year framework)
2007
Copyright © 2007, Hitachi, Ltd., All rights reserved. 13

2-1. Improving Businesses with Negative FIV [1]• Operating income in fiscal 2007
• Positive FIV in fiscal 2008

Flat-panel TV Business (2)Sales strategy
y Established policy that focuseson North America and Japan 10 thousand
units(FY2007)
y Target 20% global market sharein plasma TVs (FY2010)-Share of plasma TVs of 50 inches or larger-Total share for plasma TVs
27%-LCD TV units-Plasma TV units

30%

20%

8%

17%

13%

8%

20%
650

400
220

130
80

140

FY2006

FY2007250

FY2008400

FY2010Collaborative creation with partners
y Develop collaborative creation with Matsushita Electric Industrial Co., Ltd.
in plasma TV business– Advancing comprehensive collaboration in R&D, production,marketing and intellectual property– Cross-supply of 103- and 85-inch plasma panels
y Global alliance with IPS Alpha Technology, Ltd.
Copyright © 2007, Hitachi, Ltd., All rights reserved. 14

2-1. Improving Businesses with Negative FIV [2]Hard Disk Drive Business (1)• Operating income in fiscal 2007
• Positive FIV in fiscal 2008

Strengthen competitiveness with new technologies and productsy Steadily launch new products with goal of generating 75% of
new products ratio in fiscal 2007

– New products in first half of 2007: Industry’s first 1.0TB 3.5-inch HDD, industry-leading
high-speed 2.5-inch HDD, highly reliable 3.5- and 2.5-inch HDDs for enterprisey Develop new technologies and products that draw on the Hitachi Group’s
collective strengths– Drive the terabyte generation using perpendicular magnetic recording (PMR) technology andtunneling magneto-resistance (TMR) heads– “TOKKEN” special research project involving collaboration between research labs, anddevelopment and manufacturing divisions– Support from Hitachi Corporate Lab (From development of magnetic recording technology
through production control and SCM)

y Improve quality– Implement Hitachi's “Ochibo” quality improving
process– Raise quality evaluation ranking of Hitachi
by major customers
Quality Evaluation Ranking of Hitachi
by Major Customers (from Jan. to Mar.)

2005
#3.0

2006
#2.3

2007
#1.3

New
Products Ratio
100%
95%
100%
90%
85%
80%
75%
70%
65%
60%
55%
50%
45%

75%
50%
Jan.
to Mar.
1-3月期

Apr. to Jun.
4‐6月期

Jul. to Sep. 10‐12月期
Oct. to Dec.
7‐9月期

Copyright © 2007, Hitachi, Ltd., All rights reserved. 15

2-1. Improving Businesses with Negative FIV [2]Hard Disk Drive Business (2)• Operating income in fiscal 2007
• Positive FIV in fiscal 2008

Bolster head and media development andRestructuring head and media operations
manufacturing systems
Media
SliderHGA.*y Consolidate and integrate head and
DEV.*
MFG.*
DEV.*
MFG.*
MFG.*
media operations
U.S.
China
U.S.
Æ Direct benefits: approx. $300 million Current U.S. Japan
MexicoThailandJapan China
Japan
Philippines(cumulative over 5 years)y Launch special project in head area
U.S.
China
U.S.
Japan
FutureThailandChina
Æ Achieve significant head yieldタイ
improvement* HGA: Head Gimbal Assembly, * MFG.: Manufacturing
Philippines

Philippines

Promote project to reduce fixed costs* DEV. : Development

y Cut indirect workforce (approx. 400 jobs): approx. $75 million (over 2 years)
y Reducing general materials and product expenses(facilities, indirect materials, maintenance contracts, etc.): approx. $70 million/year

Thoroughly reduce costs and raise sales and manufacturing efficiency
y Shorten cycle time with new special SCM teamsy Material procurement re-engineering– Enhance cost reduction of commodity parts– Pursue strategic partnership with key components vendors– Worldwide total reduction of all cost by general procurement department
Copyright © 2007, Hitachi, Ltd., All rights reserved. 16

2-2. Growth Strategies

Priority Areas
Social Innovation BusinessSocial Infrastructure
Business

Industrial Infrastructure
Business

Life Infrastructure
Business

Power Systems
Railway Systems
Government Systems

Automotive Equipment
Systems
Industrial Systems
Financial Systems

Urban Systems
Home ICT Systems
Medical Systems

Information Infrastructure Business
IT Platforms

System Solutions

Infrastructure Technology/Products

Semiconductors
Materials
Motors / Inverters

PanelsHard Disk Drives
Copyright © 2007, Hitachi, Ltd., All rights reserved. 17Growth Strategy [1]2-2. Social Infrastructure Business (1)電力システム事業
Power
Systems Business

Operating margin
in fiscal 2009: 3%

Overseas utilization of domestically honed"Japanese quality" and greater localization

Strengthen business and practice more stringent risk management
spearheaded by Supervisory Office for Power Systems[Nuclear Power Business]
Participate as a key manufacturer in key new plants in Japan
Develop business based on a global alliance framework between Hitachi and GE
y Signed formation agreement for global alliance (May 2007), plan to establish companies
in the U.S., and Canada in June and another company in Japan in Julyy Expand the order of next-generation nuclear reactor;
Economic and Simplified Boiling Water Reactor (ESBWR)[Thermal Power Business]
Operations rooted in regions and marketsy Business promotion and risk reduction led by Hitachi Power Systems America, Ltd. andHitachi Power Europe GmbH that have experience and strong operating base

Expansion of overseas coal-fired thermal power businessy Order for installing coal-fired power plant from Canadian company EPCOR andTransAlta Power (worth approx. 50 billion yen; March 2007)y Received turnkey order for installation of 3 coal-fired power plants from Belgium
company Electrabel (worth approx. 300 billion yen; May 2007)
Copyright © 2007, Hitachi, Ltd., All rights reserved. 18Growth Strategy [1]Operating margin
in fiscal 2009: 3%

2-2. Social Infrastructure Business (2)Railway Systems Business

Overseas utilization of domestically honed"Japanese quality" and greater localization

Expand development and production capabilities
y Substantially increase capacity at Kasado Works（FY2006）
y Established Tokyo Engineering Center (April 2007)

Expand railway systems business in Europey Conducted test runs of hybrid railcars in the U.K.
(May 2007)y Plan to ship first railcars for the Channel Tunnel Rail
Link (CTRL), U.K. (June 2007, 180 cars)
y Plan to commence maintenance business for
CTRL (June 2007)–Establish Hitachi Rail Maintenancey Established sales base in Brussels Office (April 2007)

Growing demand for monorail systems worldwide

Test runs of hybrid railcars

Image at Dubai monorail system

y Commencement of operations of Sentosa Island monorailin Singapore (January 2007)
y Construction underway of monorail infrastructure on Palm Jumeirah Island,Dubai (scheduled to commence operating at the end of 2008)
Copyright © 2007, Hitachi, Ltd., All rights reserved. 19Growth Strategy [2]2-2. Industrial Infrastructure Business (1)Automotive Equipment Systems Business

Operating margin
in fiscal 2009: 5%
Further strengthen advanced technology
to create and maintain products having
leading market share

Development of hybrid car systems
y GM hybrid car, the Saturn VUE Green Line,features Hitachi motors and inverters
y To strengthen lithium-ion rechargeable battery
business, raised stake in Hitachi Vehicle Energy,
Saturn VUE Green Linerealize improvement in development term mainly lead by Hitachi

Development of outside recognition technology to increase safety
y Established Automotive Systems R&D Laboratory to strengthen proposal
capabilities through advanced-technology development system (April 2007)

Use tie-up with Clarion to strengthen car information systems businessy Made Clarion a subsidiary (December 2006)
y Xanavi Informatics Corporation made a wholly owned
subsidiary of Clarion (January 2007)
Copyright © 2007, Hitachi, Ltd., All rights reserved. 20

Growth Strategy [2]Operating margin
in fiscal 2009: 5%

2-2. Industrial Infrastructure Business (2)Industrial Systems Business

Further strengthen advanced technology
to create and maintain products having
leading market share[Semiconductor, LCD, printed circuit board
manufacturing equipment]
Strengthening product competitiveness further withsuccessive launch of new products and software for
CD-SEM*, where the company commands the leading
global share (Hitachi High-Technologies)[Construction Machinery]

CD-SEM

Increasing presence in global mining markets,
including BRICs, VISTA** and other countries(Hitachi Construction Machinery)Highly reliable super-jumbo excavators/loading shovels
and new-type dump trucks applying bullet train technology
New plant construction (Hitachi Construction Machinery)y 2 plants in Hitachinaka: component plant andlarge-scale machinery assembly plant* CD-SEM: Critical-dimension scanning electron microscopes, which measure
the fine pattern dimensions on semiconductor wafers** VISTA: Vietnam, Indonesia, South Africa, Turkey and Argentina

New-type dump trucks
Copyright © 2007, Hitachi, Ltd., All rights reserved. 21

Growth Strategy [3]2-2. Life Infrastructure Business (1)都市システム事業
Urban
Systems Business

Operating margin
in fiscal 2009: 5%

Utilize collective strengths of the Hitachi Groupto provide secure, pleasant solutions

Strengthen global elevator and escalator businessby bolstering manufacturing operation and product competitivenessy Establishment of production base in Shanghai to expand capacity in China (May 2007)y Launched new standard elevators with enhanced safety features (December 2006)

Strengthen and expand energy conservation business (ESCO, etc)
y Cumulative orders for approximately 130 sites worldwide
through March 2007y Introduced energy-saving equipment at customer sites
in Southeast Asia, offering remote monitoring service
through domestic control center

Expand redevelopment solutions business (PFI, etc.)
y Promote PFI business utilizing the Hitachi Group’s
collective strengths(Opened JMSDF Kure Museum (April 2007))

Office building in
Guangzhou, China
Copyright © 2007, Hitachi, Ltd., All rights reserved. 22

Growth Strategy [3]2-2. Life Infrastructure Business (2)Home ICT Systems Business

Operating margin
in fiscal 2009: 5%

Utilize collective strengths of the Hitachi Groupto provide secure, pleasant solutions[Broadcasting and telecommunication convergence Business]
Established cross-company broadcasting
and telecommunications convergence projecty Accelerate strategy (including collaborative creation) to establish competitive edge
in infrastructure, systems and services

Developed next-generation optical networking technology to realize
simultaneous transmission of high-definition video on 100 channels
y Core technology for the era of broadcasting and telecommunications convergence
using gigabit passive optical network

Launched flat-panel TV featuring “iV Pocket,”compatible with iVDR (removable HDDs) (April 2007)y Compatible with SAFIA* copyright protection technology
for the era of broadcasting and telecommunications convergence* Security Architecture For Intelligent Attachment device(content protection technology compatible with iVDR)
Copyright © 2007, Hitachi, Ltd., All rights reserved. 23Growth Strategy [4]2-2. Information Infrastructure Business (1)IT Platform Business

Operating margin
in fiscal 2009: 7%

Use storage and consulting
to bolster profitability[Storage Solutions Business]
Captured No. 1 worldwide market share in disk array subsystems (28%, FY2006)y Announced and simultaneously launched worldwide the Hitachi
Universal Storage Platform V, a new product that realizes
the world’s first enterprise-class implementation of virtualization
with thin provisioning. (May 2007)y Aggressive business development by Hitachi Data Systems– Signed OEM agreement with BlueArc® Corporationfor Hitachi high-performance NAS* platform (December 2006)– Announced acquisition of content archiving leader Archivas, Inc. (February 2007)[Server Business]
Strengthened virtualization environment of blade server BladeSymphony (February 2007)[PC Business]Announced cooperation with Hewlett-Packard in business PC field (March 2007)y Strengthening collaborative creation in high-value-added field* NAS: Network Attached Storage
Copyright © 2007, Hitachi, Ltd., All rights reserved. 24Growth Strategy [4]2-2. Information Infrastructure Business (2)System Solutions Business

Operating margin
in fiscal 2009: 7%

Use storage and consulting
to bolster profitability

Strengthen consulting frameworky Hitachi Consulting reinforcing consultants(FY2005 1,200 people Æ FY2006 1,500 people)
y U.S.-based Hitachi Consulting acquired U.K. company Impact Plus (April 2007)

Started providing new solutions to support corporate reformy Began offering BCM* Solutions (March 2007)y Began providing “workstyle reform solutions” (April 2007)

Expanding installation of finger vein authentication systems
y ATMs featuring finger vein authentication technology in operation
at 36 financial institutions in Japan, including Japan Post
Started introducing IC tag “μ-Chip Hibiki” based on international standard regulations**y Began product shipments (November 2006)
y μ-Chip Hibiki RFIDs selected for use in cargo vehicle management
and WMS* (logistics and IT) operations at Eco’s Co., Ltd.’s (food supermarket)
Tokorozawa distribution center (February 2007)* BCM：Business Continuity Management** ISO/IEC 18000-6 Type C*** WMS：Warehouse Management System
Copyright © 2007, Hitachi, Ltd., All rights reserved. 25Growth Strategy [5]2-2. Infrastructure Technology/Products
Materials Business

Operating margin
in fiscal 2009: 8%(Material Business)
Expand top-share products and promote
development of new materials, utilizing groupsynergies with social innovation business[Enhance development of high-share products
and actively invest in areas of strength]
Developed new ferrite magnet with world’s highest magnetic strength(Hitachi Metals)y Responds to trend toward automobiles, home appliances and other productsthat are more compact, lighter and conserve energy
Announced plans to strengthen copper strip production facilities (Hitachi Cable)y Enhance production of copper alloy strip, which is used in lead frames and connectors[Use group synergies to promote development]
Hitachi Metals integrated NEOMAXy Provide wide-ranging magnetic material and other solutions
such as amorphous metal materials and magnets for motors
y Maximize group synergies, particularly in automotive,
electronics and industrial equipment fields

Raising production of anisotropic conductive film for displays (Hitachi Chemical)
y Construction of new plant (announced November 2006) will raise capacity
by 70% (from August 2007)y Use in group businesses
Copyright © 2007, Hitachi, Ltd., All rights reserved. 26

Collaborative Creation and Profits—Progress with Corporate Strategy
May 28, 2007

Contents
1. Overview of Progress in Establishing a Structurethat Consistently Generates High Profits
2. Establishing a High-Profit Structure and Growth
Strategies
3. Strengthening the Management Infrastructure
4. Summary
Copyright © 2007, Hitachi, Ltd., All rights reserved. 27

3-1. Evolution of Group Management and Accelerating Innovation
Evolution to group management for high profitability
Appointed a Hitachi Executive Vice President responsible formonitoring and risk management for each infrastructure business
Developing concrete plans to reduce the number of consolidated subsidiaries
to around 700 for more efficient management

Collaborative creation- and profitability-focused innovations
Direct linkage between R&D and generating profitsy Assign 15% of corporate researchers to business divisions, etc.
(By March 2008)
y Shorten R&D period by 30%: using analysis-led design

Measures focused on fields that will lead to the creation of future profitsy Advanced exhaust gas treatment
in coal-fired thermal powery Succeeded in prototyping and operating
spintronic memory device

y Hybrid railcar drive systems
y Silicon photonics

Innovation through collaborative creationy GE, GM, HP, Unicharm, Kowa Real Estate, SAFIA (iVDR copyright protection), etc.
y Appointed 6 Corporate Business Creators,
leaders of new businesses emphasizing collaborative creation
Copyright © 2007, Hitachi, Ltd., All rights reserved. 28

3-2. Globalization
Full emphasis on market-orientated approachin the world’s growing markets

Overseas sales ratio FY2006 41% Æ FY2009 45%
Enhance response to BRICs and other markets
y [Cultivation of and Localization in the Chinese Market]
Formulated new Hitachi Group strategy for 2010 (November 2006)
y [Advancing Into the Indian Market]
Began cross-group India strategy meetings (April 2007)
y [Strengthened operations in Middle Eastern market]
Made the Middle East Office a branch (April 2007)

Bolster global proposal capabilities
y Strengthen “One Window sales”—unified sales activities
representing the whole Hitachi Group to customers
y Enhance cross-group proposal capabilities
through global expansion of Hitachi Consulting Corporation
Copyright © 2007, Hitachi, Ltd., All rights reserved. 29

3-3. Capturing Synergies
Accelerate capturing synergies
Accelerate capturing synergies between businessesy [Motor and Inverter]
Synergies from integration of motor and inverter research,and through Motor Power Systems Divisiony [Batteries]
Accelerate development of batteries throughout Hitachi groupin automotive, railcar and power tool fields
y [Urban Planning and Development Project]
Provide group-unified total solutions from elevator/escalator,
information systems to building maintenance service

Use operational synergies to improve earnings
y Further strengthen purchasing power of group as a whole:strengthen centralized purchasing and establish group procurement
information system
Copyright © 2007, Hitachi, Ltd., All rights reserved. 30

3-4. Progress with CSR Management
Advancing CSR
Promote environmental protection activities
y Established an environmental management system for the Hitachi Group
based on the ISO 14001 international standard (October 2006)y Launched certification system for Super Eco-Factories** Super Eco-Factories: Factories realizing leading-edge
y Registered 32 Super Eco-Products**
environmental protection systems** Super Eco-Products: Products evaluated from outside
a company as products with high environmental efficiency

Foster CSR awareness with business partners

y Issued Guidelines for Procurement Activities to overseas suppliersy Achieved green supplier ratio of 100%

Promote social contribution activitiesy Held classes on universal design at
10 elementary schools in Japan

Instill a CSR mindset
y Ran seminars at overseas subsidiaries in China (Beijing, Class on universal design
Shanghai and Guangzhou) and in Asia (Singapore, Thailand, Malaysia)
y Offered CSR e-learning program at 103 companies in Japan
Copyright © 2007, Hitachi, Ltd., All rights reserved. 31

3-5. Enhance MONOZUKURI and Human Resource Capabilities
Enhance MONOZUKURI capabilities
Strengthen MONOZUKURI capabilities throughSupervisory Office for MONOZUKURI (September 2006)
y Develop initiatives to strengthen capabilities through 6 subcommittees,
including Development, Design and Manufacturing Process Reform andReliability Enhancement

Promote integrated system reforms
Cut losses by reforming total supply chain management (SCM) globally(reduced 16% YoY in FY2006)
Globalizing e-Meister activities: passing on techniquesof highly skilled veterans using latest digital media technologies

Enhance human resources capabilities
Develop human resources who can act globally and assign anduse the right people in optimal positionsy Promote employee performance excellence in every countries,
including Hitachi Global Leadership Programy Ready to Inspire, uniform education for managers worldwide
y Greater use overseas of Hitachi Group joint recruitment (China, Singapore, Thailand, Malaysia)
Copyright © 2007, Hitachi, Ltd., All rights reserved. 32

3-6. Brand Strategy
Increase brand investment overseas
Increase ratio of overseas investment to 50% (in FY2008)
to strengthen the Hitachi brand value overseasy North America: “Hitachi True Stories” web documentary
y Europe: Hitachi technology exhibition in the U.K. (planned for February 2008)
y China: Run campaigns focused on the environment and energy conservationy Asia: Launched campaigns mainly in Indiay Middle East: Posted billboards in Dubai, and Cairo, Egypt
Raising the Ratio of Overseas
Brand Investment
（%）

50%
40%

42%

FY2006

FY2007

FY2008Hitachi True Stories
Copyright © 2007, Hitachi, Ltd., All rights reserved. 33

3-7. Patent Strategy
Strengthen global patent strategy
Strengthen strategic use of global patentsy Strategically promote intellectual property rights(U.S., Europe, China, India; compliance with international standards)y Expand income from emerging markets (China, India, etc.)
y Use to help win orders globally (Railway, etc.)
y Effectively utilize international standard patent pool
(SAFIA ,Blu-ray Disc, Digital TV, etc.)
Increase ratio of global patents to double value of intellectual property
No. of patent applications overseas by Hitachi Group
Overseas/Japan Ratio
100%
10,00075%

Asia, etc.
China

6%
11%

5,000

Europe

7%

U.S.

2%

0
2006

2010

* Oval shows average annual increase
Copyright © 2007, Hitachi, Ltd., All rights reserved. 34

Collaborative Creation and Profits—Progress with Corporate Strategy
May 28, 2007

Contents
1. Overview of Progress in Establishing a Structurethat Consistently Generates High Profits
2. Establishing a High-Profit Structure and Growth
Strategies
3. Strengthening the Management Infrastructure
4. Summary
Copyright © 2007, Hitachi, Ltd., All rights reserved. 35

4-1. Numerical Targets

Building of Stable, High Profit Structure
Fiscal 2009: Consolidated Operating Margin of 5%

D/E Ratio: 0.8 or below(including minority interests — FY2006: 0.76)

Copyright © 2007, Hitachi, Ltd., All rights reserved. 36

Contribute to society
through the developmentof superior technology and products

Copyright © 2007, Hitachi, Ltd., All rights reserved. 37

Cautionary Statement
Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such“forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does
not directly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar
expressions which indicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information andare subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements”
and from historical trends. Certain “forward-looking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue
reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include,
but are not limited to:- fluctuations in product demand and industry capacity, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment andDigital Media & Consumer Products segment;- uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technology on a timely and cost-effective basis and to achievemarket acceptance for such products;- rapid technological change, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer
Products segment;- increasing commoditization of information technology products, and intensifying price competition in the market for such products, particularly in the Information& Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment;- fluctuations in rates of exchange for the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities aredenominated, particularly between the yen and the U.S. dollar;- uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand and/or exchange rates;- general socio-economic and political conditions and the regulatory and trade environment of Hitachi’s major markets, particularly, the United States, Japan andelsewhere in Asia, including, without limitation, a return to stagnation or deterioration of the Japanese economy, or direct or indirect restriction by other nations
on imports;- uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing
technologies;- uncertainty as to the results of litigation and legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may become
parties;- possibility of incurring expenses resulting from any defects in products or services of Hitachi;- uncertainty as to the success of restructuring efforts to improve management efficiency and to strengthen competitiveness;- uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design anddevelopment of certain key products;- uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing; and- uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write down equity securities it holds.
The factors listed above are not all-inclusive and are in addition to other factors contained in Hitachi’s periodic filings with the U.S. Securities and Exchange
Commission and in other materials published by Hitachi.

Copyright © 2007, Hitachi, Ltd., All rights reserved. 38

Copyright © 2007, Hitachi, Ltd., All rights reserved. 39