The Hitachi Group’s Growth Strategy

Story of Value Creation in the Smart Life Sector
While global economic development continues, societal issues such as global warming, traffic jams and accidents, aging and nursing
care have become more prominent. Progress is being made on the development of technologies aimed at resolving these issues,including electrification, autonomous driving, AI, robotics and personalized medicine. This progress is giving rise to a variety of business
opportunities. We are confident that IoT solutions related to daily life will be integrated within smart cities and will comprehensively
support the lives of people living in urban areas. In fact, the global smart city market is expected to reach $2 trillion or more in 2025.

Results and Targets
Revenues (¥ billion)/
Overseas revenue ratio (%)

Principal Products and Services
Adjusted operating income (¥ billion)/
Adjusted operating income ratio (%)
More than 10%

More than 60%
42%1,816.0

More than 2,100.0

More than 210.0
5％

971.0

1,200.01,700.0

485.0More than 500.0
More than 400.0

38.0
22.4
33.0

More than 40.0

360.0
FY2018 (Results)

FY2021 (Target)

FY2018 (Results)

FY2021 (Target)

85.3

More than 44.0

ROIC
More than 15%

More than 10%

145.5

More than120.0

93.4

EBIT (¥ billion)/EBIT ratio (%)
8%

FY2018 Revenues

Healthcare¥1.8

trillion
Automotive
Systems

20%

Diagnostic systems
Treatment systems

Smart Life &Eco-friendly Systems

53 %Powertrain
Chassis parts
Safety systems

27%

Home appliances
Air-conditioning systems

More than 210.0
10.0%More than120

29.5
30.7

More than 50.0
More than 44.0

FY2018 (Results)

FY2021 (Target)

FY2018 (Results)

FY2021 (Target)

Healthcare
Smart Life & Eco-friendly Systems
Automotive Systems* The healthcare and related business includes revenues of healthcare-related businesses ofHitachi High-Technologies Corporation ("Hitachi High-Tech")

Vision and Targets under the 2021 Mid-term Management Planbusinesses, establishing the powertrain, chassis and safety systems

Accomplishing business structural reform in support of our next

navigation, automotive lithium-ion battery and cargo handling materials

stage of growth through digital technology

businesses were sold as non-core businesses.

businesses as core businesses. Meanwhile, the energy station, car

We have promoted business structural reforms in the Smart Life Sector

In terms of core business products, we will form strategic alliances andover the past several years, including the deconsolidation of the air-conduct M&A with the goal of achieving one of the world’s top three

conditioning systems business and the sale of the car navigation andmarket shares and improve profitability by pursuing economies of scale inautomotive battery businesses. During the period covered by the 2021

both procurement and manufacturing. As a first step toward these goals,Mid-term Management Plan, we will accomplish business structural

we decided to acquire Chassis Brakes International in June 2019 in an

reform by improving profitability through business replacement andeffort to strengthen the competitiveness of the chassis and safety systems

operational restructuring. At the same time, we will establish abusinesses. We will expand the safety systems business, which integrates

business model for Lumada and develop our digital service business,

electric steering and suspensions, while giving due consideration to theleading us into our next stage of growth.

market environment, where the shift to electric brakes is under way.
Competition in product development utilizing electrification and automation
technologies is intensifying both in the automotive system business andGrowth Strategies under the 2021 Mid-term Management Plan

throughout the industry. For this reason, rising research and development
costs are proving to be a primary cause of reduced profitability. As a

Significant Improvement in Profitability throughBusiness Replacement and Operational
Restructuring
Automotive Systems businessas a common foundation for research and development, reducing investment
overlap between businesses and improving efficiency.
In addition, we are promoting the use of Lumada customer cases with theChief Executive Officer Koch assumed his position at Hitachigoal of streamlining operations such as marketing, design, procurement,Automotive Systems, Ltd., during fiscal 2018, ushering in structural

production and quality improvement using digital technologies.

reforms. He promoted the classification of core and non-core

62

corporate organization, the Research & Development Group of Hitachi acts

Hitachi Integrated Report 2019

We will achieve our target adjusted operating income ratio of more than 10%

by boosting business efficiency through scale expansion, raising research andcreated from these technologies. Our basic strategy is to create

development efficiency and improving operations through the use of Lumada.

innovative healthcare solutions by combining AI with ourmeasurement and analysis technologies. Hitachi will develop

Smart Life & Eco-friendly Systems businesshealthcare business on the basis of a measurement and analysis

The Smart Life & Eco-friendly Systems business, which has a longtechnology portfolio, which the Research and Development Group ofhistory of developing products from consumer perspectives, is a core

Hitachi and Hitachi High-Technologies have built.

business aiming to improve the quality of people’s lives in the Smart

Hitachi’s top priority in the healthcare business is to minimize theLife Sector. We will create solution businesses using “design thinking,”

invasiveness (generally, invasiveness refers to stimuli that can disrupt

which involves coming up with methods for improving our lives without

the homeostasis of the body’s internal environment) of diagnosis andbeing shackled by preconceptions.

treatment. In the medical treatment field, we are focusing on cancer

In April 2019, Hitachi Consumer Marketing, Inc., which had been intreatment solutions using less invasive radiation. In accordance withcharge of home appliance sales, merged with Hitachi Appliances, Inc.,

this focus, we integrated Mitsubishi Electric Corporation’s particle

which had been handling design and manufacturing. This merger led

therapy systems business in June 2018. Moving forward, we willto the establishment of Hitachi Global Life Solutions, Inc., which iscontinue to strengthen investment related to this business, including

venturing into challenging new fields.

the development of technologies that greatly reduce equipment

We are already launching a lineup of new connected products,including robotic vacuum cleaners and refrigerators that can becontrolled and managed using smartphones. Furthermore, we areaccelerating efforts aimed at creating solution businesses, launching
services such as “Doshiteru,” a monitoring service for elderly
individuals who live alone, and “Peloridge,” a smartphone app forsharing experiences and emotions related to food.
In addition to expanding solution businesses, it is essential that weimprove business efficiency. In October 2015, Hitachi’s air-conditioningsystems business was merged with the air-conditioning systems
business of Johnson Controls in the United States, creating Johnson
Controls–Hitachi Air Conditioning, an unconsolidated subsidiary of theHitachi. By combining the sales channels, technical capabilities andresearch and development of these two businesses, we strengthened
the global competitiveness of our air-conditioning systems business.
Additionally, in the home appliances business, we will promotecosts, with the goal of expanding the use of particle therapy.

Establishment of a Lumada Business Model
Machine data is collected via the Internet from Smart Life Sectorproducts, including connected cars, connected home appliances andhealthcare equipment. Using Lumada’s analytics and AI to process thisbig data, we can create new economic value by automating productoperation, as has been done in the case of autonomous driving
systems.
Once devices that support our daily lives are automated and various
solutions are provided, subsequently these devices are integrated intosmart cities and a new data economy is created. Under the 2021 Midterm Management Plan, we will invest approximately ¥30 billion in theSmart Life Sector, focusing on the smart city market in Asia, a region
that continues to urbanize. Furthermore, we will aim to secure ¥100
billion in orders of the Lumada business.

collaboration with strategic partners overseas under a flexible capital
policy and conduct business operations with an emphasis on
investment efficiency.

Collaborative Creation of Value within the Energy Sector
Focusing on the three themes of health, safety and comfort, the Smart

Healthcare businessLife Sector creates social, environmental and economic values byMany hidden and unmet needs exist within the healthcare businesscreating communities that are easy to live in, which helps improve thefield, and high rates of growth are expected to continue in the future.

quality of people’s lives. We also provide particle therapy systems,

On the other hand, technology in the existing diagnostic imaging

allowing people to live normally while receiving cancer treatment, andsystems business has matured, and the business has entered acontribute to the elimination of fatal traffic accidents throughstage of competing for business scale expansion. Accordingly,

autonomous driving technologies. Furthermore, we will contribute to

selection and concentration are becoming increasingly important.
The strength of the Hitachi Group in this field lies in its measurement

the prevention of global warming by reducing the CO2 emissions of our
products through electrification and IoT technology.

and analysis technologies, which originated from research anddevelopment concerning electron microscopes that was continuously
conducted from 1942, when the Group’s Central ResearchLaboratory was initially established. All of the major healthcare
products that we have developed so far, including products related toX-ray and ultrasonic diagnostics, MRI, CT, mass spectrometry, DNA
sequencing, bioimmune analysis and optical topography, were all63