Hitachi Integrated Report 2022

Digital Systems & Services

Introduction
Green Energy & Mobility

Whatʼs Hitachi
Connective Industries

Value Creation Initiatives

Hitachi Astemo

Strategies by Sector

Connective Industries“Connecting data, value, industry, and society.”
This sector brings together Hitachi’s unrivaled
products, connects them to use digital, andoffers them as solutions. We aim to be“sustainable value creators.”

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

64

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Urban Group

Revenues (billion yen) /Overseas Ratio (%)

44%

Main products and services

Industrial Digital BU

Industry and distribution 343.1 billion yen
solutions, robotic SI
FY2021
Water &
Water supply andEnvironment BU
Revenues
sewage, utility solutions
182.3 billion yen
Custom-made industrial
Industrial
equipment
Productsbillion yen(process compressors,
Business
automated guided robots, 409.4 billion yen
drive systems, etc.)
Mass-produced industrial
Hitachi High-Techequipment
576.8 billion yen(air compressors, marking
systems, power distribution
equipment, etc.)
Advanced Technology Group

Lumada revenues(billion yen)

Urban Group
Advanced Technology Group
Industry GroupElevators, escalatorsand building services
Home appliances andair-conditioning systems

2,752.8

Building Systems BU
822.7 billion yen

9.4

Hitachi Global Life Solutions
396.6 billion yen

Adj. EBITA (billion yen)
Adj. EBITA ratio (%)
ROIC (%)

13.4

2,752.8/47%2,770/
48%

1,219.3

1,212

10.3

23%

632.7 9.4
900.7

Healthcare (clinical chemistry and immunochemistry analyzers, automated cell
culture equipment, particle therapy system, etc.)
Measurement and analysis (semiconductor metrology/inspection equipment,
electron microscopes, etc.)

System integration
Connected productsManaged services

3,200/
51%
1,115
808.6

13.0
10.7

Main products and services

525.6

681

257.8

296

921

FY2021(result)

FY2022(forecast)*

417
FY2024(target)FY2021 FY2022 FY2024(result) (forecast)* (target)*Announced on July 29, 2022

Mid-term Management Plan 2024: Vision

Strengths

Increased
geopoliticalrisks

Skills transfer

Heightened demand for automation

Changesin officedemands

Actual infection risks

Accelerate
new drugdevelopment

More flexible workstyles

Stricter CO2 regulations
Enhanced circular economy structure
Factory and logistics functions
stoppedSudden import/export restrictions
and exchange rate fluctuations
Skyrocketing material
and energy costs

Planetary
Boundaries
Protect the planet
Maintain social
infrastructure

Make pharmaceuticals
into strategic
products

Technology trends AI, robotics, 5G/6G, quantum computers, metaverse, regenerative medicine

C

Adoption andspread ofregenerative
medicine

Hitachiʼs goal

Develop cancer
therapies
Expand preventive
medicine

issues across fields
is important

Increasing
naturaldisasters

Mass customization

Healthcare field

Resolution of

Impact of
COVID-19

Comfortableoffice and home

Severed supply chains

Sudden changes in thesocial environment

Trendsby field

Industry field“boundary”

Urban fieldnfeatio or soc
Cr
iet
o-

y

Social issues, including the impact of COVID-19, natural
disasters and increased geopolitical risks, impact all
business areas and are becoming increasingly sophisticatedand complex. Given these conditions, in addition toresolving issues that exist between organizations andcompanies, it is also important to comprehensively resolveinterdisciplinary “boundary” issues.
Hitachi will focus efforts on planetary boundaries andwellbeing as its most critical themes. At the same time,in the Connective Industries sector, we will connect
interdisciplinary domain knowledge across fields, connect
products digitally by pooling products from different fields
across fields, and resolve “boundary” issues using total
seamless solutions connecting products, OT and IT.

65

Data

Results and Forecasts

33%

Main products and services

Corporate Governance

Hitachi Astemo

Connective Industries Business Structure
Industry Group

Sustainability

Business Strategies

GrowthWellbeing
Society where
all individuals
are comfortable
and active

Connective Industries Policy
Connect
data, value, industry,and society
1. Connect interdisciplinary
domain knowledge.
2. Connect products digitallyby pooling products fromdifferent fields across fields
into digital.
3. Resolve “boundary” issues
using total seamlesssolutions connecting
products, OT and IT.

In the Connective Industries sector, comprising
the Urban Group, the Advanced Technology
Group, and the Industry Group, Hitachi aims todigitally connect highly competitive products,
including elevators/escalators, home appliances,measurement and analysis equipment, medical
equipment and industrial equipment with theaim of achieving growth through total seamlesssolutions and recurring business. Revenue will
expand, from 2.7 trillion yen in fiscal 2021, to 3.2
trillion yen in fiscal 2024, of which Lumada revenue
will increase from 0.5 trillion yen in fiscal 2021, to
1.1 trillion yen in fiscal 2024. We will also expand
business in North America as a focus area for
global growth in an effort to increase green value.

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Business Strategies

Sustainability

Corporate Governance

66

Data

Hitachi Astemo

Connective Industries Growth Strategy
In the Connective Industries sector, Hitachi will implement three priority measures to expand
business based on the Lumada growth model, in which the cycle of co-creation of value withcustomers is driven by data. In digital engineering, we aim to strengthen front engineering
capacity, and in system integration, we aim to evolve and expand total seamless solutions. In
connected products and managed services, we will strengthen recurring business by expanding
and enhancing the functions of connected products.

Strengthening Front Engineering Capacity
Hitachi creates specific objects and policies by utilizing various methods of business concepts
and issues analysis and provides integrated solutions and services. To accelerate the creationof digital synergies in this sector, in April 2022, Hitachi doubled its number of digital consulting
staff in response to DX needs, to about 120 people. Strengthening front engineering capacity willfurther increase mobility, which drives the Lumada business cycle.

Developing and Expanding Total Seamless Solutions

CPS

Modeling Service
layer
layer

“Boundaries” issues exist in all areas, including vertical boundaries between management andworkplaces, horizontal boundaries between supply chains, and boundaries between different
industries. It has become particularly important to provide places in industry, urban, healthcare
and other fields facilitating connections in response to increasingly sophisticated and complex
challenges in recent years. Given these conditions, Hitachi will model operations using cyberphysical systems (CPS) based on domain knowledge obtained from products to develop
and advance total seamless solutions resolving “boundary” issues in the industry, urban andhealthcare fields.

Physicallayer

Advance of total seamless solutions resolving “boundary” issues

Industry solutions

Urban solutions

Healthcare solutions

Process modeling
Domain knowledge

Industry

Urban

Healthcare

Strengthening Recurring Business by Expanding and Enhancing
the Functions of Connected Products
In addition to providing products and services, we will expand recurring businesses such as
maintenance and services, repairs and modifications, and replacements and recycling. The
aim is to achieve a recurring business revenue CAGR of 6% from fiscal 2021 to fiscal 2024,
exceeding overall sector revenue CAGR and driving growth.
One measure for strengthening recurring business involves the development of new services
combining connected products and digital technologies. First, by substantially expanding thenumber of connected products, from about 0.8 million units in fiscal 2021, to approximately
two million units in fiscal 2024, we will be able to gain a deeper understanding of the realitiesof customer issues. And in the second phase, we will also merge and strengthen advanced
recurring service applications utilizing product data collected through IoT platforms. Throughthese efforts, Hitachi will develop and provide new services based on product businessknowledge and digital capabilities to expand recurring business.
Recurring
serviceapplications

Strengthening and streamlining field engineering
Predictive
maintenance

Developing service models

Automated failure Connected data analysis
and recommendation
cause analysis
services

As a Service

App-linked, data-driven...

IoT platforms

Security, load distribution...

Global communication network infrastructure

Connected
products

Merge and strengthen
advanced applications
Develop new services
using product knowledge
and digital technologies
Substantiallyexpand connectivity

0.8 million
units(FY2021)

2 million
units(FY2024)

Global Business Strategy
Hitachi plans to increase its overseas revenue ratio from 47% in fiscal 2021, to 51% in fiscal 2024.
In particular, we will proactively invest in North America, our key region in the global market, andaim for high growth of 22% CAGR between fiscal 2021 and 2024. In addition to strengthening the
integration of robotic SI and digital technologies through the acquisition of JR Automation, we will
launch a total seamless solution in North America to further expand our business by connected
products such as air compressors, for which the business has been acquired from Sullair;
semiconductor manufacturing and measurement equipment; and particle therapy systems.

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Sustainability

Business Strategies

Corporate Governance

Data

67

Hitachi Astemo

Urban Group
Comprising the Building Systems BU and Hitachi Global Life Solutions, this group aims to utilize
digital technologies to provide connected products and strengthen solution capabilities.

Revenue

Hitachi Global Life

Building Systems
BU
67%

33% Solutions

FY2021

1,219.3
billion yen

Sales andmanufacturing ofelevators andescalators
63%
Building services 37%

Hitachi Global Life Solutions
In addition to home appliances, air-conditioning systems and other product businesses, aswell as the provision of maintenance services, we offer solutions utilizing digital technologies.
With a long history of developing products from the consumer’s perspective, this businessis engaged in four areas: enriching life (connected home appliances), advancing andenriching medical care (cleanroom solutions), circular economy (recycling technologies,
environmentally friendly products) and low environmental impact (air-conditioning solutions
with low environmental impact). Specifically, this business focuses efforts on connected home
appliances, including refrigerators and washing machines that can be controlled and managedwith smartphones, air-conditioning remote diagnostics and maintenance systems using IoT,
and the creation of solutions utilizing digital technologies. Further, through a joint venturewith Arçelik in the overseas home appliance business, we will expand sales of Hitachi-brandproducts and accelerate the overseas expansion of the solutions business.

Building Systems BU

Total Seamless Solutions Business Example (Urban Field)

This business unit manufactures and sells elevators and escalators, and develops building services(comprehensive elevator and escalator maintenance services and modernization, as well as building solutions).
As building-related needs become increasingly sophisticated due to changing market environments, Hitachi
aims to become a smart building solutions provider resolving social issues such as prompting green buildings
and the new normal.
In Japan, we will attempt to expand business by capturing the recovery in demand for elevator andescalator modernizations that had slumped due to the pandemic. Further, in May 2022, we comprehensively
renovated our control centers, comprising the core systems and facilities that enable the remote monitoringand maintenance services for elevators, escalators and other building equipment, including the dashboard
facilitating the digital transformation of building management, significantly enhancing quality and expanding
menu options related to remote monitoring and maintenance services.
Outside Japan, we will accelerate the creation of synergies with Yungtay Engineering Co., Ltd., which became
a wholly owned subsidiary in April 2022 (renamed Hitachi Yungtay Elevator Co., Ltd., in May). In addition to
firmly maintaining a top share in terms of orders received in China, the largest market in the world, accounting
for more than 60% of demand for new elevators and escalators, we will work to expand the maintenanceservice and modernization business, areas in which market growth is expected.
Additionally, by leveraging strengths in these core business areas, as well as combining building IoT platforms
with strong products and services of the sector and Hitachi Group companies, we will provide smart building
solutions supporting green buildings and the new normal to contribute to improving people’s quality of life.

We connect building IoT platforms (including building IoT solutions and worker solutions) withproducts and systems in the Connective Industries sector, such as elevators, security, airconditioning equipment, lighting, pumps and power supplies, to visualize and analyze all building
data. This increases building management efficiency, improves operational quality and provides
building users with safety, security and comfort.
Providing smart building solutions for overall optimization by seamlessly connecting “boundaries”
between owners (managers) and users, common and private spaces, and facilities and systems.
Providing value

Management
Efficient building
management

Operation

Maintaining and improving
the quality of building operations

Life

Providing a safe andcomfortable building
environment

Pumps

IoT sensors
Processing

Power supply

Analysis

BCP
Accumulation
Building IoT platform

Elevators
Lighting

Security

Air conditioners
Informationon people flow

Improvingbuilding
management
efficiency andoperating quality
Providingbuilding users
with safety,
security, andcomfortHitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Sustainability

Business Strategies

Corporate Governance

Data

68

Hitachi Astemo

Advanced Technology Group
Comprised mainly of Hitachi High-Tech, this group aims to expand business by enhancing
proprietary technologies for the healthcare and semiconductor fields and strengthening businesscreation capabilities.

Revenue

9% Others

Hitachi High-Tech 91%
FY2021

Industrial
30% Solutions

632.7

Analytical &Medical Solutions

28%

Nano-technology
Solutions42%billion yen

Total Seamless Solutions Business Example (Semiconductor Field)
We are engaged in utilizing product data and improving development and manufacturing
efficiency through co-creation with customers to handle increasingly complicated challenges insemiconductor device structuring and manufacturing processes. As a result, the development
period for new products and processes can be shortened in the development phase, yields canbe improved in the prototype phase, and line productivity can be improved in the mass production
phase. At present, we are already accelerating the creation of solutions at co-creation sites locatednear customers, and in 2022, a new engineering co-creation site was established in the UnitedStates located in Hillsboro, Oregon.
Consolidate and analyze data generated by Hitachi High-Tech semiconductor
manufacturing products for processing, testing, measurement, and analysis,
and feed that back into manufacturing processes and product groups
Customerco-creation sites

Service application platform
Use product data forpredictive maintenance/
analysis visualization/
condition optimization

Feedback into
manufacturing
processes/products

Healthcare, Measurement & Analysis Systems BusinessIn fields such as healthcare, nanotechnology (semiconductor), and social and industrial
infrastructure, Hitachi provides solutions that resolve customer issues utilizing technologicalcapabilities based on measurement, diagnostics, analysis and global sales capabilities.
In the healthcare field, Hitachi High-Tech boasts the world’s largest market share in clinicalchemistry and immunoassay analyzers, with more than 20 billion tests conducted each year
throughout the world. In May 2022, Hitachi High-Tech entered into a strategic partnership with
Invivoscribe, Inc. (United States), a global provider of blood cancer testing kits and services, withthe aim of accelerating the molecular diagnostics business. Hitachi also enjoys a strong market
share in particle therapy systems, which are able to treat cancer while maintaining quality of life
with less physical burdens caused by treatment. In the semiconductor field, Hitachi High-Tech
has strengths in plasma etching systems that enable ultrafine processing of semiconductors,
as well as high-resolution, high-speed inspection equipment, built on a foundation comprising
electron microscopes and other high-precision measurement and analysis technologies. In
advanced CD measurement SEM, in particular, Hitachi High-Tech holds a global top share.

IoT platform

Development phase

Shorten thedevelopment of
new products andprocesses
Prototype phase

Improve the yieldrate of new
products andprocesses
Semiconductor
manufacturing
products

Mass production phaseMicroprocessing

Semiconductor
manufacturing
processes

Contamination/
fault testing

Development
phase

Size
measurement

Prototype
phase

Failure analysis

Mass production
phase

Improve theproductivity ofmass production
lines

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Sustainability

Business Strategies

Corporate Governance

Data

69

Hitachi Astemo

Industry GroupThe Industrial Digital BU, the Water & Environment BU and the Industrial Products business(Hitachi Industrial Products and Hitachi Industrial Equipment Systems) strengthen the global ×
digital business.

Revenue

Industrial Products

Industrial
Digital BU

44% Business

Mass-produced
67% industrial equipment
Custom-made

33% industrial equipment37%

FY2021

900.7

billion yen

Water &
Environment BU 19%
Industrial Digital BU
This business unit provides digital solutions and robotic SI integrating IT and OT in the industry
and distribution fields. In Japan, we aim to establish a recurring growth model with Lumada,which will lead to sustainable innovation, by strengthening upstream consulting functions,
expanding the SI business constituting the core business, and strengthening service businesses.
Globally, we will focus on the North American market and accelerate business development
combining the robotic SI of JR Automation, acquired in 2019, with digital technologies. Further,by integrating KEC, which handles robotic SI business centered on automobiles, with Hitachi
Industrial Equipment Systems’ robotic SI business engaged in assembly and conveyor lines
for various manufacturers, Hitachi Automation was established in April 2022 to strengthen the
robotic SI business in Japan and the ASEAN region.

Water & Environment BUThis business unit provides a wide range of utility solutions, from social infrastructure facilities
for water supply, sewerage, etc., to air-conditioning and industrial plant facilities. We will further
strengthen environmental and clean technologies with the aim of creating and expanding nextgeneration utilities business in electronics, semiconductors, pharmaceuticals, biotechnology andother key markets. Through the development of total seamless solutions originating in OT, wewill maximize value across customer value chains and respond to increasingly complex social
issues.
Regarding overseas markets, we are targeting global expansion rooted in local communities
centered in the ASEAN region, which is our focus market.

Industrial Products BusinessThis business provides a broad lineup of custom-made and mass-produced industrial equipmentthat supports industrial and social infrastructure globally.
In the custom-made industrial equipment business, we aim to become a highly profitablebusiness entity contributing to green initiatives. We will work to expand products, services andrecurring business that reduces environmental burdens through electrified products, centrifugal
compressors and logistics.
In the mass-produced industrial equipment business, we aim to establish a strong productbusiness that contributes to the Social Innovation Business. While positioning air compressors
and marking systems as global priority businesses, we are focusing efforts on expanding
connected solutions (businesses including IoT controllers and location communication functions)and green products. Moreover, with regard to air compressors, we will pursue synergies with
Sullair, acquired in 2017, and in marking systems, we are accelerating global developments with
the April 2022 acquisition of Photon Energy (Germany), which has strengths in innovative laser
marking systems, and Telesis Technologies (United States), which handles industry-leading laser
markers, acquired in July 2022.

Total Seamless Solutions Business Example (Industry Field)
In collaborative creation with Suntory Beverage & Food, we have achieved enhanced product safety andsecurity with the traceability of single bottle at a next-generation factory that continues to evolve. Massive
volumes of data are collected from each line, which are then integrated and aggregated in various data
formats used to trace and visualize factory data. Based on this effort, we have realized an IoT platform
for overall optimization leading to the pursuit of safety, security and workstyle reforms. Further, we arecontributing to system enhancement with products that include marking systems enabling high-speed
special printing even on physical layers, as well as compact and low-floor automated guided robots.
IoT infrastructure that collects and consolidates data from production equipment
and IT systems to be utilized for overall optimization
Suntory Kita-Alps Shinano-no-Mori
Water Plant

3. Utilization
Utilize integrated andcollected data fortraceability, visualizingof factory data, etc.

Single bottle Visualization of
Other
tracingfactory dataapplications

Applications
IoT platform

2. Connection
Integrate andcollect various
formats of data
1. Collection
Data collection

4. Action
Pursue safety and security,
workstyle reforms, promoteadvances in factory
management
Automated
High-speed
in-factory
special printing transportation

Variousinformation
Quality
Equipment Procurement Production management
Shipment

Marking Automatedsystem guided robot

Better productsafety andsecurity withsingle bottle
traceability
Realize evolving
next-generation
factory model