“ i.e.HITACHI Plan II ”
Medium-Term Management Plan
January 30, 2003

Hitachi, Ltd.

2All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Contents

1 The Vision Behind “ i.e.HITACHI Plan II ”
2 The Goals of “ i.e.HITACHI Plan II ”
3 Key Measures of “ i.e.HITACHI Plan II ”
4 Specific Actions of “ i.e.HITACHI Plan II ”
5 Examples of Targeted Businesses
6 Conclusion
3All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Contents

1 The Vision Behind “ i.e.HITACHI Plan II ”
2 The Goals of “ i.e.HITACHI Plan II ”
3 Key Measures of “ i.e.HITACHI Plan II ”
4 Specific Actions of “ i.e.HITACHI Plan II ”
5 Examples of Targeted Businesses
6 Conclusion
4All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

1. The Vision Behind “ i.e.HITACHI Plan II ”
Advancing from the “i.e.HITACHI Plan” to “ i.e.HITACHI Plan II ”

Overview of “i.e.HITACHI Plan”
Hitachi’s basic strategy is in the right direction :Become a global supplier able to offer “information systems services”,“social infrastructure systems” together with “the key hardware, softwareand highly functional materials and components”
However, Hitachi was insufficient in responding to drastic changes in theoperating environment that were not foreseen when the plan wasformulated.

To achieve the goals of “ i.e.HITACHI Plan II ” ：Concentrate resources on “New Era Lifeline Support Solutions”
and “Global Products Incorporating Advanced Technology”
Follow up on progress annually and take additional actions
and other measures necessary to accomplish the plan’s goals
5All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

1. The Vision Behind “ i.e.HITACHI Plan II ”
Advancing from the “i.e.HITACHI Plan” to “ i.e.HITACHI Plan II ”
More innovations to become customers’ “best solutions partner”
Basic Aim of“i.e.HITACHI Plan”

Targeted Domains of“ i.e.HITACHI Plan II ”

Fuse Technologies & Knowledge
Become a global supplierable to offer“information systems services”,“social infrastructure systems”
together with“the key hardware, softwareand highly functional materials
and components”“New Era Lifeline Support Solutions”“Global Products Incorporating
Advanced Technology”

6All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Contents

1 The Vision Behind “ i.e.HITACHI Plan II ”
2 The Goals of “ i.e.HITACHI Plan II ”
3 Key Measures of “ i.e.HITACHI Plan II ”
4 Specific Actions of “ i.e.HITACHI Plan II ”
5 Examples of Targeted Businesses
6 Conclusion
7
All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

2. The Goals of “ i.e.HITACHI Plan II ”
Goal: Achieve positive FIV* in fiscal 2005

Fiscal 2005 Net Sales and Earnings(Forecasts for FY2002 )Net Sales: current level( 8,050 billion yen )Operating Margin：： at least 5%( approximately 2% )ROE：： at least 8%( approximately 2% )*FIV is Hitachi’s economic value-added evaluation index in which the cost ofcapital is deducted from after-tax operating profit. After-tax operating profit
must exceed the cost of capital to achieve positive FIV.
8All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Contents

1 The Vision Behind “ i.e.HITACHI Plan II ”
2 The Goals of “ i.e.HITACHI Plan II ”
3 Key Measures of “ i.e.HITACHI Plan II ”
4 Specific Actions of “ i.e.HITACHI Plan II ”
5 Examples of Targeted Businesses
6 Conclusion
9All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

3. Key Measures of “ i.e.HITACHI Plan II ”
Establish a Highly Profitable Structure Through Realignmentof Business Portfolio
Hitachi has already designated certain businesses as candidates forwithdrawal based on their lack of synergy with targeted businessdomains or the difficulty of achieving positive FIV.
→ Exit certain businesses currently accounting for
approximately 20% of net sales
Bolster targeted businesses, create new businesses
Allocate proceeds from withdrawal of businesses to additional
investments in targeted businesses, investment in new businessesor reductions in interest-bearing debt

Accelerate Globalization
Identify businesses suitable for globalization to spur further growthin the global market
10All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

3. Key Measures of “ i.e.HITACHI Plan II ”
ＣＩＩ（Corporate
Innovation Initiative））ⅡＣＩＩ（Emphasize problem solving on the frontline operations by vesting
responsibility and authority
Bolster targeted businesses, create new businesses in the “Inspire ABusiness” domain“ Project C II ” : Further improve free cash flows“ Project D ” : Continuous effort to reduce procurement costs

Raise Motivation and Utilize Human Resources
Effectively
Utilization of the personnel database
Introduce the Free Agent Policy (in-house job seeking policy)
Introduce the 360-degree Feedback Program to managers
and higher posts

11All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

3. Key Measures of “ i.e.HITACHI Plan II ”
Reinforce Group Management and Introduce New Corporate Governance Structure
Build a structure that promotes integrated management and increases the transparency ofmanagement.

Hitachi, Ltd.

Hitachi Group companies

Board of Directors

Board of Directors

Chairman of the Board

Nominating Committee

Directors(Executive Officer)･･･

Compensation Committee･･･

Directors (outside)･･････（ report））

Audit Committee（appoint, authorize to decide,supervise））

Execution of Business Activities
President and Chief
Executive Officer

President

Executive Vice President
and Executive Officer

Business Gr.

･･････Senior Vice President
and Executive Officer･･･

Directors (Non-executive Officer)

Business Gr.

SeniorExecutiveCommittee

CorporateDivisions

Nominating Committee

Strengthen
Cooperation

Directors(Non-executive Officer)

Compensation Committee･･･Directors (Executive Officer)

Directors (outside)（ report））

Audit Committee（appoint, authorize to decide,supervise））

Execution of Business Activities■ Hitachi directors and executive officers will berepresented on the boards of group companies as
outside directors.
■ Certain group companies’ directors will berepresented on Hitachi’s Board of Directors.

･･･

Executive Officer

12
All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Contents

1 The Vision Behind “ i.e.HITACHI Plan II ”
2 The Goals of “ i.e.HITACHI Plan II ”
3 Key Measures of “ i.e.HITACHI Plan II ”
4 Specific Actions of “ i.e.HITACHI Plan II ”
5 Examples of Targeted Businesses
6 Conclusion
13All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

4. Specific Actions of “ i.e.HITACHI Plan II ”
Focus on “New Era Lifeline Support Solutions”
SAN/NAS storage solutions,
Biomedical business,
Urban redevelopment business,
Strategic outsourcing business,
Mu-Chip* solutions, etc.
* World’s smallest RFID IC chips

Focus on “Global Products Incorporating
Advanced Technology”
Hard disk drive business,
Automotive equipment business,
Semiconductor production equipment business,
Battery business (lithium-ion batteries, fuel cells), etc.

Accelerate Globalization
Identify businesses suitable for globalization to spur furthergrowth in the global market
14All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

4. Specific Actions of “ i.e.HITACHI Plan II ”
“New Era Lifeline Support Solutions”

Reinforce targeted businesses
SAN/NAS storage solutions,
Strategic outsourcing business, etc.

Launch new businesses that can serve ascore growth drivers
Biomedical business,
Urban redevelopment business,
Mu-chip solutions, etc.

15All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

4. Specific Actions of “ i.e.HITACHI Plan II ”
“Global Products Incorporating Advanced Technology”

Reinforce Targeted Businesses
Hard disk drive business,Semiconductor production equipment business, etc.

Launch new businesses that can serveas core growth drivers
Automotive equipment business,
Battery business ( lithium-ion batteries, fuel cells), etc.

16
All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Contents

1 The Vision Behind “ i.e.HITACHI Plan II ”
2 The Goals of “ i.e.HITACHI Plan II ”
3 Key Measures of “ i.e.HITACHI Plan II ”
4 Specific Actions of “ i.e.HITACHI Plan II ”
5 Examples of Targeted Businesses
6 Conclusion
17
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5. Example of “New Era Lifeline Support Solutions” (1)
SAN/NAS Storage Solutions
Guide global markets as the leading company in this field“True North”
By fusing hardware and software,“enable strategic use of any kind of dataat any time, by anybody, from anywhere
in a secure manner”
Maintain the top position in hardware by providing the world’s
highest performance and scalability
Expand the storage management software businessEstablish de-facto standards in this area for closer connections
with software/hardware provided by other companies
18All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

5. Example of New Era Lifeline Support Solutions (2)Biomedical Business
Establishment of the Medical Strategy Council
Formulate comprehensive medical business strategy
for the Hitachi GroupGrowing business domains
Advanced Diagnosis and Therapy :PET cancer diagnosis, proton beam cancer therapy,
intelligent operating rooms, robot-assisted surgery, etc.
Applied Medical Biotechnology:
DNA diagnosis, tissue engineering, etc.
Medical Services:Home diagnostic business of diabetes and other diseases,
management support systems for hospitals, etc.
19All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

5. Example of “New Era Lifeline Support Solutions” (3)Urban Redevelopment Business
Provision of total solutions aimed at urban area
redevelopment, as part of urban renewal projects
Join forces with partners to advance businesses
that add value to urban areas
Optimize energy provision for entire urban districts andprovide hardware, software, services, networks, IT
systems and other building-related requirements
Examine the establishment of a group specialized
in this field20
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5. Example of “New Era Lifeline Support Solutions” (4)Strategic Outsourcing Business
Leverage expertise in information systems and social
infrastructures
Comprehensive support forcustomers’ business operations

Expertise
IT systems operation services

Knowledge

Shared services

Technology

Financial services

Facilities

Private finance initiatives (PFI)21
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5. Example of “New Era Lifeline Support Solutions” (5)Mu-chip (the world’s smallest RFID IC) Solutions(Tracking capability)
Management Systems
ASPWeb ServerID ManagementCenter

Mu-chip
Home ApplianceInternetProduction
Management

TrackingUse management

EC・送運○・・Manufacturers

Distributors

Consumers

CRM, Emergency response …
22
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5. Example of “Global Products Incorporating Advanced Technology” (1)Hard Disk Drive Business
HGST

Unrivaled R&D Capabilities
1500

Comp. YA strong R&D teamComp. Z

Ownership of roughly 40% of all HDDrelated patents in the U.S.

1000

Promoting use of next-generation
technologies (perpendicular magneticrecording, etc.)

500

A Full-Lineup of HDDs
HGST3.5”(for servers)3.5”(for desktop PCs)
2.5”
1.8”
1.0”

○○○
○
○0

No. of R&D Staff Members

Companies
Company C Company D Company E
A and B○○
××××○
×××××○
○×○×
○
××
23

HGST：Hitachi Global Storage Technologies, Inc.
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5. Example of “Global Products Incorporating Advanced Technology” (2)Automotive Equipment BusinessEngine Management System Business
Reinforce the advanced engine management system business, leveraging strengths
in engine combustion analysis and simulation technologies, as well as in systemdevelopment capabilities made available in partnership with Hitachi Unisia
Automotive, Ltd., in order to alleviate environmental problems through better fueleconomy and lower emissions

Electric Powertrain Management System Business(motors, inverters, batteries, etc.)

Steady launch of business activities to meet the forecasted take-off of this market in2006 and thereafter

Driving Control System Business(Brakes, Electric Power Steering systems, etc.)

Reinforce businesses in conjunction with Hitachi Unisia Automotive, Ltd. in thefield of total vehicle driving control technology, including brakes and electric
power steering systems

Car Information System Business
Provide total solutions ranging from hardware to services, including wide-area
telematics
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24

5. Example of “Global Products Incorporating Advanced Technology” (3)Semiconductor Production Equipment Business
Adopt a comprehensive approach that taps the technologicalstrengths of all Hitachi Group companies

Semiconductor Production Equipment Steering Committee
Front-end
Oxidization,
Ion implantation

Lithography

Filmformation

Back-end
Etching,Ashing

Parametrictest

Mounting,
Bonding

Molding,MarkingFunctiontest

Yield improvement support
Production support systems

25
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5. Example of “Global Products Incorporating Advanced Technology” (4)Battery Business

Hitachi’s Strengths

Materials
Processing

Mobile devices,

Lithium-ion
Batteries

Eco-vehicles,
etc.

ControlHome network
systems,

Power train
Surface mounting

Miniaturization

Fuel Cells

Distributive
power systems,
etc.

26
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5.Approximate Outlook for Growth in Targeted and New Businesses
ProfitabilitySystems
integrationandservices

Outsourcing
Urban redevelopment

SAN/NAS storage solutions

Biomedical

HDD
Automotive equipment

Reinvestmentof Resources

Energy300 billion yen

Withdrawal

Unprofitablebusinesses

600 billion yen

Sales

Businesses withfew synergies
27
All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Contents

1 The Vision Behind “ i.e.HITACHI Plan II ”
2 The Goals of “ i.e.HITACHI Plan II ”
3 Key Measures of “ i.e.HITACHI Plan II ”
4 Specific Actions of “ i.e.HITACHI Plan II ”
5 Examples of Targeted Businesses
6 Conclusion
28
All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

6. Conclusion
Additional Reforms Directed at Transforming Hitachi
Into the “Best Solution Partner”“i.e.HITACHI Plan II”“New Era Lifeline
Support Solutions “Global Products Incorporating
Advanced Technology””

29
All Rights Reserved, Copyright（C） 2003, Hitachi, Ltd.

Cautionary Statement
This document contains forward-looking statements which reflect management's current views with respect tocertain future events and financial performance. Words such as "anticipate," "believe," "expect," "estimate,""intend," "plan," "project" and similar expressions which indicate future events and trends identify forwardlooking statements. Actual results may differ materially from those projected or implied in the forward-looking
statements and from historical trends.
Further, certain forward-looking statements are based uponassumptions of future events which may not prove to be accurate.
Factors that could cause actual results to differ materially from those projected or implied in any forwardlooking statements include, but are not limited to, rapid technological change, particularly in the Information &Telecommunication Systems segment and Electronic Devices segment; uncertainty as to Hitachi's ability tocontinue to develop products and to market products that incorporate new technology on a timely and costeffective basis and achieve market acceptance; fluctuations in product demand and industry capacity,
particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and DigitalMedia & Consumer Products segment; increasing commoditization of information technology products, andintensifying price competition in the market for such products; fluctuations in rates of exchange for the yen andother 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 access to liquidity or
long-term financing, particularly in the context of restrictions on availability of credit prevailing in Japan;
uncertainty as to Hitachi's ability to implement measures to reduce the potential negative impact of fluctuationsin product demand and/or exchange rates; general economic conditions and the regulatory and tradeenvironment of Hitachi's major markets, particularly, the United States, Japan and elsewhere in Asia, including,
without limitation, continued stagnation or deterioration of the Japanese economy, or direct or indirect
restriction by other nations of imports; uncertainty as to Hitachi's access to, or protection for, certain
intellectual property rights, particularly those related to electronics and data processing technologies; Hitachi'sdependence on alliances with other corporations in designing or developing certain products; and the market
prices of equity securities in Japan, declines in which may result in write-downs of equity securities Hitachiholds.
These factors listed above are not exclusive and are in addition to other factors that are stated or indicatedelsewhere in this document, or in other materials published by the Company.