ANNUAL REPORT 2019
Hitachi Chemical Co., Ltd.

2018.4.1

2019.3.31

The Hitachi Chemical Group Identity

MissionContribute to society through the development of superior
technologies and products.

Founding Spirit“Pioneering Spirit”, “Sincerity”, “Harmony”

VisionWith a pioneering spirit to explore uncharted areas, wedevelop innovative solutions beyond the boundaries
of chemistry, delivering “wonders” that exceed the
expectations of customers and society.

CONTENTS
Introduction

03 Hitachi Chemical’s Challenges andOur Initiatives

History
At a Glance

09 Management Strategy

Our Strategy

15 Value Creation Process
17 Strategy Development Process
19 Materiality
21 10-year Strategy
23 Review of the 2018 Medium-termManagement Plan

25 Formulation of the 2021 Medium-termManagement Plan

01

29 Information and Communication
31 Mobility

05 Highlights of Fiscal Year 201807 Trends in Management Indicators

Top Message

29 Initiatives of Key Businesses

33 Energy
35 Life Sciences

37 Environment
38 Diversity & Inclusion
Governance

39 Corporate Governance
43 Compliance / Risk Management
45 Board of Directors

Please refer to the corporate website for additional information not contained in this Annual Report.

www.hitachi-chem.co.jp/english
Investors Relations

News releases, presentation materials,
stock information, financial section , etc.

CSR Information

Hitachi Chemical Group
Annual Report

Sustainability initiatives and activity
results, GRI content index, etc.

Surpassing conventional common sense and going beyond
the field of conventional chemistry, our quest to create
new “wonders” will be continued to fulfill the dreams ofcustomers and society.
“Working On Wonders” is Hitachi Chemical’s declaration to continue creating wonders through the development ofinnovative technologies and products for customers, shareholders, business partners, and local community members.

Organizations Covered

Editorial Policy

Hitachi Chemical Co., Ltd., its 89 consolidated subsidiaries and 2 equity-method associates andjoint ventures (a total of 92 Hitachi Chemical Group companies). (As of the end of March 2019)
When referring to Hitachi Chemical Group as a whole, the terms “Hitachi Chemical,” “the Hitachi
Chemical Group,” “the Group,” and “consolidated” are used. The terms “the Company” and “nonconsolidated” refer to Hitachi Chemical Co., Ltd.

This report is published to help various stakeholders, including shareholders
and investors, understand our activities aimed at fulfilling the Hitachi ChemicalGroup Vision. It is an integrated report covering mainly information from theyear under review, such as our management strategy and business activities
including initiatives for sustainability.
We are progressing with activities based on a new medium-term management
plan from fiscal year 2019 to its end in fiscal year 2021. Upon formulating the2021 Medium-term Management Plan, we conducted another materiality
analysis, reviewed the 10-year Strategy targeting fiscal year 2025, and lookedback on the 2018 Medium-term Management Plan that we had been working
on since fiscal year 2016. This report will introduce Hitachi Chemical’s thoughts
behind the strategy to provide value to society and stakeholders on a mediumto long-term basis and how the results of this were used in formulating the2021 Medium-term Management Plan.
We would be delighted to hear your opinions after reading this report.

Reporting Period
Fiscal year 2018 (April 1, 2018 to March 31, 2019)
This report also contains information regarding events of particular importance that have occurredprior to or after fiscal year 2018. Please note that “fiscal year” and “FY” refer to accounting years
starting on April 1st and ending on March 31st of the following year.

Guidelines Consulted
International Integrated Reporting Council (IIRC) Integrated Reporting Framework
Ministry of the Economy, Trade and Industry Guidance for Collaborative Value Creation
GRI Sustainability Reporting Standards
Ministry of the Environment of Japan Environmental Reporting Guidelines (2012 edition)

Forward-looking Statements
In addition to information of material fact regarding the past and present activities of Hitachi
Chemical, this report contains forward-looking statements concerning future plans and forecasts.
Forward-looking statements are assumptions and judgments based on information available atthe time of publication. Therefore, future results of business activities and events may differ fromforward-looking statements due to changes in a variety of factors.

Third-party Assurance ofEnvironmental and Social data

For GRI content index,
refer to the Hitachi Chemical website
GRI Content Index

About Hitachi Chemical CSR

For a third-party assurance report,
refer to the Hitachi Chemical website
Third Party Assurance Report

About Hitachi Chemical CSR

In order to enhance the credibility of the environmental and social data we disclose on our CSR website, we have engaged KPMG AZSA Sustainability
Co., Ltd. to provide assurance as a third party in respect to some environmental and social data (energy consumption, greenhouse gas emissions,water consumption, VOC emissions, accident frequency rate, accident severity rate, and number and proportion of female managerial positions).

Annual Report 201902

Introduction

Hitachi Chemical’s
Challenges and History(billion yen)

600

Since its foundation in 1912, Hitachi Chemical has created numerous products and technologies
that have solved problems for customers and the society and has continued taking on thechallenge of cutting a path for the age. Hitachi Chemical creates new value through innovationin its four key business domains, seeks to realize its vision for 2025, and to contribute to thedevelopment of society.

400

1962

Hitachi Chemical Co., Ltd. was established
The Chemical Products Division of Hitachi, Ltd. became independent
and was established as Hitachi Chemical Co., Ltd. on October 10, 1962.
Inaugural President Sanshiro Fujikubo took up the new challenge, saying,“Now is the ideal opportunity for launching a business. Chemicals industry
has the most potential for the future and you can expect diversified
development from our company after a few years of struggling.”

200

Revenue
Note: Consolidated from FY1977 onwards
Data based on IFRS has been used from
FY2013 onwards

First Oil Shock

Plaza Accord

1973

1985

0

1912

1962

FoundedIndependent

1980

1912

1974

Started researching electrical insulating varnishes

Started manufacturing pharmaceutical, MS-antigen

Hitachi Chemical started research to
become the first domestic producerof insulating varnishes for motors
indispensable for electronic products.
Became one of Hitachi Chemical’s
upstream products. Currently, widely inuse, including in motors for electronic
vehicles.

Hitachi Chemical started pharmaceutical
R&D as a new division in 1967. In 1972,
it acquired approval to produce MSantigen, an agent for allergic diseases,
and entered the pharmaceuticals sector.
Later, successor drug MS-antigen 40
contributed to the treatment for tens of
thousands of people each year.

1933

1978

Trial manufacture of carbon brushes

Started selling photosensitive dry film of alkali-based
solvents

Following insulating varnishes, led to thedevelopment of carbon brushes used
to deliver electricity into motors, a mass
production system was establishedthree years after trial production. Usedin bullet trains, vehicles, and wind power
generators among others.

1955

A printed wiring board material for
PCs, mobile devices, etc. At the time,organic solvents developers were themain type of photosensitive film but
Hitachi Chemical developed alkalinedevelopment photosensitive film as it
was more friendly on the environment.
The development method was highly regarded for is ability to provide
highly detailed wiring patterns and greater safety.

Started manufacturing copper-clad laminates for
multilayer PWBs

1984

Hitachi Chemical succeeded in
integrating complex wiring into a copperclad laminate by utilizing the printed
wiring method as a replacement for
manual wiring and soldering of copper
wires. This enabled the mass productionof electronic circuits and contributed tothe spread of TV and radio sets.

03

1970

Started manufacturing anisotropic conductive films fordisplays
Hitachi Chemical developed anisotropic
conductive films with the then revolutionary
characteristics of anisotropic conductive
film for LCD circuit conduction where solder
was used. This enabled the high-volume
production of LCDs with high picture quality.

681

billion yen

2015

Formulated
10-yearStrategy(FY2016-FY2025)

The 2021 Medium-termManagement Plan
Policies by business
Functional Materials
Information and Communication
Provision of materials-based solutions
that cannot be copied by competitorsand establishment of a strong
brand in the field of semiconductor
packaging business

Advanced Components and Systems
Mobility
Provide high-value-added solutions
for customers’ issues by leveraging
our strengths as a component
manufacturer capable of developing
proprietary materials and strengthen
our earning capability

EnergyUse individual characteristics ofglobal bases to shake up the productmix and build a shared foundation of
manufacturing capability

Collapse ofJapan’s economic
bubbleCollapse of
dot-com bubble
in the U.S.

Global financial
crisis

1991

2001

2008

1990

2000

Life Sciences
Create synergy with operatingcompanies acquired throughM&A and develop future base forbusinesses

2010

2018 20192025

Present
For Hitachi Chemical Group’s history,refer to the Hitachi Chemical website
About Hitachi Chemical Corporate Profile
Brief History

1998

2008

Started high-volume production of carbon anodematerials for lithium-ion batteries

Started manufacturing allergy diagnostic reagents for
simultaneous measurement of 33 items

As demand for mobile devices grewsignificantly, Hitachi Chemical developed
anode materials using artificial graphite
at a time when expectations of greater
performance for lithium-ion batteries werearising. This made accelerated charging
and discharging and longer battery life
possible.

Hitachi Chemical made it possible to performa simultaneous test for many allergens froma single blood sample. This reduced burden
on patients to provide blood samples, visiting
hospitals for treatment, and shortened
diagnosis time.

2010

1998
Started manufacturing CMP slurry for STI (shallow trench
isolation)
Hitachi Chemical developed originalcerium oxide particles that self-destructwhile polishing and an auto-collapse
mechanism that appears in a process
following high planarization used inconcave-convex polishing of wafers inthe semiconductor production process.

Started operating lead-acid batteries for wind power
generation
Hitachi Chemical developed a lead-acidbattery with a long life that can handle sudden
fluctuations in electricity output due to strong
or weak wind speed and endure irregular andfrequent charging and discharging cycles.
This contributed to the successful operation ofJapan’s first wind power station with outputpower stabilization control.

2017

2001
Started manufacturing molded plastic rear door modules
Hitachi Chemical succeeded in manufacturingmolded plastic rear door modules for the
first time in Japan, where such modules had
been conventionally made of metal. Reduced
burden on the environment by making thedoors lighter and enabled support for various
designs by improving material flexibility.
* Sample of molded plastic rear door

Started production development and contract manufacturingof regenerative medicine products
Hitachi Chemical started production
development and production of regenerative
medicines in a sterile manufacturing
facility with a quality control system oncontract from pharmaceutical companies
and research organizations. This has
contributed to the progress of constructing
a global supply system and the spread ofregenerative medicine.

Annual Report 201904

Highlights of Fiscal Year 2018

Highlights of Fiscal Year 2018
Established JOINT Consortium
Providing Comprehensive Solutions for
Semiconductor Packaging

production of semiconductor packaging, and by promoting open
innovation among the companies participating in the consortium,
we will solve customers’ issues and contribute to technologicalinnovations in semiconductor packaging development.

Hitachi Chemical established the Jisso Open Innovation Networkof Tops (JOINT) in fiscal year 2018 with 15 companies involved
in development of semiconductor packaging, materials, andequipments, starting activities with the Packaging Solution Centeras its base.
Speed is required in semiconductor development, and thisconsortium* helps customers cut workload and time by providing
comprehensive solutions from the development of cutting-edge
packaging technologies through to the packaging process byusing the materials and equipments possessed by the participatingcompanies.
JOINT enables Hitachi Chemical and other companies towork together by pooling their technologies and information foruse in accordance with the development theme. By promptly
providing comprehensive solutions such as optimal combinationsof the various types of materials and processes needed for the* Generally, a consortium involves participating companies, organizations, and other actors
to jointly act towards a specified theme or objective by providing each participant’s assets.
JOINT, though, is managed by Hitachi Chemical and uses our Packaging Solution Center
while promoting projects that utilize materials and devices from the participating companies.

the logo mark of JOINT consortium

104% of previous
year’s level* Applicable period: 3 years between 2015-2017
Eligibility: Top 100 Japanese companies, universities, and other organizations with thelargest number of international patent applications

Revenue and number of employees by segment

Advanced
Components andSystems Segment

388.2 billion yen

According to an announcement by the World Intellectual Property
Organization Japan Office in April 2018, Hitachi Chemical had thehighest ratio of women named as inventors in international patentapplications by Japanese companies* at 43.6%.
Hitachi Chemical has long systemized education about
intellectual property, strived to enhance employees’ IP mindset
and literacy, advanced active application for patents, andacquisition of rights to enhance our competitive edge. Moreover,
diversity and inclusion are positioned as important management
strategies, and structures have been set up to enable diverse
human resources to thrive. Going forward, we will increase theGroup’s competitiveness through these initiatives to achievesustainable growth in global markets.

Packaging Solution Center

FY201857.0%

Securing Top Position Among JapaneseCompanies for the Highest Share of Women
Named as Inventors in International Patent
Applications

Functional
Materials Segment

Revenue

681.0

43.0%

65.8%

292.8 billion yen
99% of previous
year’s levelbillion yen

Operating income

Advanced
Components andSystems Segment

15,130 people
101% of previous
year’s level

Operating income

0.5 billion yen

36.9 billion yen

83% of previous
year’s level

79% of previous
year’s level

Number of
employees

22,989peopleFunctional
Materials Segment

34.2%
7,859 people
104% of previous
year’s level

Main products and the overview of fiscal year 2018 of each segment
Segment

Functional
Materials

Major Products

92.5 billion yen

Electronic
Materials

Epoxy molding compounds, diebonding materials, CMP slurry(96% of previous year’s level)

Inorganic
Materials

Carbon anode materials and anodematerial for lithium ion batteries(112% of previous year’s level)

Resin
Materials

Functional resin, anisotropic
conductive films for displays

PrintedWiring Board
Materials
Others05

Revenue

Copper-clad laminates,
photosensitive dry films
Sales and services

34.3 billion yen
58.5 billion yen(94% of previous year’s level)

80.0 billion yen

Segment

Major Products

Revenue

141.7 billion yen

Automotive
Components

Plastic modeled products, friction
materials, powder metal products(100% of previous year’s level)

EnergyStorage
Devices andSystems

Automotive batteries, industrial
batteries(102% of previous year’s level)

Advanced
Components Electronic
and Systems Components

Printed wiring boards

180.2 billion yen
41.9 billion yen(99% of previous year’s level)(96% of previous year’s level)

27.5 billion yen(110% of previous year’s level)

OthersDiagnostic reagents and devices

24.4 billion yen(199% of previous year’s level)At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

The Stock Acquisition of apceth BiopharmaGmbH, a Contract Manufacturer of Regenerative
Medicine Products

Hitachi Chemical will also construct a framework that assures thetimely manufacture and shipment of uniform quality products ineach region to our pharmaceutical manufacturing customers who,
in turn, sell their products globally.

Hitachi Chemical concluded a contract in January 2019 to acquire
all the shares of apceth Biopharma GmbH in Germany. apceth
Biopharma, which has made regenerative medicine products
on contract for European and American pharmaceuticals
manufacturers, has a track record of manufacturing various
regenerative medicine products for investigation, including cancer
immunotherapy cell, iPS cell, and mesenchymal stem cell. This
stock acquisition allowed
Hitachi Chemical Groupto construct a framework
for manufacturing andsales of regenerative
medicine products in
Europe in addition to its
existing businesses inJapan and the United
A cleanroom at apceth Biopharma GmbH
States.

In Regards to Inappropriate
Product Testing of
Hitachi Chemical Products
P.43-44

Number of
consolidated
subsidiaries

Others

19.9%

9.3%

135.8 billion yen

43.1%* Systems that prevent accidents by detecting the vehicle’s surroundings through sensors
mounted on its front, sides and rear.

Revenue and number of employees by region

OthersAsia (excluding Japan)

Hitachi Chemical is building a new factory in Taiwan that will start
the manufacture of advanced functional laminate materials forprinted wiring boards in April 2020. Advanced functional laminate
materials for semiconductor packaging substrates are used invarious fields, including next-generation wireless communication
technology(5G), advanced driver-assistance systems (ADAS)* andartificial intelligence (AI), and their demand is expected to growgoing forward. Hitachi Chemical decided to invest approximately
7.5 billion yen in establishing a supply system in Taiwan, thebiggest demand center for its products.

Hitachi Chemical offers its deepest apologies for having caused considerable inconvenience andconcern to our customers, shareholders, and all other persons concerned after it was came to lightduring fiscal year 2018 that inappropriate product testing, etc., of certain products had taken place.
Hitachi Chemical will strengthen the Group’s governance and strive to improve its quality control system
while doing everything in its power to regain the trust of stakeholders.

FY2018103% of previous
year’s level

Building a New Factory in Taiwan to
Manufacture Advanced Functional Laminate
Materials for Printed Wiring Boards

Revenue

681.0
billion yen

37.0%

251.6 billion yen
101% of previous
year’s level

293.6 billion yen

Hitachi Chemical reorganized its businessheadquarters on April 1, 2019 for management
structure corresponding to its key businessdomains.
This resulted in a revision of the segments to whichsome products belong.
This report categorizes these products by using
actual results from original categories until fiscal
year 2018 and changes to use the revised segment
targets from fiscal year 2019 onward.

Japan

108% of previous
year’s level

Asia (excluding Japan)

49.4%

Number of
employees

41.3%

people100% of previous
year’s level

22,989Japan

9,499 people

Others

102% of previous
year’s level

Before the review

30

companies

Business Category
Electronic Materials
Inorganic Materials
Resin Materials

Electronic Materials
Information andCommunication

Printed Wiring Board Materials

Printed Wiring Board Materials

Electronic Components

Automotive Components

Mobility

Mobility

Energy Storage Devices and Systems

EnergyLife Sciences

Life Sciences

Energy Storage Devices and Systems
Advanced
Components
and Systems

45

companies

After the review

Segment

Functional
Materials

14

companies

Asia(excluding
Japan)

11,355 people

102% of previous
year’s level

Revision of main products in businesssegments(As of March 31, 2019)

2,135 people

Japan

Electronic Components
OthersAnnual Report 201906

Trends in Management Indicators

Trends in Management Indicators
Revenue / Operating margin

ROIC*1 / ROE

The 2018 Medium-term Management Plan target

The 2018 Medium-term Management Plan target(Millions of yen)

800,000

Revenue
Functional Materials Segment
Advanced Components and Systems Segment
Operating margin

(%)

12.0

The 2018 Medium-termManagement Plan

600,000

9.0

400,000

6.0

(%)

ROIC

15.0

ROE
The 2018 Medium-termManagement Plan

12.0
9.0
6.0

200,000

3.0

0

0
2013

2014

2015

2016

2017

2018

3.0
0
2013

(FY)

Revenue increased slightly due to a higher demand for slurry forchemical mechanical planarization and carbon anode materials
for lithium ion batteries as well as the benefits of new mergers andacquisitions. Operating income decreased significantly due to factorsthat include the deterioration of our sales mix stemming from sluggish
growth of products used for smartphone applications, higher fixed
costs due to the launch of our regenerative medicine business,and expenses associated with the inappropriate testing of Hitachi
Chemical products, an issue that came to light in fiscal year 2018.

2014

2015

2016

2017

2018

(FY)

ROIC declined from 9.6% to 8.3% due to a decrease in income
before taxes caused by factors such as sluggish growth of products
used for smartphone applications. ROE also declined from 9.4%
to 7.0% due to insufficient synergic effects with newly consolidated
subsidiaries and expenses associated with the inappropriate
testing of Hitachi Chemical products. Under the 2021 Medium-termManagement Plan, we are emphasizing asset efficiency and returns
on assets with the target of strengthening ROIC management toimprove ROIC by 5% over three years.
*1 Percentage of adjusted operating income after tax against working capital and thebalance of fixed assets

Financial Data

FY2013

FY2014FY2015FY2016FY2017FY2018

488,725

526,687

546,468

554,144669,234

681,025

261,179

277,127

269,769

272,994

297,051

292,845

227,546249,560

276,699

281,150

372,183

388,180

Overseas share of revenue (%)

51.1

53.6

58.3

58.0

62.9

63.1

Operating income (Millions of yen)

36,353

Revenue (Millions of yen)
Functional Materials Segment (Millions of yen) *2

Advanced Components and Systems Segment (Millions of yen) *2

36,56929,22653,03653,152

46,219Operating margin (%)

7.5

5.5

9.7

9.6

6.9

5.3

Functional Materials Segment (%) *2

9.8

8.5

14.3

16.2

15.8

12.6

Advanced Components and Systems Segment (%)*2

4.8

2.3

5.2

3.1

0.2

0.1

Net income attributable to owners of the parent (Millions of yen)

29,464

22,58738,51240,18636,32428,723

Net income attributable to owners of the parent to revenue (%)

6.0

4.3

7.0

7.3

5.4

4.2

Return on equity (ROE)(%)

9.9

6.8

10.9

11.0

9.4

7.0

Return on invested capital (ROIC) (%)

8.1

8.9

12.8

12.6

9.6

8.3

Return on assets (ROA) (%)

6.2

4.4

7.1

7.0

5.5

4.1

Debt/Equity attributable to owners of the parent ratio (DER) (Times)

0.2

0.2

0.2

0.1

0.3

0.2

Dividend payout ratio (%)

25.4

33.2

27.0

28.5

34.4

43.5

R&D expenses (Millions of yen)

26,23426,92027,81628,16430,83932,608R&D expenses to revenue (%)

5.4

5.1

5.1

5.1

4.6

4.8

31,93526,64332,02239,85942,58952,517

Capital expenditures (Millions of yen)

36

36

50

55

60

60

Cash flows from operating activities (Millions of yen)

50,35734,00995,06960,81934,916

77,159Cash flows from investing activities (Millions of yen)

37,09922,25835,66334,60687,80247,397

Cash flows from financing activities (Millions of yen)

2,374

16,874

22,12336,47628,932

12,664

Cash and cash equivalents at fiscal year-end (Millions of yen)

87,652

88,997

119,988

107,649

84,037

101,292

Dividends per share (yen)

2: For detailed information on both segments, refer to p.05.

07

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

CO2 emissions per unit of sales (relative to FY2014)*3

Proportion of female managerial positions (under age of 45) *4

The 2018 Medium-term Management Plan target

The 2018 Medium-term Management Plan target

(%)

(%)

110

20
The 2018 Medium-termManagement Plan

The 2018 Medium-termManagement Plan

105

15

100

10

95

5

90

0
2014

2015

2016

2017

2018

2015

(FY)

2016

2017

2018

(FY)

The Hitachi Chemical Group achieved its fiscal year 2018 target of
CO 2 emissions of 96% (4% reduction relative to fiscal year 2014) bypromoting continued energy-saving activities Group wide. Under the2021 Medium-term Management Plan, the Hitachi Chemical Groupwill work together to further reduce CO 2 emissions based on Hitachi
Environmental Innovation 2050, adopted as the Hitachi Group’scommon framework to envisage a low-carbon society, and to achieve
long-term targets and expand activities from within Japan to global
scale.

Hitachi Chemical achieved its fiscal year 2018 goal for the proportionof females in managerial positions as a result of the promotion ofdiversity and inclusion being positioned as a management strategy
to build a competitive edge in addition to departmental training
plans through strong management leadership and proactively
advancing career recruitment. Mindsets about female employees andmanagement are changing. In April 2019, Hitachi Chemical appointed
its first female executive officer. From fiscal year 2019 onward, we will
strengthen initiatives to raise the ratio of women and non-Japanesenationals in management as a management target.

*3 Data covers major production sites in Japan.

*4 Non-consolidated, under age of 45

ESG Data *5

FY2013

FY2014FY2015FY2016FY2017FY2018

390.5

Revenue of Environmental Conscious Products (Billions of yen)

324.7

364.9

404.3

381.6

387.0

Environmental investment (Billions of yen) (major production sites in Japan)

0.62

0.61

0.50

0.67

0.56

0.69

Energy consumption (TJ) *6

8,630

9,369

8,497

10,312

10,446

10,276

495

541

482

590

592

578

1.43

1.40

1.32

1.41

1.23

1.25

-

100

99

101

96

96

10,97010,672

9,311

9,725

9,652

9,566

Volatile organic compound (VOC) emissions (Tons) *6

506

577

519

725 *7793 *7789 *7

Number of participants in chemical substance management training

710

374

400

460

304

1,095

Number of supplier audits (non-consolidated) (Companies) *8

89

73

137

162

147

215

Greenhouse gas emissions (1,000 tons CO2e) *6
Greenhouse gas emissions per production unit (Tons CO2e per million yen) *6

CO2 emissions per unit of sales (Percentage relative to FY2014) (%) *3
Water consumption (1,000m3) *6(Persons)

18,149 (7,530) 19,499 (10,207) 19,117 (9,920) 20,043 (10,922) 22,623 (13,158) 22,989 (13,490)

Number of employees (outside Japan) (Persons)

1.9

2.0

2.7

3.1

3.1

4.5

8

-

-

10

12

8

14

Proportion of female assistant managers (%) *8

2.6

3.8

2.9

2.6

4.2

3.7

Proportion of employees with disabilities (Japan, consolidated)

2.27

2.39

2.44

2.45

2.50

2.46

Accident frequency rate (Japan, consolidated)

0.34

0.09

0.10

0.15

0.20

0.24

Accident severity rate (Japan, consolidated)

0.003

0.001

0.007

0.001

0.012

0.010

Proportion of female managerial positions (%) *8
Proportion of female managerial positions (under age of 45) *

2,072

3,137

3,350

4,110

4,491

4,606

Number of patent applications (outside Japan) (Applications)

1,392 (727)

1,452 (651)

1,493 (576)

1,557 (642)

1,635 (860)

1,721 (990)

Number of patents held (outside Japan) (Patents)

4,988 (2,406)

5,501 (2,518)

6,429 (2,999)

6,870 (3,082)

6,710 (3,122)

6,800 (3,197)

Social contribution expenditure (Millions of yen)

103

107

138

159

263

171

8 (5/1/0)

9 (6/1/1)

9 (6/1/1)

11 (5/1/2)

11 (5/1/2)

10 (5/1/2)

Number of participants in compliance drill (Persons)

Number of Directors (including Outside/ Female/Foreign Directors) (Persons) *9*5: For the scope of the third-party assurance of environmental and social data, refer to p.02.
*6: Applies to major production sites (43 sites at 24 companies in FY2018). www.hitachi-chem.co.jp/english/csr/stakeholder/environment/plan-3rd.html*7 : The surveyed substances have been expanded from 41 substances to 77 substances.
*8: Non-consolidated basis.
*9: Non-consolidated basis. As of the end of July of every fiscal year, 9 persons (4/1/2) as of the end of July 2019.

Annual Report 201908

Management Strategy

We will enhance the quality of management
and business to provide value that society
and customers really require
President and Chief
Executive Officer

For an explanation of measures toprevent recurrence of inappropriate
product testing at Hitachi Chemical,
refer to P.43-44

For information on the 2018 Mediumterm Management Plan, refer to
P.23-24

For details on where we want to be in 10
years’ time, “A global innovation provider
that goes beyond the boundaries ofchemistry, with advanced functional
materials as core and extending todevices, systems and services” refer toP.21-22

09

In fiscal year 2018, it has come to light that
inappropriate testing has been conducted
on Hitachi Chemical products. I would
like to take this opportunity to offer mysincere apologies once again to all our
stakeholders, including our shareholders,for the inconvenience and concern that thismay have caused.
Our mission at Hitachi Chemical
is “Contribute to society through thedevelopment of superior technologies andproducts.” We have stated the value of“Sincerity’ as one of our founding spirits,
and we have maintained that this is theorigin of our management based on basics
and ethics. The fact that an incident has
occurred in spite of this is a cause for deepreflection, and we will take decisive action
on measures to prevent its recurrence
and to ensure that same kind of situations
does not happen again. These include
a companywide change in awareness,eliminating compromises through a quality
assurance system that is independentof business divisions, and establishmentof a product testing-related systems thatremoves human involvement as much as
possible.

Overview of the 2018 Medium-termManagement Plan
Main Results of the 2018 Medium-termManagement Plan

Achieved global expansion
and strengthening of strategic
businesses

Under the 2018 Medium-term Management
Plan (FY2016–FY2018) we adopted two
basic policies: “strengthen global business”
and “strengthen management base,”
toward realizing where we want to be in 10
years’ time (FY2025).
Looking at our results under the firstpolicy, “strengthen global business,”At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

we have three main achievements.
We strengthened and expanded thesemiconductor packaging materials
business based on the niche and cluster
strategy , we promoted the open innovation
strategy, and we achieved dynamic, noncontinuous growth through M&A.
With regard to the first achievement—theniche and cluster strategy—we exercised
our comprehensive strength by forming
groupings of several product families.
This positioned us to promote the cluster
strategy for expanding our global, top
market share businesses and the niche
strategy, where we promote businesses
that have high profitability and a strong
growth rate despite a small scale, enablingthem to contribute to earnings. To startwith the cluster strategy, in January 2019
we relocated and opened the Packaging
Solution Center in Kawasaki City. Using thisas a base, we developed comprehensive
solutions in the field of semiconductor
packaging materials by collaboratingwith other companies and succeededin expanding our market share. With
regard to the niche strategy, our CMP
slurry (nanoceria) which can achieve finecircuit formation in semiconductor devices
has ridden on top of a semiconductor
technology innovation wave and increased
its market share, while anisotropic
conductive films for displays for displays
has also maintained a high market share
due to its technological capabilities.
For the second achievement—Open
Innovation strategy—in addition to the
Packaging Solution Center mentioned above,
we have also established a new Innovation
Center in a building adjacent the Tokyo Head
Office. Through the Center, we promote
communication with customers and otherpeople outside the company, explore new
innovation themes, and work to realize them.
We also have an existing partnership with a
US venture capital company, under which
we acquire and evaluate information on thelatest technologies and products. A notable
result of this was the 2016 in-licensing ofquantum dot (QD) film technology, whichenables vivid, colorful images to be shownon displays, from US Nanosys Inc. Basedon this technology, we developed QD
film, which was adopted last year by a US
manufacturer for 4K TV displays. This has
started to contribute to sales expansion.

This example shows how collaboration
with external companies enabled us toachieve commercialization of a cutting-edge
technology in a shorter time. We believe it
will lead to further developments in Open
Innovation.
In our third achievement—M&A—
we conducted several M&A, primarily inthe field of Advanced Components andSystems. This has enabled us to expand
our business scale globally. In particular, along-cherished ambition of the Group has
been the acquisition of a business basefor development and manufacturing inEurope. Fulfilling this ambition is a big step
toward raising the global position of ourbusiness. In the life science-related field,
where growth on a long-term perspective
is expected, we have managed to enter
regenerative medicine field as a new
business in addition to the diagnostic
reagent and system business.
Looking at our achievements in regard
to the other basic policy, “strengthen
management base,” in the Group’sbusiness activities, we introduced asystem for conducting financial analysis
by product, region, and customer, alongwith a system for sharing human resource
information throughout the entire Group.
This has enabled us to visualize ourmanagement information globally andto carry out detailed data analysis. As
the diversity of management decisionmaking becomes increases, the speed ofdecision making has also accelerated. We
have also strengthened internal controls
at regional headquarters in the US andChina. Furthermore, in the 2018 Mediumterm Management Plan, we set numericaltargets for reduction of CO2 emissions
and promotion of career opportunities for
women, both of which we achieved.
Points for Reflection in the 2018 Mediumterm Management Plan

Delayed response to the external
environment caused profitability tofall short of the target

Looking at points for reflection, the first isthat we were too slow to respond to theexternal environment. In particular, in the
Functional Materials Segment, we were
too slow to breakaway our reliance on
the smartphone business and profitability
deteriorated significantly due to a sharp
downturn in demand during the second

For details about the Packaging
Solutions Center, refer to
Hitachi Chemicals website About
Hitachi Chemical News release
Jan. 12, 2017:
Relocating and Upgrading theOpen Laboratory that Promotes
Open Innovation for Semiconductor
Packaging Materials and Processes

For details about the Innovation Center,
refer to Hitachi Chemicals website
About Hitachi Chemical News release
Jan. 27, 2017:
Opening of the Innovation CenterA place to identify new themes andapproaches to drive innovation withpartners

Nanosys,Inc.
Jason Hartlove, CEO, Nanosys, Inc.
(Head Office: California, U.S.)

For details on quantum dot (QD) film
technology, refer to
Hitachi Chemicals websitel About
Hitachi Chemical News release
Dec. 26, 2016:
Launching mass production and salesof quantum dot film that realizes a wider
color gamut in 4K and 8K TVs

Annual Report 201910

Management Strategy

For information on the 2021 Mediumterm Management Plan, refer toP.25-28
For the 10-year Strategy, refer toP.21-22.
For information on Materiality, refer toP.19–20.

The 2018 Medium-termManagement Plan
Key Performance
Indicators*1 Numerator: Revenue minus costof sales and selling, generaland administrative costs;
Denominator: Revenue*2 Ratio of adjusted operating
income after tax to working
capital and fixed assets*3 Per unit of revenue comparedto FY2014 results (for major
production sites in Japan,
including Group companies)*4 Non-consolidated, among
employees aged up to 45

11

half of fiscal year 2018. Internally, we had asense caution regarding our dependence
on smartphones for some time, and we
had been strengthening our initiatives ingrowth markets such as next-generation
wireless communication technology (5G)
and electric vehicles (EVs). However, thedeceleration of the smartphone market
was sharper than we had expected, andour response lagged. Hitachi Chemical has
adopted strategies to stabilize its earnings
capability, in which we provide wide
range of products with different businesscycles to form an earnings base that is
not susceptible to economic fluctuations.
However, under the 2018 Medium-termManagement Plan we were unable to makethese strategies work effectively. Also wewere slow to respond to increasing prices
for raw materials, particularly in the energy
storage devices business.
On the management front, as I
mentioned at the start, the revelation of
inappropriate product testing has greatly
damaged the trust that stakeholders placedin us , and this is the largest point forreflection. Reliably implementing measures
to prevent its recurrence is our top priority.
Furthermore, in the 2018 Medium-term
Plan, we set a policy of realigning ourbusiness portfolio in light of rapid advancesin commoditization of products, andwe aimed to make a shift to a businessstructure with higher profitability. However,the creation of new high value-added
products has been delayed, and the results
have been lower than expected.
While we achieved good results in
expanding our business scale under the2018 Medium-term Plan, we were unable
to keep pace with the rapid changes in
the market environment, and in the final
fiscal year of the plan our operating margin,
ROIC (return on invested capital), andFY2018 target

FY2018 result

Revenue

CAGR 7-8 %(FYs2015-2018)

CAGR

Adjusted operating
income ratio*1

11%

7.1%

ROIC*2

15 %

8.3 %

ROE

12 %

7.0 %

CO 2 emissions*3

96 %

96 %

Proportion of female
managerial positions*4

12 %

14%

7.6 %

ROE (return on equity) were all significantly
lower than our targets. The management
team and I have a real sense of crisis in
this regard, and in the 2021 Medium-termManagement Plan, we will act decisively
with determination.

The 2021 Medium-termManagement Plan
Basic Policies of the 2021 Medium-termManagement Plan

Improve the quality of management
and business
For the 2021 Medium-term Management
Plan (FY2019–FY2021) we reviewed the
10-Year Strategy formulated in 2015,
based on the reflection points for the2018 Medium-term Management Plan
and added materiality (key issues forsustainable growth with society), merging
these together to formulated basic policies.
The first basic policy is to “strengthen
governance at the global level,” which
consists of rebuilding the compliancesystem based on the incidences of
misconduct and strengthening Group
governance. The second is to “establish
a high-profit base,” which consists ofexpansion of top market share businesses,
accelerated creation of new businesses andproducts, and a new challenge to rebuild aglobally advanced cost structure.
Under the 2018 Medium-termManagement Plan, we achieved an
expansion in scale (revenue), but we missed
our profit target by a large margin , andwe need to steadily increase our earning
capability. Therefore, we will position the2021 Medium-term Management Plan asa stage for improving the quality of the
management and business bases that we
expanded under the 2018 Medium-termManagement Plan. In line with this, we will
work to pave the way for achieving thegoals of the 10-Year Strategy.
Strengthening Governance at the Global
Level

We will become a company trusted
by the society and our customers,that never repeat incidences of
misconduct
The top priority in “strengthening
governance at the global level” is to regain
the trust of our customers and society. With
regard to the misconduct of inappropriate
product testing and preventing its

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

recurrences, all our employees are working
as one, steadily executing measures in both
hard and soft aspects to ensure that suchan incident never happens again. In thesame way, the entire Company is making
a concerted effort on measures to protect
employees’ safety and health.
Regarding the strengthening ofGroup governance, we are promoting
countermeasures since risks increase
with the growth in the number of Group
companies. By expanding the Groupbusiness scale through M&A during the2018 Medium-term Management Plan, thenumber of subsidiaries has expanded to89, out of which 75 locate overseas. We
aim to reduce the risk by discerning therole of each company and appropriately
reorganizing them.
Furthermore, we will continue to establish
a structure that enables risk controls of
the Group companies by their respective
regions. In North America and China, wewill strengthen our auditing system basedon the regional headquarter functions that
we have put in place and reinforce thestructure for autonomous risk management
by Group companies. In ASEAN and the
newly entered European region, over the
next three years, we will build the samekinds of systems that we have in North
America and China.
Establish a High-profit BaseWe will apply our core technologies,
namely materials, process, andevaluation technologies, in highgrowth markets to establish a highprofit baseBased on the falling profit level in fiscal
2018, we see the rebuilding of a high-profit
base as our top priority. As a result of muchinternal discussion, we have concluded that
we need a business strengthening strategy
that is based on our strengths in business.
Hitachi Chemical’s strengths lie in its
materials technologies, process technologies,
and evaluation technologies, which havebeen developed over its long history andhave been used to create new functions
from either organic or inorganic materials.
We have grown by applying these functions
to the growth markets of each period. The
growth markets over the coming years
are expected to include 5G and EVs. We
will establish systems that enable Hitachi
Chemical to apply its diverse technologies

Strengthen governance at the global level

Basic Policiesof the 2021
Medium-termManagement
Plan

Rebuild compliance systems
Strengthen Group governance
Establish a high-profit base

Expansion of de facto top share businessAccelerated creation of new businesses and products
New challenge to rebuild globally-advanced cost structure

Policies for Individual Business Fields
Information andCommunications

Provision of materials-based solutions that cannot be copied bycompetitors and establishment of a strong brand in the field of
packaging solution business

Mobility

Provide high-value-added solutions for customers’ issues byleveraging our strengths as “a component manufacturer capable ofdeveloping proprietary materials” and strengthen our profitability.

EnergyUse individual characteristics of global bases to shake up the
product mix and build a shared foundation of manufacturing
capabilityLife Sciences

Create integrated synergy with operating companies acquired
through M&A and develop future base for businesses

to arising growth markets with the changes
in the times. By becoming a company thatcan provide solutions to any materials-related
issue when customers or society consultswith us, Hitachi Chemical will be recognized
as a company that plays a vital role in society.
It is this recognition that will underpin theestablishment of a high-profit base, and I
believe it is essential to our continued growth
going forward.
Based on this thoughts , we will steadily
execute three strategies: “Expansion of defacto, top share business”, “Accelerating thecreation of new businesses and products”,“New challenge to rebuild globallyadvanced cost structure”.

For policies, performance, and plans ofeach business, refer to P.29-36.

Expansion of De Facto, Top Share BusinessWe will aim to expand market shareby providing proprietary solutions
that are aligned with market needs

Under the 2021 Medium-term Management
Plan, we will continue to pursue the policiesof the niche & cluster strategy that we
worked on during the 2018 Medium-termManagement Plan.
In terms of the cluster strategy, we haveestablished a consortium called “JOINT,”
based in the aforementioned Packaging
Solution Center. By collaborating withcustomers, equipment manufacturers
related to development of semiconductor
packaging materials and equipment, andmaterial manufacturers, the consortium
will achieve optimal combinations of theAnnual Report 201912

Management Strategy

various materials and processes needed for
manufacturing semiconductor packaging
and rapidly provide total solutions, such as
new semiconductor packing, to customers.
Furthermore, in the automotive field, where“CASE” (Connected, Autonomous, Shared,and Electric) has become an important
theme for the future of the automotive
industry, we will provide solutions thatincorporate differentiation in materials,
process technologies, analysis and design
technologies, and modularization.
Meanwhile, under the niche Strategy,
we will consolidate the unrivalled positionof our high-value-added products in eachindustry, aiming to achieve an even stronger
de facto standard status for them. These
products, such as CMP slurry, QD film, andcircuit-connecting film for displays, havehigh profit margins and growth rates thatcan be expected to contribute to earnings.
Accelerated Creation of New Businesses
and Products

We will create new businesses andproducts in fields where strengths
can be leveraged

The 2021 Medium-termManagement Plan Key
Performance Indicators

With regard to the creation of new
businesses and products, under the 2018
Medium-term Management Plan, we
achieved a certain degree of diversification
through operationalization of regenerative
medicine among other activities. However,we were unable to achieve the expected
results in new fields where we have lessexperience. Therefore, under the 2021
Medium-term Management Plan, we
will focus even more intensely on fields
related to existing products and markets,
where Hitachi Chemical can leverage its
strengths, and accelerate creation of new
FY2018 result

FY2021 target

Adjusted operating
income ratio*1

7.1%

over

ROIC*28.3%

over

CO2 emissions*3(Compared to FY2010, per unit of revenue)

13% reduction

overRatio of diversity inmanagement*4

20 %

over

10%
13%
15%
30%

reduction*1 Numerator: Revenue minus cost of sales and selling, general and administrative costs; Denominator: Revenue*2 The ratio of operating capital and the balance of property, plant and equipment to adjusted operating income after deducting tax*3 (1) Aggregation scope: Major production sites in Japan and overseas (including Group companies)(2) CO2 emissions (compared to FY2010, per unit of revenue): FY2018 result 87% The 2021 Medium-term Management Plan
target 85% or lower*4 Numerator: Total number of foreign nationals and women in management within Hitachi Chemical Co., Ltd. and major Group
companies Denominator: Total number of management personnel within Hitachi Chemical Co., Ltd. and major Group companies.

13

businesses and products. Among theGroup ’s businesses, the fields that show
especially strong promise for high growth
are 5G, EV, new batteries, and medical.
We can contribute Hitachi Chemical’smaterial technologies to the technologies
that are needed in these growth fields. In
addition, we will search for development
themes where we can achieve bothadvanced functions and high added value,and concentrate management resourcesin these. Moreover, we will continue to
use open innovation through cooperation
with external organizations to accelerate
operationalization of the new businesses.
New Challenge to Rebuild Globallyadvanced Cost Structure

We will reinforce our businessstructure in terms of both stockand flow by realigning business andcustomer portfolios
With regard to cost structure reforms,
we will begin by reorganizing businesses
that have an operating margin of lessthan 5% in order to realign our businessportfolio. To deal with products that have
low profitability, under the 2018 Mediumterm Management Plan, products that did
not meet internal criteria for revenue scale,growth potential, and profitability wereplaced on watch, and those that showedno potential for improvement after a certain
time were withdrawn or sold. However,to date, this approach has only applied
to products with a small business scale,so it has not made a big impact in termsof improving the Group’s overall productcomposition. Under the 2021 Mediumterm Management Plan, we will lift theborderline operating margin for products
subject to low profitability countermeasuresfrom 3% to 5%, and decisively accelerate
our actions. Furthermore, as shown in theachievements during the 2018 Mediumterm Management Plan, we have madeprogress on visualizing global management
information and enabling detailed analysis
of marketing information. Therefore, wewill also proceed with realignment of ourcustomer portfolio.
Through these initiatives, we will improve
our operating margin, bringing it up to
the 10% level. In addition, by reforming
back-office operations and reducing thenumber of Group companies, we will
strengthen our management structure andAt a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

achieve further increases in profitability
and capital efficiency. Furthermore, underthe 2021 Medium-term Management Plan,
we will move away from managementbased income statement, which focuses
excessively on sales and profits, and adopt
ROIC as our key performance indicator.
ROIC shows whether the capital received
from shareholders is being converted
efficiently into profit. We will also strive toincrease our asset efficiency even more,aiming for a target of 13% or higher.
Investment Plan for Growth

We will focus investment in theinformation and communications field
The level of capital investment at Hitachi
Chemical remained between 30 billion
yen and 40 billion yen during the 2000s.
In the 2018 Medium-term Management
Plan, however, we announced cumulative
investments of 150 billion yen over thethree-year period, in addition investments in
M&A. The result was capital investments of
135 billion yen, and the addition of five newconsolidated subsidiaries through M&A.
Under the 2021 Medium-termManagement Plan, we aim to increase
cumulative capital investment over the threeyear period to 155 billion yen, and to focus
our investments mainly in the informationand communications field. With regard to
M&A, we will continue examining investment
options with a focus on the information andcommunications field, in which we made no
investments over the past three years, andwill look for the best opportunity to make an
investment. In other fields, we will prioritize
reinforcing the positions of the companies
that have already joined the Group andtaking advantage of their synergies.
Sustainability Initiatives

Through our initiatives for materiality,
we aim to contribute to the SDGs andincrease our corporate value
In undertaking sustainability initiatives,
I believe that the operations of Hitachi
Chemical must be environmentally friendly
and contribute to society. Hitachi Chemical
has advocated sustainable engineering, andhas actively worked to contribute to society
and the environment through its businessprocesses and the products it creates
based on the technologies it has developed
throughout its long history. Under the 10-

Year Strategy that we formulated in 2015,
we have also considered our contribution
to society and the environment and clearly
demonstrated our intention to increase
corporate value over the long term bypromoting businesses that solve social
issues. The key performance indicators
in our medium-term management planalso include sustainability-related targets:
under the 2021 Medium-term Management
Plan we aim to achieve a reduction of atleast 15% in CO2 emissions (compared to
FY2010, per unit of revenue) and to achievea ratio of diversity in management positionat least 30%.
In formulating the 2021 Medium-termManagement Plan, Hitachi Chemical
conducted a revision of its materiality —priority issues for the mutual sustainablegrowth of the Group and society. After
revising our materiality, we set programsand key performance indicators for eachissue which we will incorporate into specificmeasures to be carried out.
We have connected our businessdevelopment based on materiality to theSDGs, and reconfirmed that this will leadto improvement in business profitability
and increase of corporate value. By
promoting this concept throughout theGroup, we will gain a real sense of our work
contributing to society, leading to fulfillment,
motivation, and happiness of the Group’s
employee. We believe that sustainability
initiatives are also integral to the growthof our employees, who are the source ofcorporate value creation.

SDGs
The Sustainable Development Goals(SDGs) are international goals statedin The Agenda for Sustainable
Development adopted by 193
countries at the United Nations
General Assembly, to be achieved in
the 15 years from 2016 to 2030. The
SDGs comprise 17 goals and 169
targets to realize a sustainable world.

To Our Stakeholders
In fiscal year 2018, inappropriate producttesting has come to light, and the profit has
slumped as demand declined in our main
business fields. The management of Hitachi
Chemical has entered fiscal year 2019 witha sense of crisis. The 2021 Medium-termManagement Plan is a stage for increasing
the quality of management and businesstowards achieving the future we envisage
for the Group, and for steadily realizing
results. We will diligently carry out measures
starting in fiscal year 2019, the first year of
the Medium-term Plan, working to achieve
the goals of “strengthen governance at
the global level” and “establish a highprofit base.” As we do so, we ask for yourcontinued guidance and support.

Sustainable Engineering
Sustainable Engineering is an
accumulation of Hitachi Chemical’s
technologies involving theminimization of adverse effects andenvironmental burden from the stagesof R&D, product planning and design
through the combination oftechnologies with an aim to contributeto society and the environment as wellas to enhance our corporate value.

Annual Report 201914

Value Creation Process

Value Creation Process
Input Hitachi Chemical’s strengths

Financial capital

HC-Way of Marketing and Sales
Become a person (groups) thatcan discuss ideal future image
with customers

Stable financial basefor expanding our operations

Corecompetencies

Manufactured capital

P.22

Global production basefor capturing the growing market
What the Hitachi ChemicalGroup aims to be

Various core technologies+
Business
conceptualization ability

Intellectual capital
Extensive, in-depth know-how and coretechnologies that straddle amassed
organic and inorganic chemistry

HC-Way of Production
Meet various customers’
requirements without fall bypromptly providing solutions

Human capital
Hitachi ChemicalGroup Identity

Diverse and global human resources thatbring about innovation and solutions

Social and relationship capital
Cooperative relationships with manydifferent stakeholders developed throughopen innovation

Hitachi Chemical’s Materiality
Natural capital
Efficient use of resources and energy
based on sustainable engineering, andtechnologies that help solve global
environmental issues

P.19
Hitachi ChemicalGroup Identity

External
environment

Basic management
policies•ESG trends (SDGs, etc.)•Global Risk Report•Megatrends

Business aims

15

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

To realize the Hitachi Chemical Group Vision, Hitachi Chemical creates a wide variety of products with its
core competencies in materials technologies, process technologies and evaluation technologies, in addition
to its business conceptualization ability. Driven by this, we will implement “Working On Wonders” through ourfour key businesses and provide value to stakeholders in terms of “improvement in Quality of Life (QOL)” and“realization of a sustainable environment”.

OutputBusiness activities

Products and services

Information andCommunication

P.29

Examples of products
and technologies

eting and Sa
f Mark
les
ay o
W
C
H

Products fornext-generation
wireless
communications(5G) technology

HC-Way of R&DHC-

Wa y of P ro d u ctio

Mobility

P.31

Examples of products
and technologies

Lightweight
products toimprove fuelconsumptionn

The 2021
Medium-termManagement
Plan
P.25
10-year Strategy
P.21

EnergyP.33

Examples of products
and technologies

Hybrid energy
storage systemthat helps spreadrenewableenergyLife Sciences

P.35

Examples of products
and technologies

Technologies
for regenerative
medicine

Hitachi Chemical is helping
with the proliferation of 5G
and related infrastructure byproviding materials with low
dielectric loss to prevent signal
delays and heat generation
when transmitting
high-frequency
signals.

Our resin rear door modules
and formed resin for molded
exterior product technologies
improve fuel economy bymaking products lighter,
thereby helping to prevent
global warming. We
have diverse designs
to meet wide-ranging
needs.

Our hybrid energy storage
system facilitates the
management of variable
output from solar and wind
power generation facilities,
accelerating the proliferationof renewable energy.

We improve Quality of Life
(QOL) by reducing the physicaland economic burden on
patients with minimallyinvasive, fundamental
regenerative medicine that
replaces conventional
surgical treatments
and anti-cancer
therapies.

Improvement in Quality of Life (QOL) and Realization of a Sustainable Environment

HC-Way of R&D
Continue to compete globally
through the creation of new
business (i.e. innovation)

Outcomes

Value provided to stakeholders

Shareholders
and investors

Society

Customers
and suppliers

Governments
and public
administrations

Employees

Globalenvironment

Annual Report 201916

Strategy Development Process

Strategy Development Process
Backcasting from “where we want to be in 10 years’ time”
In fiscal year 2015, as a first step towards the next 50 years, we outlined
our “where we want to be in ten years’ time” and settled on the 10-year
Strategy to implement it. Backcasting from fiscal year 2025, the final year ofour 10-year Strategy, we formulate our Medium-term Management Plan.
Hitachi Chemical conducted a materiality analysis to identify priority issues
for sustainability to incorporate into its business strategies for the 2021
Medium-term Management Plan, and reflected these priorities in measuresfor each division.

Review of materiality
analysis strategy

FY

Review of materiality
analysis strategy

FY

FY2012 marked

50th
anniversary

2015

18
The 20 term
m
iu
d
Me
Plan
ement
Manag

2018

Fiscal years 2012-2013

21
The 20 term
Medium ent Plan
em
Manag

2021

Fiscal year 2015

Formulating a “Management Message Looks to the Future”

Formulation of our 10-year Strategy

When we celebrated our 50th anniversary in 2012, we held acommunication workshop attended by all staff members ofthe Hitachi Chemical Group. We formulated a “Management
Message Looks to the Future” by asking ourselves what we
aim to achieve over the next 50 years, and how to achieve it.
The message was shared among all staff members.

With the aim of delivering the Hitachi Chemical Group Vision, wedrew a blueprint for “where we want to be in 10 years’ time” andformulated our 10-year Strategy for making the blueprint cometrue. The values that Hitachi Chemical should deliver throughits operations is defined as “the improvement of Quality of Life
(QOL)” and “the realization of a sustainable environment.” In thisway, we pursue growth that goes beyond simply an extension of
our existing growth. Backcasting from “where we want to be in 10
years’ time,” we drew up the Medium-term Management Plan.

Establishment of the Hitachi Chemical Group Identity andstart of WOW-BB activities.

We repeated discussions by anticipating 50 years in the
future. The Hitachi Chemical Group Identity, consisting of
our corporate philosophy (Mission), founding spirit (Values),
and the Hitachi ChemicalGroup Vision (Vision), wasestablished in fiscal year
2013. To embody the Hitachi
Chemical Group Vision,
we have started WOWBB activities in which theentire Group workforce can
The Team that received the Gold Award for the
WOW Global Awards in fiscal year 2018 (982
participate to take on newteams from around the world participated)challenges.

17

Fiscal year 2018
Formulation of the 2021 Medium-term Management Plan

Key measures in the 2021 Medium-term Management Plan entail
reviewing materiality, the priority issues for Hitachi Chemical tosustain growth alongside society, and reviewing the 10-year
Strategy, its targets for fiscal year 2025. In addition, the 2021
Medium-term Management Plan was drawn up after a seriesof discussions held by the Executive Officers and Directors on
issues and measures that Hitachi Chemical should address andundertake over the next three years while looking back at the2018 Medium-term Management Plan (fiscal years 2016–2018).

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

10-yearStrategy(FYs 2016–2025)

FY

2025

Where we want to be inten years’ time

Realization of the
Hitachi ChemicalGroup Vision

A global innovation provider that
goes beyond the boundaries ofchemistry,
with advanced functional materials
as core and extending to devices,
systems and services

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Review of Materiality
When reviewing materiality, Hitachi Chemical (1) referred to the sixclassifications of capital (financial, manufactured, intellectual, human,social and relationship, and natural capital) in the IIRC’s International <IR>
Framework, (2) envisioned changes in the business environment based on an
analysis of SDGs, the Global Risk Report, and Megatrends, and (3) lookedback at our activities and changes in conditions over the past three years.
The opinions of experts were also reflected in (2) and (3) above.

Review of 10-year Strategy
In the context of changes in the external environment,
more progress was made than anticipated in electricvehicles (EVs), self-driving cars and advanced
driver-assistance systems (ADAS). Hitachi Chemical
expects more advances to be made in AI, Society
5.0, and next-generation wireless communications
technology (5G), while growth looks likely to slow
on the smartphone market. Although there is noneed to change our vision for “where we want to be
in 10 years’ time,” we saw a need to more quickly
implement measures to get there.

Review of Materiality
P.19-20
Review of 10-year Strategy
P.21-22
Review of the 2018 Mediumterm Management Plan

Formulation of the2021 Medium-termManagement Plan
P.25-28

P.23-24

Review of the 2018 Medium-term Management Plan
Under the 2018 Medium-term Management Plan, Hitachi Chemical mainly
implemented measures to strengthen global business and the management
base, but did not finish measures to improve profitability, even thoughbusiness scale was expanded. In particular, we still need to advance theniche & cluster strategies and open innovation, establish cost structure as a
global business leader, and promote global management.

Based on these key measures, we
examined measures with each divisionand came up with the 2021 Mediumterm Management Plan.

Annual Report 201918

Materiality

Materiality(Key issues for sustainable growth with society)To sustain growth along with society, Hitachi Chemical conducts a materiality analysis to identify priority
issues and measures to undertake for the three years of its next Medium-term Management Plan. After
identifying materiality, Hitachi Chemical sets key measures and KPIs for the Medium-term Management Plan.

Objectives of materiality
analysis

In pursuit of long-term, sustainable growth with society, Hitachi Chemical
identified the priority issues that it should undertake over the three-year periodof the next Medium-term Management Plan. Hitachi Chemical conducted
its first materiality analysis in 2013. This marks the second time that Hitachi
Chemical has reviewed materiality, the first being in 2015.

Key points of analysis(revisions)

We specified “Hitachi Chemical’s 10 Material Issues” by looking back atchanges in conditions at the Hitachi Chemical Group since the previous
materiality analysis, while also anticipating changes in the businessenvironment in light of SDGs, the World Economic Forum’s Global Risk
Report, and analysis of Megatrends.

Analysis (revision)
process

Identify issues
STEP
1

STEP
2

STEP
3

19

· Our analysis of materiality in 2015 was classified using the six types ofcapital defined by the International Integrated Reporting Council (IIRC) in
its International <IR> Framework report, namely intellectual, manufactured,financial, human, social and relationships, and natural capital.
· We ascertained the rate of achievement in measures tied to the 2018
Medium-term Management Plan, based on the materiality analysis in 2015.
· We created basic management policies as commitments that managers
should make to realize the Hitachi Chemical Group Identity and Vision.
In addition to business aims, we also identified social issues with a significant
impact on Hitachi Chemical, in light of external conditions encompassing
SDGs, the Global Risk Report and an analysis of Megatrends.
· On this basis, we formulated proposals for materiality and had them
reviewed by external experts.

Approval by management· The materiality proposal created in Step 1 was examined in an Executive
Officers’ study group.
· The Executive Officers’ Meeting decided on materiality in light of the outcomeof the discussions.
· The Board of Directors approved the “Hitachi Chemical’s 10 Material Issues”

Incorporation into Medium-term Management Plan
· We examined key policies for the 2021 Medium-term Management Plan
based on issues raised after reviewing materiality, the 10-year Strategy, andthe 2018 Medium-term Management Plan.
· We then defined the main measures and KPIs for each materiality, andreflected them in initiatives for sustained growth in the 2021 Medium-termManagement Plan.

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Review of Materiality
Formulation of the2021 Medium-termManagement Plan

Review of 10-year Strategy

For more information about materiality,refer to Hitachi Chemical’s website
About Hitachi Chemical
CSR
Governance and CSR Management
Hitachi Chemical’s Value Creation andMateriality

Review of the 2018 Mediumterm Management Plan

Solve social
issuesDesign measures tobe undertaken during
the 2021 Medium-termManagement Plan
Identify
materiality
Identify 10 material issues inlight of the Hitachi ChemicalGroup Identity, basic
management policies,
business aims, andexternal conditions

Hitachi Chemical’s
10 Material Issues
01

Strengthening ability todiscern true needs

02

Strengthening businessdesigning ability to enhancebusiness value-added

03

Strengthening technology
platform

04

Improving productivity
globally

05

Strengthening financial
standing

06

Promoting diversity &Inclusion to strengthen
corporate competitiveness07

Strengthening group
governance08

Timely and appropriate
communication withstakeholders

09

Implementation of social
responsibility in the entire
value chain

10

Pursuing businesses that offer
solutions to environmental
and social issues

Help solve social
issues, such as
SDGs, through these
initiatives

Set out measures and
KPIs for each materiality
in the 2021 Medium-termManagement Plan

Reasoning behind identification ofmateriality

Key measures in the2021 Medium-termManagement Plan

We must further strengthen its coretechnologies (materials, process, andevaluation technologies) while expanding
its business domains and addressing
technological innovation in IoT and AI, as
well as advancing its materials technologies.

Development of newmaterials technologies,etc.

We must have diverse human resources
with different nationalities, genders, skills,
backgrounds, and experiences in order
to continue innovating and reinforcing its
competitiveness. We intends to enhance its
management base with diversity and createa corporate culture where all employees canwork together and improve their abilities.

Promote diversity at
decision-making layer,etc.

We must identify and properly address risks
related to socially unacceptable behavior in
the value chain while also addressing risks
caused by internal behavior in the Group.

Realize a low-carbon
society by reducing CO2
emissions, etc.

We must advance business that creates
economic value while also solving
issues affecting society and the global
environment, such as by working towards
SDGs.

Create technologies andproducts that contributeto SDGs, etc.

SDGs to which
Hitachi Chemical
contributes

Annual Report 201920

10-year Strategy

10-year Strategy
In order to realize the Hitachi Chemical Group Vision, we conceived a hypothetical future with a long-term
outlook in our “where we want to be in ten years’ time,” then in fiscal year 2015 formulated the 10-year Strategy
for its actualization.
As we prepared to formulate our 2021 Medium-term Management Plan, we undertook a reevaluation of the 10-year
Strategy based on changes in the internal and external conditions.

Realizing the Hitachi Chemical Group Vision

Hitachi Chemical Group Identity

MissionContribute to society throughthe development of superior
technologies and products.

Founding Spirit“Pioneering Spirit,”“Sincerity,” “Harmony”

VisionWith a pioneering spirit to
explore uncharted areas, wedevelop innovative solutions
beyond the boundaries ofchemistry, delivering “wonders”
that exceed the expectations ofcustomers and society.

Hitachi Chemical’s Five Challenges
1. Discovering potential needs
2. Designing future scenarios
3. Developing the next core technology 4. Becoming a globally competitive firm
5. Building a co-creative work style

On the occasion of our 50th anniversary in 2012, we looked
ahead 50 years to formulate our “Management Message
Looks to the Future” which was shared with all employees.
This was the base for numerous discussions that resulted
in the establishment of the Hitachi Chemical Group Vision,
which describes what kind of Group we want to be going
forward. Combined with our Mission and our Founding Spirit,these became the Hitachi Chemical Group Identity. By sharing
this Identity—a system embodying the Group’s mission andvalues—globally, we will exert our strengths as a team acrossregional boundaries and business fields, moving our businessforward toward the goal of achieving our vision.
Under the Hitachi Chemical Group Identity, we haveformulated our 10-year Strategy and a corresponding 3-year
Medium-term Management Plan. We have also established
WOW Marketing, designed to offer clients proposals filled with“wonders.” Along with including it in our 10-year Strategy, we
are working to accelerate the practice of WOW Marketing byidentifying individual issues from among Hitachi Chemical’s
Five Challenges, and the entire Group is engaged in WOW-BB
activities aimed at solving those issues.

Where We Want to Be in Ten Years’ Time (FY2025)

A global innovation provider that goesbeyond the boundaries of chemistry,
with advanced functional materials as core and extending to devices, systems and services

Prevailing in global
competition
As a provider of innovation, work toachieve an operating margin of 14% or
greater.

21

To contribute to society andcontinue to grow sustainably
as a company by practicing managementthat emphasize

the environment, society andgovernance (ESG).

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Review of Materiality

Review of Materiality

Formulation of the2021 Medium-termManagement Plan

Review of the 2018 Mediumterm Management Plan

Strengthening Core Competencies

Materials
technologies
that bring forth
function

Process
technologies
that form
products

Evaluation
technologies
that translate
needs

Wide-ranging core technologies
Business conceptualization ability

The ability
to identify acustomer’s true
needs

Hitachi Chemical’s strength lies in its wideranging core technologies, including materials,
process and evaluation technologies. Basedon this strength, we are working to further
strengthen our ability to conceptualize
business—to identify a customer’s true needs
and design businesses—by asking ourselves
where and how profit will be generated, andhow we can continue to maintain our strengths.
This will require providing solutions more closelyaligned with the customer needs, whether in theform of materials, components and devices, oreven systems and services.

Business
designcapabilities

10-year Strategy Execution

Hitachi Chemical’s Value-providing Solutions
Information andCommunication

Mobility

EnergyLife Sciences

High
Efficiency

Smart

Acceleration
Lighter
No waste

Individualization
Diversification
Connected

Improvement in Quality ofLife (QOL)

Realization of Sustainable
Environment

In fiscal year 2018, we conducted a study ofchanges in external conditions in fields including
electronics, automobiles, energy and theenvironment, social infrastructure, agriculture,and life sciences. Advances in the shift to electricvehicles and in automated driving and advanced
driver assistance systems were greater than
expected. While AI, Society 5.0, and 5G nextgeneration wireless communications technologies
have expanded, growth in the smartphonemarket has slowed. While these changes will
not require altering our vision for where we want
to be in 10 years, we recognize that they will
require the early execution of measures aimed atachieving that vision.
We will continue to generate new business inour key areas of information and communication,
mobility, energy, and life sciences; change theway our existing businesses work; and work to
expand our business in areas where we have the
top share of the global market.

Annual Report 201922

Review of the 2018 Medium-term Management Plan

Review of the 2018 Medium-termManagement Plan
Since 2016, Hitachi Chemical has been engaged in a variety of initiatives under our 2018 Medium-termManagement Plan formulated to address the first three years of our 10-year Strategy.
In formulating our 2021 Medium-term Management Plan, we reviewed the outcomes and issues of the initial
three-year plan.

Outline of the 2018 Medium-term Management Plan

The 2018 Medium-term Management Plan
Cultivate top share business bychanging method of competition

Strengthen
globalbusiness

Accelerate commercialization
through open innovation

Build global management
infrastructure

Strengthen
management
base

Establish cost structure as a global
business leader

Under the 2018 Medium-term Management Plan (for fiscal
years 2016 through 2018), we set forth two basic policies
designed to achieve our vision for where we want to be in 10
years: strengthening global business and strengthening themanagement base.
Based on these two policies, we formulated a numberof key strategies, including: (1) expansion of global topshare businesses through reforms to the niche and cluster
business structures; (2) accelerate commercialization throughcollaborative creation by using outside resources; and (3)acquire technologies and business platforms from outside
the Group and accelerate growth. At the same time, we
promoted ESG management by reducing CO2 emissions on
the environmental side and by focusing particularly on efforts topromote career opportunities for female employees on the socialside. We also made advanced efforts on the governance side byreinforcing corporate governance based on efficacy evaluations.

Outcomes of the 2018 Medium-term Management Plan
Results

Key management indicators

Overseas share of revenue (%)

63

FY2018 target

63

58

Revenue

CAGR 7-8 %(FYs2015-2018)

FY2018 result

CAGR

7.6%

Adjusted operating margin (%)

9.6

8.5

7.1

Revenue (Billions of yen)
800

669.2
600

11%

7.1%

ROIC *2

15 %

8.3%

ROE

12%

7.0%

CO2 emissions *3

96 %

96%

Proportion of female
managerial positions *4

12%

14%

681.0
Life Sciences, etc.

554.1
Energy storage devices
CAGR 19%400
Automotive products
CAGR 3%200
Functional materials
CAGR 3%

0
2016

23

Adjusted operating
income ratio*1

2017

2018

(FY)

*1 Numerator: Amount derived by subtracting the cost of sales and selling, general and administrative expenses
from revenue; Denominator: Revenue*2 Operating income after taxes and adjustments as a percentage of working capital and balance of fixed assets*3 Per unit of sales versus FY2014 results Scope: Major production sites in Japan (including Group companies)*4 Non-consolidated, under the age of 45

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Review of Materiality

Review of 10-year Strategy

Formulation of the2021 Medium-termManagement Plan

Review of the 2018 Mediumterm Management Plan

The 2018 Medium-term Management Plan Outcomes and Areas for Improvement
Key Outcomes
Expanded and strengthened strategic business globally: 7.6%
sales growth rate
Implemented and progressed the niche and cluster strategy·Grew market share of semiconductor packaging materials approximately from
30% to 40%, relocated and expanded Packaging Solutions Center in ShinKawasaki·Launched CMP slurry (nanoceria) business (growing market share fromapproximately 50% to 60%) and expanded production capacity

Achieved commercialization through Open Innovation·Launched quantum dot (QD) business and increased sales

Achieved dynamic growth through M&A·Launched new business in thermal management materials, diagnostic
reagents and regenerative medicine·Built global business foundation for energy storage devices (the U.S., Europe, and ASEAN)

Strengthened Our Management Foundation
Visualization of global management information (HR & financial)
Strengthen internal controls at regional headquarters in the
U.S. and China
Reduced CO2 emissions; reinforced promotion of career
opportunities for womenAreas for
Improvement

Under the 2018 Medium-term Management Plan, we moved
forward with our niche and cluster strategy, and successfully
expanded our market share in CMP slurry (nanoceria) andsemiconductor packaging materials. Through open innovation,
we also launched our quantum dot (QD) film business, while
M&A enabled us to launch businesses in thermal management
materials, diagnostic reagents, and regenerative medicine, thusachieving our revenue target.
Acquisition of production sites in Europe for thermal
management materials, regenerative medicine, and energy
storage devices was also a major achievement.
In terms of strengthening our management foundation, we
worked toward visualizing global management information,
including skills, experience and other HR data as well as
financial information. We also made progress in strengthening
internal controls at our regional headquarters in the U.S.
and China. In ESG management, a target for reducing CO2
emissions was established with the goal of contributing to
the prevention of global warming. We achieved that target,
reducing CO2 emission to 96% of fiscal year 2014 levels on perunit of sales basis. The proportion of females in managerial
positions, a target established to promote career opportunities
for women, was 14% on a non-consolidated basis for thoseunder the age of 45, exceeding the target of 12%.

Revelation of inappropriate product testing and missed targets for both operating margin and ROIC

Inappropriate product testing and other issues came to lightin fiscal year 2018, causing significant loss of trust among ourcustomers and the general public. We are taking this very
important problem seriously.
In terms of performance, we missed both our operating
margin and ROIC targets. This was due to delays in changing
Response
to External
Conditions·Delay in breakaway our relianceon the smartphone business·Inadequate price adjustments in
response to rising material prices

Management
Issues·Regaining trust lost due to inappropriate
product testing and other issues·Insufficient transformation of businessstructure·Failure to achieve development andlaunch of new fields and products·Deterioration in asset efficiency andreturn on assets

our emphasis from the smartphone business and inadequate
price adjustments in response to rising material prices. Failure
to make progress in expanding the sales of high-value-added
products and developing new fields and new products, alongwith worsening asset efficiency, were also factors.

Market development and operationalization targeting new growth markets, including
next-generation (5G) wireless communications technology, electric vehicles, andindustrial applications.
Revise contracts to reflect the changes in materials markets around energy storage
devices
Ensure execution of measures to prevent a recurrence
Act decisively to realign business portfolio
Focus development in fields where Hitachi Chemical can make the most of its
strengths in material technologies
Improve PMI and ROIC-based management for companies acquired via M&A

Annual Report 201924

Formulation of the 2021 Medium-term Management Plan

Formulation of the 2021 Mediumterm Management Plan
In fiscal year 2018, Hitachi Chemical formulated its 2021 Medium-term Management Plan, a framework for its efforts
in the fiscal years 2019 through 2021, the second stage of our 10-year Strategy. Working together as a Group, weare engaged in a variety of initiatives designed to improve the quality of our management and our business.

The 2021 Medium-term Management Plan Basic Policies and Numerical Targets
Stage to Improve Quality of Management and Business
The 2021 Medium-term Management Plan
Strengthen
governanceat the global
level

Rebuild compliance systems
Strengthen group governance

Expansion of de facto, top sharebusinesses

Establish ahigh-profit
base

Accelerated creation of new
businesses and products
New challenge to rebuild globallyadvanced cost structure

Key Management Indicators

FY2018 result

In formulating the 2021 Medium-term Management
Plan, which begins in fiscal year 2019 and runs throughfiscal year 2021, we reviewed the 2018 Medium-termManagement Plan and also reviewed our 10-year Strategy
formulated in fiscal year 2015. We also reviewed materiality
aimed at achieving sustainable growth along with society.
Based on these results, we then established the basic
policies for the 2021 Medium-term Management Plan,
which we have designated in the 10-year Strategy as thestage for improving the quality of our management andbusiness base which we successfully expanded over thecourse of the 2018 Medium-term Management Plan. Thosebasic policies address efforts in two areas: strengthening
governance at the global level, and establishing a highprofit base.
FY2021 target

Adjusted operating income
ratio*1

7.1%

over

10%

ROIC *2

8.3%

over

13%

13% reduction

over

15%

20%

over

30%

CO2 emissions *3(intensity reduction rate compared to FY2010)

Proportion of diversity inmanagement *4

Basic Policy 1

reduction*1 Numerator: Amount derived by subtracting costof sales and selling, general and administrative
expenses from revenue: Denominator: Revenue*2 Operating income after taxes and adjustments as apercentage of working capital and balance of fixed
assets*3 (1) Aggregation scope: Major production site inJapan and overseas (including Group companies);(2) CO2 emissions (intensity reduction rate comparedto FY2010) : FY2018 results 87% the 2021 Mediumterm Management Plan target 85% or lower.
*4 Numerator: Total number of non-Japanese andwomen in management within Hitachi Chemical Co.,
Ltd. and main Group companies; Denominator: Total
number of management personnel within Hitachi
Chemical Co., Ltd. and main Group companies

Strengthen governance at the global level

Stop repeated compliance issues and earn thetrust of society and customers
Basic Policy 1-1

Rebuild compliance systems

Steadily implement measures to prevent recurrence of
inappropriate product testing

Basic Policy 1-2

Strengthen group governanceIntra-regional audit structures developed in the U.S. andChina regions to undertake independent risk management

Reduce compliance risk by decreasing the number ofcompanies
Continually enhance employees’ education andcommunication with employees, particularly by managers

25

Build frameworks in ASEAN and Europe regions

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Review of Materiality

Formulation of the2021 Medium-termManagement Plan

Review of 10-year Strategy

Review of the 2018 Mediumterm Management Plan

Basic Policy 2

Establish a high-profit base

Concentrate management resources on existing semiconductor,
smartphone, and automotive parts businesses as well as on 5G, EV,
new batteries and life sciences fields
Market size growth estimates for major industries*
Sector

Unit

2018

2021

CAGR

Semiconductor silicon wafers

MS (Million square
inches)/year

12,445

13,7783%

Smartphones

Million/year

2,109

2,250

2%

Next-generation (5G) wirelesscommunication technology basestations

Billion yen/year

0

10,000202%

Automobiles (engines)

Ten thousand/year

8,746

9,268

2%

Automobiles (EV)Ten thousand/year

607

1,970

48%

Lithium-ion batteries

Trillion yen/year

2.8

4.0

13%

Other secondary batteries

Trillion yen/year

4.0

5.0

7%

CDMO (Contract development andmanufacturing)M$/year

529

805

15%

Telecommunications

Automobiles

Secondary batteries

Regenerative medicine*Estimates by Hitachi Chemical based on forecasts from an external research agency

Basic Policy 2-1

Expansion of de facto, top share buisiness

Provide proprietary solutions andmake them the de facto standards,
based on our technology platformcomprising material, process, andevaluation technologies

We are working to share a globally competitive strategy by grouping
semiconductor packaging materials and other products and businesses
together, thus advancing the cluster strategy that aims for a global top share andthe niche strategy that aims to expand revenue through high-profit, high-addedvalue products. Based on a technology platform comprising material, process,and evaluation technologies, we will achieve de facto status and expand our topshare businesses by offering proprietary solutions.

Policies by businessInformation and Communications: Provision ofmaterials-based solutions that cannot be copiedby competitors and establishment of a strong
brand in the field of semiconductor packaging
business
Mobility: Provide high-value-added solutions forcustomers’ issues by leveraging our strengths
as a component manufacturer capable ofdeveloping proprietary materials and strengthen
our earning capability
Energy: Use individual characteristics of global
bases to shake up the product mix and build ashared foundation of manufacturing capabilityLife Sciences: Create synergy with operatingcompanies acquired through M&A and develop
future base for businesses

P.29-36

Category

Cluster

Niche

Semiconductor
packagingmaterials

Market needs

Solutions

Speed pace of package designand evaluation

Provide one-stop solutions for advanced
packaging via JOINT *1

CASE *2

Respond to new demands
for connectivity, automateddriving, and EVs

Provide solutions combining material/process
differentiation, analysis/design technologies, andmodularization

CMP Slurry

Enhance total performance interms of functionality and thepolishing process

Provide technical services in each market usingmaterial technologies, implement services withspeed

Quantum dot(QD) film

Achieve both higherdefinition displays and lower
environmental loads

Pursue collaborative creation with QD
manufacturers to improve optical properties andreduce cadmium content improve

ACF for displays

Respond to increasing densityof high-definition display
components

Bolster technical services utilizing the Integration
Lab. in Suzhou, China*1 JOINT (Jisso Open Innovation Network of Tops): Consortium providing comprehensive solutions for semiconductor packaging*2 CASE: Connected, Autonomous, Shared, Electric

Annual Report 201926

Formulation of the 2021 Medium-term Management Plan

Basic Policy 2-2

Accelerate creation of new businesses and products

Change target from fields where insight is lacking to fields

where strengths can be leveraged
The 2018 Medium-term Plan

Marketpenetration

Product
development

MarketMarketDiversification

The 2021 Medium-term Plan
New

New

Marketdevelopment

Key areas for new
products and businesses

Marketdevelopment

Diversification

Marketpenetration

Product
development

Existing

Existing
Existing

Product

New

Existing

Product

New·Classify responsibilities and authority of, and step up coordination between,business divisions and research divisions·Use U.S. venture capital companies to expedite results from the use of open
innovation

Expand new
businesses andproducts in fields
where strengths
can be leveraged

Basic Policy 2-3

Key areas

PolicyMarket scale in 2025 (billions of yen)

Information andCommunication

Development of new materials and solutionoriented business models for 5G/IoT devices

Low dielectric material
Materials for IoT

120
100

Mobility

Proposals for the development of new materials
and usable technologies to support electric,
lightweight and connected vehicles

Motorized/lightweight
Sensors

2,330
3,000

EnergyPropose solutions using materials for new energy
and environmental issues

New energy
Environment

70
90Life Sciences

Support regenerative medicine and other clinicalresearch by supplying highly functional, highvalue-added consumable goods

Consumable goods forregenerative medicine

600

New challenge to rebuild globally-advanced cost structure

Business Portfolio Realignment
Reinforce businessstructure in terms of bothstock and flow by realigningbusiness and customer
portfolios
Improve adjusted operating
income ratio by 3%
Improve ROIC by 5%

Implement prompt restructuring measures,
including the selling off or withdrawal fromlow-profit businesses with operating income
margins below 5%

Review of Individual Contract Terms
Improve customer portfolio through portfolio
analysis of individual customers’ sales
amounts and profit levels(Targeting approx. 3% on a sales basis)

Reforms of indirect operations (10% cost reduction)
Decrease in number of Group companies (25% reduction)

27

Under the 2018 Medium-term Management
Plan, we worked to target new customers
and new markets. As a result, while we
succeeded in entering the regenerative
medicine field, other success stories are few.
In the 2021 Medium-term Management Plan,
we will, thus, focus on the main businessfields of information and communications,mobility, energy, and life sciences. We will
work to create new businesses and productsin fields in which the Hitachi Chemical Groupcan leverage its strengths and insights,
including improved rather than completely
new products, and developing business withgroup companies of existing customers. We
will also accelerate efforts to generate resultsfrom open innovation following the pattern ofquantum dot (QD) film.

As part of working to establish a high-profit baseunder the 2021 Medium-term Management
Plan, we have positioned ROIC, a componentof capital efficiency, as a key management
indicator, and will be implementing even moreaggressive efforts in that area.
Increasing operating margins and asset
efficiency are both important to improving ROIC,
but under the 2021 Medium-term Management
Plan, we will work not only to improve operating
margins and reduce costs by streamlining
indirect operations, but also to improve asset
efficiency through asset reduction by cuttingback on the number of Group companies. At
the same time, we will improve ROIC by selling
off or withdrawing from low-profit businesses inan effort to strengthen our business structure.

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Investment plan for growth

Basic shareholder returns policy

Focused investment in the information andcommunications field
Asset sales to provide basic funding for M&A

Implement a stable per-share dividend aimed ata payout ratio of approximately 30%

220.0billion yen

Cumulative
operating CF

billion yen

Operating CF
margin ratio

9.1%

159.5

10.5%

179.3 billion yen

170.0 billion yen

Investment
M&A, etc.

Capitalinvestment
135.0 billion yen

18%Life Sciences, etc.

16%

Energy28%

Mobility

10%
10%
30%

Information andCommunication

38%

Results for FY2016
to FY2018

Capitalinvestment
155.0 billion yen

50%

Planned for FY2019
to FY2021

Hitachi Chemical determines distribution of our profits
to shareholders through comprehensive considerationof factors including business environment, performance,
future business expansion, payout ratio, and an appropriate
amount of internal reserves.
Distribution of profits to shareholders is based on stabledividend growth. Internal reserve funds will be invested
in R&D in high-value-added products with strong growthprospects and in building a global supply structure. They
will also be applied to strengthening our operating base andexpanding growth. At the same time, we will make effective
use of these funds to establish a resilient financial structure.
Acquisitions of treasury stock are a means of returning
profits to shareholders that complement the dividend, and it
is conducted dynamically and consistent with the scope ofour dividend policy.

Sustainability initiatives
As a member of the global community, we contribute to achieving a sustainable society
Hitachi Chemical’s 10 MaterialIssues(Key issues for sustainable growth with society )P.19-20

01

Strengthening ability to discern true
needs
Strengthening business designing

02 ability to enhance business valueadded

03 Strengthening technology platform
04 Improving productivity globally
05 Strengthening financial standing
Promoting diversity & Inclusion

06 to strengthen corporate
competitiveness07 Strengthening group governance08

Timely and appropriate
communication with stakeholders
Implementation of social

09 responsibility in the entire value
10

chain
Pursuing business that offer
solutions to environmental andsocial issues

To grow sustainably along with society, Hitachi Chemical has conducted amateriality analysis aimed at identifying priority issues to be addressed over thethree years of our next medium-term management plan. These issues havebeen reflected in the plan and KPIs have been established to measure progress.
In fiscal year 2018 we defined 10 material issues. These are reflected in the2021 Medium-term Management Plan, which sets out measures and KPIs
for achieving each of them. Each of our employees will work to address thematerial issues in their respective divisions and to achieve the KPIs, as we aim
to realize sustainable growth both for Hitachi Chemical and for society as awhole and contribute to achieving the sustainable development goals (SDGs).
We have also announced numerical targets for CO2 emissions and diversity
in management and will be working toward achieving them as part of the 2021
Medium-term Management Plan.
Key SDGs to which we contribute throughESG management
Main Measures

Key SDGs to which we
contribute through our products
and services

Related SDGs

Promote diversity
at decision-making
layer, etc.

Conduct training &auditing to prevent
inappropriate
behavior, etc.

Disclosure of ESG
information throughwebsite, etc.

Realize a low-carbon
society by reducing
CO 2 emissions, etc.

Annual Report 201928

Initiatives of Key Businesses

Information andCommunication
Policies of Key Businesses

Provision of materials-based solutions that cannot
be copied by competitors and establishmentof a strong brand in the field of semiconductor
packaging business
Positioning of Hitachi Chemical
25

FY202120

Company

Company B
C

CompanyA

15
10
Company

50Representative Executive Officer, Senior Vice President and Executive Officer,
General Manager of Information and Communication Business Headquarters

Hiroyuki Yamashita

The 2021
Medium-termManagement
Plan Targets

ROIC

29.0%

Progress on the 2018 Medium-termManagement Plan
Under the 2018 Medium-term Management Plan, Hitachi
Chemical strengthened key businesses through the niche andcluster strategies, and improved its ability to create customertailored proposals with the Packaging Solution Center. The
Group also reinforced its business foundation with the viewthat considerable opportunities for business growth are on thehorizon amid technological innovation in the automobile field(self-driving cars and electrification) and in the development of
next-generation wireless communications technology (5G) in
the information communications field.
Under the niche strategy, sales steadily increased following
the release of CMP slurry (nanoceria) as a new product thatfacilitates high-density circuit formation in the semiconductor
wafer polishing process. Additionally, sales expanded from thelaunch of quantum dot (QD) film that widen the color gamut
on high-resolution 4K and 8K display, and particle dispersion
anisotropic conductive films.
Under our cluster strategy for semiconductor packaging,
we made steady progress in the electronic materials andthe printed wiring board materials business with several
new products being adopted by our customers, including
photosensitive dry films for fine circuit formation andsemiconductor packaging materials for high-density mounting,29

D

FY2018

200

400

600

800

1,000

Revenue (Billions of yen)

Operating margin (%)

30

1. The Packaging Solution Center, which was moved to Kawasaki
City, Kanagawa, Japan and expanded, is at the core of ourOpen Laboratory strategy to provide a one-stop solution for
semiconductor packaging materials. We aim for a 50% market
share.
2. Discover latent needs in 5G and EV markets, and improve operating
margin and revenue by providing solutions for these needs.

* Bubble chart created based on research carried out by Hitachi Chemical

which are used to manufacture semiconductor devices used in
the cloud storage and wearable device fields.
The Packaging Solution Center, which has an Open
Laboratory to facilitate the development of cutting-edge
semiconductor packaging technologies, was moved to
Kawasaki city in Kanagawa prefecture, Japan to take advantage
of its better transportation access from overseas. This puts inplace a structure for creating next-generation semiconductor
packaging technology through open innovation with customers,
equipment manufacturers, and materials makers.
Over these three years, we have increased our efforts on
the earnings side by making major capital investments to
expand production capacity and advanced other preparations
to tap into robust demand for products in the future.
Specifically, Hitachi Chemical expanded production capacity
for semiconductor CMP slurry in Taiwan and Japan andconstructed a new factory in Taiwan for copper-clad laminates
used in printed wiring boards on the expectation that thesetwo products will drive earnings growth.

Key Measures for the 2021 Medium-termManagement Plan
During the 2021 Medium-term Management Plan, Hitachi
Chemical will advance its the niche and cluster strategies while
taking a conservative view of the business environment, which
has become increasingly uncertain in terms of trade policies
of various countries and market conditions for semiconductors
and smartphones. At the same time, Hitachi Chemical aims
to sharpen its global business competitiveness by further
strengthening its ability to propose customer-tailored solutions
through its Open Laboratory. Hitachi Chemical will contributeto the proliferation of 5G communications and automobiles

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Progress in Fiscal Year 2018 and Roadmap for Going Where We Want to Be
FY2018 Progress
Business Overview
Launched JOINT consortium withsemiconductor packaging and device
manufacturers

Electronics Materials
Expanded production capacity fivefold
for CMP slurry (nanoceria)
VIZIO, Inc. adopted our QD films in its
new 4K TVs

Key Measures for FY2019

Electronic Components
Launched new products for module
substrates

Expand sales and cross-develop
advanced technology materials in thesemiconductor field
Expand market share in anisotropic
conductive films for displays (newproduct)
Expand quantum dot (QD) film items
for mass production

Transform business structure toachieve top market share in high-valueadded products (improve capacity
utilization at the new factory in Taiwan,
promote diverse alliances)

With solutions based onmaterials that competitors
cannot imitate, Hitachi
Chemical will transform
into a high-earnings
business model by
providing “functional
value” that is highly
praised by markets andcustomers around theworld.

Leveraging
its advanced
functional materials
technologies, Hitachi
Chemical aims to bean essential player,
recognized by markets
and customers
around the world, inproviding “functions”
that spur innovations
associated withpeople, products andthe environment.

Increase profitability by expanding
high-value-added products andstrengthening manufacturing
capabilities

with advanced electronics by honing in on solutions based onits unique materials and process technologies.
While coordinating closely with its customers, Hitachi
Chemical aims to rapidly solve problems in response tocustomer requests by building out support systems foreach stage of product design, prototyping, production andlogistics, by leveraging its globally strengthened and expanded
production capacity as well as management resources intechnology services and analysis and evaluation centers.
In the surrounding business environment, supply chain
structures are changing and merging together in various
industries, and future business growth will require open
innovation through alliances and other means. With this in mind,
Hitachi Chemical is advancing strategic alliances while seeking
out partners who share the same vision with Hitachi Chemical.

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Vision for the 10-year
Strategy (FY2025)

Business activities in tune with “Basics
and Ethics” for restoring customers
trust
Reassess product portfolio

Printed Wiring Board Materials
Constructed a new factory in Taiwan
for highly functional laminate materials
for use in printed wiring boards
Opened the Technology Center in
Malaysia for evaluating the propertiesof photosensitive dry films

Goals for the 2021 Mediumterm Management Plan

Over medium and long term, Hitachi Chemical is focusing on
the development of new business fields with an eye firmly on
new markets and technologies that will give rise to innovativetechnologies like artificial intelligence (AI). Centered on the
Packaging Solution Center, which has an Open Laboratory,
Hitachi Chemical will maximize the utilization of JOINT, aconsortium to develop semiconductor packaging technology,
to bring together the knowledge of Hitachi Chemical and otherparticipating companies with the objective of establishinggroundbreaking semiconductor packaging technology
and process technology unheard of today. Through these
initiatives, Hitachi Chemical will contribute to the development
and advancement of the information communications field, andrealize sustainable growth in global business.

Providing Value to Society Through Products and Technologies
Quantum dot (QD) film

CMP slurry (nanoceria)

Anisotropic conductive films for displays

To show brighter images on 4K and 8K LCDs,
quantum dot (QD) films developed by Hitachi
Chemical are used to widen the color gamut
without increasing power consumption.
We offer a lineup of products with reduced
environmental impact in compliance with the
RoHS Directive in the European Union.

CMP slurry (nanoceria) is polishing materials
used in the circuit formation process forsemiconductor devices. They are better
able to reduce the polishing flaws on
the semiconductor substrate than theirconventional counterparts. Cracks and thedisconnection of the circuit, which may result
from such flaws, can also be prevented.

These films are fine anisotropic conductive
materials for displays. These films connect
batches of very small electrodes in the orderof micrometers while achieving both electricalconductivity and insulation properties. Thesefilms enable the production of higher definition
images in smaller, thinner devices, and are widelyused in smart phones, LCDs and other devices.

Quantum dot (QD) film

CMP slurry (nanoceria)

Anisotropic conductive films for displays

Annual Report 201930

Initiatives of Key Businesses

Mobility
Policies of Key Businesses

Provide high-value-added solutions for customers’issues by leveraging our strengths as a component
manufacturer capable of developing proprietary
materials and strengthen our earning capability
Positioning of Hitachi Chemical
25
20

FY202115
10FY201850Vice President and Executive Officer,
General Manager of Mobility Business Headquarters

Hiroyuki Morishima

The 2021
Medium-termManagement
Plan Targets

ROIC

13.0%

Progress on the 2018 Medium-termManagement Plan
Under the 2018 Medium-term Management Plan, Hitachi
Chemical created a foundation for building a top-level position
globally in each product field of the mobility business. As a result,
we achieved our sales targets. Moreover, by turning ISOLITE
GmbH into a consolidated subsidiary, Hitachi Chemical acquireda base in Europe, which was an important issue for global
development. However, we did not reach our target for operating
income, as we were unable to reduce fixed costs at the samepace that production volume declined amid changes in market
conditions and political affairs, in addition to the impact from theimproper testing came to light in fiscal year 2018. We are taking
measures to address this issue as an important priority underthe 2021 Medium-term Management Plan.
In the plastic components business, our product lines that
address the needs of automakers for lighter weight vehicles
performed well, with Toyota Motor Corporation adopting
our high-strength molded plastic gears for use in its nextgeneration engines, and Subaru Corporation utilizing our
exterior plastic molded foam technology for automotive side
garnishes. We will continue establishing basis for future growthin global business during the 2021 Medium-term Management
Plan. In the powder metal products business, Hitachi Chemicallaunched mass production of differentiated products, such

31

Company E

200

CompanyC

CompanyA

Company

Company

B

400

600

D

800

1,000

Revenue (Billions of yen)

Operating margin (%)

30

For the CASE era, Hitachi Chemical aims to create new products andtechnologies while satisfying emerging needs, augmenting its basesin Europe, and expanding its EV business in China. Hitachi Chemical
is keen to improve its operating margin and revenue by reviewing its
manufacturing bases with an eye on expanding global business andworking to further improve development efficiency by using MI.

* Bubble chart created based on research carried out by Hitachi Chemical

as turbo products that use materials able to maintain wear
resistance under high temperatures, and magnetic productsthat use proprietary materials with high magnetic properties
and impact strength. Hitachi Chemical received high praise forthese unique products from its customers. In carbon anodematerials for lithium-ion battery (LiB), operating income waslower than targeted due to tougher price competition with raw
material costs increase and emerging of rival manufacturers
in China. In formulating the 2021 Medium-term Management
Plan, management has drawn up strategic policies in reaction
to these changes in the external management conditions, andis aggressively advancing initiatives to expand business.

Key Measures for the 2021 Medium-termManagement Plan
In the mobility business sector, Hitachi Chemical reviewed
its 10-year Strategy in 2018 in response to the advent of the
CASE era. While honing its materials technologies, Hitachi
Chemical ultimately aims to help create an abundant society
through the realization of comfortable mobility spaces by
globally providing comprehensive solutions to problems in
next-generation automobiles. Hitachi Chemical intends tostrengthen its presence in the weight-saving, electrification,and heat management fields, and then create business
opportunities with these strengths during the transition to
the CASE era. Amid the electrification of automobiles, we areconfident that both our materials and molding technologies
will provide advantages in the fields of motors, batteries, andinverters connecting the two, as electric vehicles will require
functions that are different from conventional automobiles.
Meanwhile, Hitachi Chemical has identified the risk that theelectrification of automobiles may reduce the volume of someAt a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Progress in Fiscal Year 2018 and Roadmap for Going Where We Want to Be
FY2018 Progress

Key Measures for FY2019

Goals for the 2021 Mediumterm Management Plan

Vision for the 10-year
Strategy (FY2025)

Molding Materials Business
Expanded mass production of unique exterior plastic
products using lightweight foam technology
High-strength plastic gears adopted in next-generationenginesCreate global supply structure(Optimization including alliances
as well)

Powder Metal Products Business
Mass production of turbo and magnetic productsthat improve fuel consumption and environmental
performance

Develop key products for CASE
era, win orders

Friction Materials Business
Expanded business by strengthening relationships withalliance partners
Products adopted by Ford Motor Company afterstrengthening operations in North America

Expand environmentally friendly,
copper-free friction materials

Carbon Anode Materials for Lithium-ion Batteries
Tapped into demand from growing xEV market
Stricter environmental regulations in China created abottleneck in materials

Augment global supply chain
Develop high value-added anodematerials
Strengthen sales channels tocustomers in Europe

Functional Resin Materials Business, ElectricalInsulating Varnishes
Tapped into regional demand by establishing a resin
development center in Malaysia (Johor)
Kept up with global business development of
automakers with a three-region manufacturing
structure based in Japan, China, and Asia

Create high value-added molded
products for automobiles
Discover and nurture new needs
for molded by investing resources
to create new businesses

engine-related products. However, we aim to sustain growth in
the business by developing solutions for new functions.
In order to fulfill the requests of customers in eachcountry and region, Hitachi Chemical is advancing global
development based on strategies for each region, an issue
that was thoroughly examined during the 2018 Medium-termManagement Plan. Along with global development, reinforcing
the earnings foundation is another issue of paramountimportance. Hitachi Chemical aims to optimize fixed costs byreassessing the positioning of its bases, expanding automatedproduction lines and inspection processes, in addition toreviewing the product portfolio.

Hitachi Chemical willbuild a robust earnings
foundation by improving
safety, quality, andproduction efficiency.
We aim to pioneer the
CASE era in lightweight
structural materials
through materials,
molding, and shaping
technologies.

While honing its
materials technologies,
Hitachi Chemicalaims to contributeto the creation of anabundant society
through the realizationof comfortablemobility spaces by
globally providing
comprehensive
solutions to issues
in next-generation
automobiles.

Product Lineup for the CASE Era
Electrification

Epoxy molding
compounds forsemiconductors

Composite resin
molded products

Heat management

Anode material for
lithium-ion batteriesHigh heat-resistantvarnishes

CASE
CASE stands for Connected, Autonomous, Shared and Electric, key words that
describe changes underway in the automobile industry.

Turbo bushing

Weight savings

MI (Materials Informatics)
This methodology shortens the time required to develop new materials by utilizing Big
Data analysis and simulations in material development.

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Automotive Side Garnishes
These decorative panels are attached to the bottom of the side doors of an
automobile.

Molded plastic reardoor module

Plastic gears

Interior molded
products

High-temperatureinsulation materials

Providing Value to Society Through Products and Technologies
Exterior plastic molded foam products
Hitachi Chemical was the first company in the world to develop plastic molded foam technology suitable forthe exterior components of automobiles. This technology is currently being used to make plastic components
attached to the lower part of the side doors of the Toyota Lexus. This exterior plastic molded foam technology
was newly developed to satisfy rigidity needs while maintaining appearance quality for exterior components, thecoalescence of existing plastic molded foam technology with proprietary material design
technology, mold design technology, and molding technology accumulated over many
years. By using these technologies, the exterior plastic molded foam products adopted
in the Toyota Lexus UX are about 30% lighter than previous plastic molded components,
while maintaining the same level of rigidity and external appearance quality.

Annual Report 201932

Initiatives of Key Businesses

EnergyPolicies of Key Businesses

Use individual characteristics of global bases
to shake up the product mix and build a sharedfoundation of manufacturing capability
Positioning of Hitachi Chemical
25
20
15

0

Vice President and Executive Officer,
General Manager of Energy Storage Business Headquarters

Misao Nakagawa

The 2021
Medium-termManagement
Plan Targets

ROIC

9.0%

Progress on the 2018 Medium-termManagement Plan
Under the 2018 Medium-term Management Plan, Hitachi
Chemical aggressively advanced M&A activities with the objectiveof establishing a position in global markets by expanding scale.
Hitachi Chemical acquired new bases via HCEN in Taiwan, FET
in Europe, and HCBT in Thailand. As a result, revenue increased
largely in line with forecasts. However, operating income was lower
than expected. This reflected insufficient improvement in productquality, delays passing higher lead raw material costs onto prices
for lead-acid batteries, and fewer-than-anticipated synergies withconsolidated subsidiaries acquired through M&A activities.
In the industrial battery systems business, sales increased
thanks to stronger demand for UPS batteries and forklift
lead-acid batteries, key sources of revenue. To prepare forstronger demand in the future, Hitachi Chemical invested in
new production lines and other facilities. Although growth
looks likely, the emergence of rivals overseas has increased
price competition, and so it has become necessary to reduce
basic costs and introduce new products. Under NEDO’s
demonstration projects in Europe, the smart community
demonstration project in Speyer, Germany, was wrapped up in
2017, and the large-scale hybrid storage battery system wasfinished in Niedersachsen, Germany in November 2018.
In the automotive battery business, sales were lifted by the

33

A

C

10
5

Company

Company

FY2021CompanyB

FY2018
200

400

600

800

1,000

Revenue (Billions of yen)

Operating margin (%)

30

Hitachi Chemical aims to rank in the world’s top three in terms of
profitability in the industry by creating synergies globally through thedevelopment of shared platforms for manufacturing capabilities andthe acceleration of post-merger integration (PMI) after M&A as well
as by increasing sales of high-value-added advanced environmental
products and expanding the product lineup.

* Bubble chart created based on research carried out by Hitachi Chemical

addition of FET and HCBT to the scope of consolidation throughM&A. In Japan, sales increased for ISS vehicle batteries, whichhave superior technologies. In addition to expanding businessscale, we must further reinforce our manufacturing capabilities,
including improvements in quality and production efficiency.
In the capacitor business, Hitachi Chemical successfullyincreased productivity by shifting to OEM production overseas andintegrating production bases for film capacitors. We also workedon the development of highly performed products in Japan.

Key Measures for the 2021 Medium-termManagement Plan
During the 2021 Medium-term Management Plan, our basic
aim is to increase efficiency and create a shared platform for
manufacturing capabilities, while making a comprehensive, boldshakeup of the product line by leveraging the advantages of ourglobal bases, with lead acid batteries that address environmental
issues as a core business. In addition to overseas production
bases, we are unifying global operations in development,
marketing, and procurement, concentrating resources on reducing
the defect rate and improving quality, and optimizing global
manufacturing bases in a bid to rank in the world’s top three interms of profitability in the industry. We are also focusing efforts ondeveloping and commercializing post-lead-acid batteries.
In the industrial battery systems business, the market has
been expanding for UPS batteries and forklift batteries, areas ofexpertise for Hitachi Chemical, which aims to expand its market
share by increasing production in response to this demand.
Hitachi Chemical also aims to improve profitability and expand
its market share by launching new products that address needs
for longer life and higher durability. In addition to storage battery
monitoring systems and services, Hitachi Chemical is buildingAt a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Progress in Fiscal Year 2018 and Roadmap for Going Where We Want to Be
FY2018 Progress

Key Measures for FY2019

Goals for the 2021 Mediumterm Management Plan

Globally unified operations
Concentrate resources on improving
quality
Globally optimize manufacturingbases

Use individual characteristics
of global bases to shake up the
product mix and build a sharedfoundation of manufacturing
capability
Commercialize post-lead acidbatteries

Expand market share in UPS
batteries and forklift batteries
Launch new products
Create a business model for storage
batteries in Europe

Expand market share in UPS andforklift batteries, areas of expertisefor Hitachi Chemical into Europe
and Southeast Asia
Create a business model forstorage batteries in Europe, andgenerate earnings

Increase sales of maintenance-free
replacement batteries in Southeast
Asia
Increase market share in ISS vehicle
batteries

Expand ISS vehicle batteries toEuropeIncrease market share via global
brand strategy
Develop batteries for auxiliary
equipment

Create new products with higher
heat resistance, better reliability,and greater capacities

Transform products and reform
manufacturing

Business Overview
Create global production bases

Industrial Battery Systems
Increased production of UPS batteries
and forklift batteries
HCEN constructed new plant in
Shaoguan, China
Completed a large-scale hybrid storage
battery system in Niedersachsen,
Germany, and began test operations

Automotive Battery
Created a system for reflecting leadcost changes in prices

Vision for the 10-year
Strategy (FY2025)

Aim to be one of top
three global firms interms of profitability
in automotive &industrial batteries
and capacitors

Capacitor
Improved productivity by integrating
manufacturing bases

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and commercializing business models for energy managementthat take advantage of the knowledge gained from NEDO’s
demonstration projects in Europe.
In automotive batteries, we aim to expand our market sharethrough a global brand strategy, in addition to increasing salesof ISS vehicle batteries, and boosting sales of maintenance-freebatteries in Southeast Asia and other regions. We have also set
our sights on margin improvement through the development ofbatteries for auxiliary machinery, demand for which is likely togrow alongside advances in CASE.
In capacitors, Hitachi Chemical is moving to improve
productivity through reforms in manufacturing, whiledeveloping and bringing to market new products that feature

higher heat resistance, better reliability, and greater capacity
for the social infrastructure market.
Hitachi Chemical Energy Technology Co., Ltd. (HCEN)
FIAMM Energy Technology S.p.A (FET)
Hitachi Chemical Storage Battery (Thailand) Public Company Limited (HCBT)
Idling Stop System (ISS)New Energy and Industrial Technology Development Organization (NEDO)
An uninterruptible power supply (UPS) is a power source apparatus. Since it
incorporates devices such as a battery to store electrical power, UPS provides
emergency power to an external load during a definite period of time with set output
when the input power source fails.
Batteries for auxiliary machinery
Batteries for auxiliary machinery are backups for electrical equipment installed in hybrid
vehicles and electric vehicles. Regular 12V lead-acid batteries are placed in the trunk
space or elsewhere.

Providing Value to Society Through Products and Technologies
NEDO’s Demonstration Projects in Europe

Lithium ion batteries for industrial

Hitachi Chemical is participating in three of NEDO’s
demonstration projects in Europe. A large-scale
hybrid storage battery system was completedin Niedersachsen, Germany, where wind power
generation has expanded over the past few
years. This demonstration project commenced
operations in November 2018. The completed
system has two kinds of storage batteries withdifferent characteristics and it is able to charge
and discharge a large volume of electricity at highoutput, economically adjusting the balance insupply and demand for electric power. The aimof the system is to help stabilize the power gridso that more
renewableenergy canbe deployed.

Hitachi Chemical provides lithium-ion batteries
for hybrid RTG* cranes. Regenerative electric
power generated when the crane moves
containers at port is used to charge up thebatteries, thereby helping to reduce fossil
fuels used by diesel generators. In the railway
industry, a new electric train that uses lithium-ion
batteries has been developed. This new electrictrain can run on non-electrified sections of
track, where previously only diesel trains ran, bydrawing energy from batteries that were charged
up during the electrified sections of track.

Test facility for the Niedersachsen
demonstration project(Large-scale hybrid storage battery system)

Decided to register with Ministry of theEnvironment’s JCM Project
In May 2019, Hitachi Chemical successfully
registered with the JCM Project, an initiative
to conserve energy by introducing a container
formation facility at a lead-acid battery plant in
Vietnam that was completed in December 2018,as an auxiliary project facility that was adopted
under the joint crediting mechanism (JCM) of
the Ministry of the Environment in 2015. As aresult, Hitachi Chemical will acquire JCM credits
over the next nine years, helping to reducegreenhouse gases in Japan.

* Rubber tire gantry crane with a hybrid system combining dieselelectric power generators and lithium-ion batteriesHybrid RTG craneLead-acid battery production line withcontainer formation process

Annual Report 201934

Initiatives of Key Businesses

Life Sciences
Policies of Key Businesses

Create synergy with operating companies
acquired through M&A and develop future basefor businesses
Market trends in diagnostic reagent industry andperipheral areas of regenerative medicine industry
Market trends in diagnostic
reagents industry(millions of USD)

(Trillions of yen)

80,0006

CAGR approx. 4 %60,000Market trends in peripheral areasof regenerative medicine industry(2016–2025)

440,000Drug development
Consumables

Equipment
Services

CAGR approx. 20 %(2012–2030)(Services, consumables, etc.)

2

20,000
0
2016

2019

2025

Source: Global Data

0
2012

2020

2030

Source: Hitachi Chemical, based on Ministry of
Economy, Trade and Industry data

Vision for 2025
Executive Officer,
General Manager of Life Science Business Headquarters

Global niche leader in totalsolutions for POCT

Global leader in the contractdevelopment and manufacturingorganization (CDMO) field

Masato Yoshida

The 2021
Medium-termManagement
Plan Targets

Create Group synergies andfoster future business foundation

to establish a cornerstone for global development from basesin North America and Europe, where many new pharmaceuticaldevelopment firms are located, was a major achievement for
Hitachi Chemical. We were able to achieve targets ahead ofschedule for the number of contracts acquired during the 2018
Medium-term Management Plan.

Progress on the 2018 Medium-termManagement Plan

Key Measures for the 2021 Medium-termManagement Plan

The life sciences business excels at providing total solutions
through the Hitachi Group’s network, and is Hitachi Chemical’s
fourth pillar in foundation businesses that will drive future growth.
Under the 2018 Medium-term Management Plan, life sciencesbusiness grew steadily for three years as a result of large-scale
M&A activities and enlargement of the business base.
In the diagnostic reagent business, Hitachi Chemical turned
Kyowa Medex Co., Ltd. (now Hitachi Chemical Diagnostics
Systems Co., Ltd.) into a consolidated subsidiary, building afoundation for advancing business through the acquisitionof products, highly professional human resources, andtechnologies and sales networks.
In the regenerative medicine business, productioncommenced at a newly constructed manufacturing basein Yokohama city, Kanagawa, Japan following the receipt
of orders for manufacturing contracts with Daiichi SankyoCo., Ltd. and SanBio Co., Ltd. Hitachi Chemical signed atechnology licensing agreement with Accellta Ltd. in Israel tointroduce technologies related to methods used in making
stem cell culture media and for culturing stem cells. Moreover,Hitachi Chemical acquired production and sales bases in the
U.S. and Europe after buying stakes in PCT (now HCATS) in
the U.S and apceth Biopharma GmbH in Germany. Being able

In the context of the long-term development of the life sciencesbusiness sector, Hitachi Chemical aims to be a global niche
leader in the POCT field, which is positioned as a focus
domain in the diagnostic reagent business, and a global leader
in the CDMO field for regenerative medicine business. To
achieve this, management has set specific targets in its 10year Strategy and the 2021 Medium-term Management Plan.
In the diagnostic reagent business, we are focusing on
expanding sales of diagnostic reagent products to domestic
medical practitioners who use the compact diagnostic
equipment developed by Hitachi Chemical. In addition, we
will augment our sales channels overseas for POCT reagentsthrough partnerships with local reagent suppliers while utilizing
our sales base in the U.S. With demand for genetic diagnosis
likely to increase, Hitachi Chemical is focusing on the field of
liquid biopsy and is advancing research into new diagnostic
markers with an eye on commercialization within five years.
In the regenerative medicine business, Hitachi Chemical
is keen to turn a consolidated profit through synergies in
PMI with HCATS and apceth Biopharma, which became
consolidated subsidiaries. By deploying CFC systems, atechnology that automates the production of cells, we areautomating key processes (separation, collection, refining,35

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Progress in Fiscal Year 2018 and Roadmap for Going Where We Want to Be
FY2018 Progress

Goals for the 2021 Mediumterm Management Plan

Key Measures for FY2019

Vision for the 10-year
Strategy (FY2025)

Diagnostic Reagent BusinessObtained approval to produce andsell in vitro diagnostics for FGF23related hypophosphatemic rickets
and osteomalacia
Developed new enzymes able toshorten test times for diagnosing
diabetes

Acquire foundation for diagnostic
reagent business in Europe andthe U.S.
·Develop and bring to market new
POCT products·Expand and update the overseas
sales network

Expand overseas sales of reagentsfor dyslipidemia, HbA1c
Increase sales of allergendiagnostic reagents
Concentrate resources in targeteddomains, upgrade structure for
POCT business

Regenerative Medicine
Businesses
Started production in the contract
cell cultivation business forindustrial mass cultivation
Signed agreement to jointly
develop production automation
platforms with Invetech
Entered into contract diagnostic
reagent manufacturing agreementwith GSK for SPEAR® T-celltherapies

Diagnostic reagents
Global niche leader intotal solutions for POCT

Regenerative medicine
Global leader in CDMO
field

Create materials businesses related
to life sciences·Develop culture media technology
and consumables businessincubation

Acquired shares in apceth
Biopharma GmbHS
VA OC
LU IALE

Targeted positions

Turn profitable on a consolidated
basis and update the global
business foundation in Japan, theU.S. and Europe·Establish a globally connectedstructure for production,marketing, and development·Improve earnings by introducing
automation and mass culture
technologies

Create synergies from PMI withacquired companies in Japan,
Europe and the U.S.
Reduce production costs andachieve partial automation byintroducing automated systems
into cell production processes forautologous cell cultivationetc.) in the production of autologous cells. We aim to
improve profitability by reducing production costs,
including personnel expenses, and stabilizing quality
while reducing the work performed manually. Hitachi
Chemical aims to create a consumables business anddevelop culture media technology for regenerative
medicine through its know-how and materials
technologies, the forte of the Hitachi Chemical Group.
With the life sciences business as a pillar, Hitachi
Chemical will examine moving into other businessdomains, such as disease prevention, that link
together the diagnostic reagent business and theregenerative medicine business.

Help improve the qualityof life of people byadvancing individualized
medical treatment

Flow of production for regenerative medicine products (incubation)
Services provided by Hitachi Chemical
Customers(Pharmaceuticals firms)

Cell separation

Cell processing

Collection and refining

Blood sample Transportation

Cell cultivation

Customers Patients

Filling

Production (incubation)

Transportation

Infusion /injection

POCT (Point of Care Testing) are tests that can be quickly performed at a general practitioner’s office.
CDMO stands for contract development and manufacturing organizations that provide contracted services.
Liquid biopsy is a technology for diagnosing diseases with blood and other body fluids instead of using patient
tissue.
Hitachi Chemical Advanced Therapeutics Solutions, LLC (HCATS: formerly called PCT Cell Therapy Services, LLC)
CFC refers to counter-flow centrifugation systems.
Autologous cells are cells from the same patient.
Culture media refer to liquid and solid substances that include the nutrients necessary for cultivating cells.

Providing Value to Society Through Products and Technologies
Diagnostic Reagent Business

Regenerative Medicine Businesses

Allergy diagnostic systems

Established a global service structure for regenerative medicine productsThis system measures the levels of allergenspecific IgE antibodies in human serum,
which helps physicians identify the allergens
responsible for the patients’ symptoms. The
system simultaneously measures 48 IgE
antibodies, including antibodies to pollen,
food and animal allergens, in a 0.2ml sample,
enabling the collection of a large amount ofdata in a single test.

Hitachi Chemical has established a structure for servicing key regions from bases in the U.S.
Germany and Japan for customers in North America, Europe, and Asia, where most newpharmaceutical development companies in the field of regenerative medicine are concentrated.

apcethBiopharma

Number of new pharmaceutical development
companies in the regenerative medicine field*
Hitachi Chemical
Yokohama facility

Europeand Israel

241

Asia

companies

142

HCATS

North
America

484

companies

companies
Africa1

companies

Oceania

23

companies*Number of regenerative medicine-related new drug development companies
Source: Alliance for Regenerative Medicine

Annual Report 201936

Environment / Diversity & Inclusion

Environment

Key Management Indicators in the 2021
Medium-term Management Plan
CO2 emissions

To achieve a sustainable society in harmony with the global
environment, Hitachi Chemical will globally promote thereduction of environmental burden in its business activities,
products, and services and the solution of environmental
issues such as climate change.

(intensity reduction rate compared to FY2010)13%

reduction(FY2018 result)

15

over

% reduction(FY2021 target)*1 Scope: major production site in Japan and overseas (including Group
companies)*2 CO 2 emissions (intensity reduction rate compared to FY2010)
Reduction from 87% in FY2018 to below 85% by FY2021 (target)

Related Key Materiality and Contributing to SDGs

Implementation of social responsibility in the entire value chain
We must identify and properly address risks related to socially
unacceptable behavior in the value chain while also addressing
risks caused by internal behavior in the Group.

Pursuing businesses that offer solutions to environmental and social issues
We must advance business that creates economic value while
also solving issues affecting society and the global environment,such as by working towards SDGs.

Review of the 2018 Medium-termManagement Plan
Under the 2018 Medium-term Management
Plan, the Hitachi Chemical Group continued
with its efforts to conserve energy, including
its Carbon Management Strategy that wasformulated with numerical targets for reducing
CO2 emissions as a management benchmark.
As a result, Hitachi Chemical achieved 96% of
its target for reducing CO2 emissions in Japan
in fiscal year 2018 (4% reduction compared withlevels in fiscal year 2014).
On a global basis, the Group advanced
improvement activities over the course of
the three years of the Environmental Action
Plan for 2016 to 2018. We improved energy
consumed per production unit by 5% throughthe expanded use of renewable energy (uproughly threefold over the past three years),
installation of high-efficiency equipment, andimprovements in production processes. We
improved water usage per production unit by
19% through improvements in water quality andrecycling and reuse. Out of the 12 action items,
however, we failed to achieve numerical targets
for improvement in energy consumed per
production unit, the recycling rate, improvement
in water usage per production unit, andmaintaining zero environmental accidents.
We are taking corrective measures for thesemissed targets, and aim to further improve byfine-tuning key measures in the Environmental
Action Plan for 2019 to 2021.

37

Key Measures for the 2021 Medium-termManagement Plan
Since we drew up the 2018 Medium-termManagement Plan in fiscal year 2015, theworld has changed considerably toward
the realization of a sustainable society
with the adoption of SDGs and the Paris
Agreement. In light of these trends, Hitachi
Chemical formulated the 2021 Medium-termManagement Plan and the Environmental
Action Plan for 2019 to 2021 following
extensive deliberations with outside experts
and relevant internal divisions.
As key management indicators for the 2021
Medium-term Management Plan, Hitachi
Chemical has set a target for reducing CO2
emissions intensity by over 15% by fiscal year
2021 (compared with fiscal year 2010 level) in
major production sites in Japan and overseas,in line with the long-term targets of Hitachi
Environmental Innovation 2050, the common
framework for the whole Hitachi Group. Under
the Environmental Action Plan for 2019 to 2021,
we have set action targets that weigh potential
environmental risks and opportunities, including
measures to strengthen corporate governance,
further reduction of CO2 emissions when
products are used, and address water risks, inaddition to initiatives to reduce environmental
impact centered on facilities.
Hitachi Chemical intends to contribute to therealization of a sustainable society by moving
steadily forward with these measures.

Carbon Management Strategy
With the aim of achieving a lowcarbon society, and to measure CO 2
emissions as a cost in the
manufacturing process, Hitachi
Chemical has introduced the Carbon
Evaluation System, an original,
in-house financial evaluation systemthat positions CO 2 emissions as oneof the costs incurred during
manufacturing and translates thebalance between target emissions
and actual emissions into a carbon
profit or loss. We will reflect these
metrics in its business strategies andenvironmental investments whileconsidering the balance between
earnings and environmental impact ineach business division.

For more information about Hitachi
Environmental Innovation 2050, referto the Hitachi Chemical website
About Hitachi Chemical CSR
Environmental Report Policy on
Global Environment

For more information about theEnvironmental Action Plan for 2019
to 2021, refer to the Hitachi Chemical
website About Hitachi Chemical
CSR Environmental Report
Environmental Management
Environmental Action PlanAt a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Diversity & Inclusion
To deliver “wonders” that exceed expectations and meet thediverse needs of customers and society, Hitachi Chemical
promotes diversity and inclusion to make diverse humanresources the driving force for creation of innovation andprovision of solutions.

Key Management Indicators in the 2021
Medium-term Management Plan
Proportion of diversity in management20%(FY2018 result)

over

30

%

(FY2021 target)*Numerator: Total number of women and non-Japanese nationals
in management positions at Hitachi Chemical and major Group
companies. Denominator: Number of managers at the Company andmajor Group companies.

Related Key Materiality and Contributing to SDGs

Promoting diversity & inclusion to strengthen corporate competitivenessWe must have diverse human resources with different nationalities,
genders, skills, backgrounds, and experiences in order to continue
innovating and reinforcing its competitiveness. We intend to enhance its
management base with diversity and create a corporate culture where all
employees can work together and improve their abilities.

For more information about our diversity
and inclusion initiatives, refer tothe Hitachi Chemical website About
Hitachi Chemical CSR Social
Report Together with Our Employees
Promoting Diversity & Inclusion (D&I)

HiNextAn integrated platform for humanresource management that uses
cloud-based services.
The aim is to expand career options,assign the best people to the rightpositions, and promote co-creation
by visualizing human resource data
across the Hitachi Group.

Review of the 2018 Medium-termManagement Plan
Hitachi Chemical set up special, dedicatedpositions for promoting diversity and inclusionas key aspects of its management strategy
for creating competitive advantages. Underthe 2018 Medium-term Management Plan, We
achieved its 12% target for the percentageof women in management positions (nonconsolidated basis), having implemented
plans to train and promote female employees
in each business division. In April 2019, theCompany appointed a woman to an Executive
Officer position. Groupwide, our humanresources have become increasingly diverse
as operations have expanded globally, with
about 60% of our 20,000-strong workforce
consisting of non-Japanese people.
Hitachi Chemical has set World Class
Professional (WCP) as its vision for humanresource development (i.e., the ideal
employee) with the aim of establishing a
global human resource system that includes
an employee training program and amanagement by objective (MBO) system thatencourages employees and organizations
to take on challenges. To foster a culture of
dialog and challenge-taking, we first launched
the Global Coaching Program in fiscal year
2012 and had over 10,000 employees takepart in it fiscal year 2018.

Key Measures for the 2021 Medium-Term
Management Plan
During the 2018 Medium-term Management
Plan, Hitachi Chemical has identified the ratioof women in management positions on a
non-consolidated basis as a key management
indicator. In order to have more diverse
opinions reflected in management as global
business development accelerates, we aim
to promote diversity at the decision-making
layer with diversity targets for management
on a global basis for the Group.
Under the WCP vision for human resource
development, we will create a global
foundation for the Group that facilitates thecycle of human resources management in
hiring, training, and promoting employees. In
February 2019, we began operating HiNext
as a human resources information systemthat enhances visibility on employee skills
and experiences across the Group.
In addition, to continue innovating withdiverse human resources, Hitachi Chemical
is augmenting its systems and nurturingawareness in an effort to foster a healthy andinclusive workplace environment where eachand every employee can work to the best of
their ability.
Once a year, all employees of the Groupare given a survey to understand how thesemeasures have had an impact, and where
improvements can be made.

Annual Report 201938

Corporate GovernanceCorporate Governance
Hitachi Chemical will carry out management in the interests of shareholders andall other stakeholders by establishing the Hitachi Chemical Corporate Governance
Guidelines in order to achieve sustainable growth and increase corporate value.

Measures to Strengthen Corporate Governance Structures
In order to achieve a high level of agility,
objectivity and transparency in its
management, Hitachi Chemical adopts
the “company with nominating committee,etc.” structure that separates executive
and supervisory functions. To maximize theadvantages of this organizational structure,
Hitachi Chemical has an executive framework
centered on the President and Chief
Executive Officer that facilitates management
based on highly agile and professional
decision-making. The Board of Directors
supervises managerial functions from an
independent and objective standpoint.
Furthermore, Hitachi Chemical has ensured
diversity among Directors and reflects on
their management opinions thus capitalizing

Changes in corporate
governance structures

their respective extensive experienceand knowledge. We are also reinforcing
operational aspects of the Board of Directors
through means such as the introduction of asystem for evaluating effectiveness.
Additionally, in order to attain sustainablegrowth and increase corporate value, we haveestablished the Hitachi Chemical Corporate
Governance Guidelines and prepared the
Corporate Governance Report for submission
to the Tokyo Stock Exchange.
With strengthen governance at the global
level as a basic policy in the 2021 Mediumterm Management Plan, Hitachi Chemical has
been rebuilding its compliance systems andreinforcing Group governance.

Establishment of structure of
a company with committees
Companies Act
enacted

2000
Transitioned to a company withnominating committee, etc

2003

2006

Japan’s Stewardship Code announced
Revised Companies Act
comes into effectCorporate Governance
Code introduced2010

For Corporate Governance Guideline,
the Hitachi Chemical website About
Hitachi Chemical Corporate Profile
Corporate Governance Hitachi
Chemical Corporate Governance
Guidelines

For strengthen governance at the global
level, refer to P.25.

Composition of the Board of
Directors (As of the 30th July 2019)
Percentage of non-executive Directors

2014 2015

Starting in FY2003

FY2013
Starting in

Foreign Directors appointed

FY2014

Conducted effectiveness evaluationof the Board of Directors’

78% (7 out of 9 Directors)* Chairman of the Board does not concurrently
serve as an Executive Officer.

Starting inFemale Directors appointed

For detailed information on corporate
governance, refer to the Hitachi
Chemical website About
Hitachi Chemical Corporate Profile
Corporate GovernanceStarting in

FY2015Percentage of Outside Directors

44% (4 out of 9 Directors)

Percentage of Outside Directors in
Nominating, Compensation, and Audit
Committees
Nominatng Committee:

60% (3 out of 5 members)Compensation Committee:

Corporate governance structure (As of the end of June 2019)

60% (3 out of 5 members)

Audit Committee:

Annual General Shareholders’ Meeting[Supervision]
Nominating Committee[Execution]

80% (4 out of 5 members)

Board of Directors
Compensation Committee

Audit Committee

President and Chief Executive Officer

Executive Officers’ Meeting

Senior Vice President and Executive Officer, Vice
President and Executive Officers, Executive Officers(An advisory body to the Chief
Executive Officer)

Nominating Committee:
Decisions regarding proposals on theappointment and dismissal of Directors
Compensation Committee:
Decisions on compensation for Directors
and Executive Officers

Business
divisions
Independent Auditor
Auditing Office39

Main authority of eachcommittee(Ernst & Young ShinNihon LLC)

Audit Committee:- Audit of Directors and Executive Officers’
business operations and preparation ofaudit reports- Decisions regarding proposals on
the appointment and dismissal of
Independent Auditors

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Attendance rate at Board of
Directors’ meetings in FY2018
Name

Kazuyuki Tanaka
Takemoto Oto
George Olcott
Masayuki Sarumaru
Richard Dyck
Chieko Matsuda
Yoshihito Kitamatsu
Koji Tanaka*
Yoshihiro Nomura
Hisashi Maruyama

Attendance rate

100%

(16 out of 16 meetings)

100%(16 out of 16 meetings)

100%(16 out of 16 meetings)

94%(15 out of 16 meetings)

100%(16 out of 16 meetings)

100%(16 out of 16 meetings)

100%(16 out of 16 meetings)

Convocation Status of Important Meetings
In fiscal year 2018, Hitachi Chemical’s Boardof Directors held 16 meetings and passed
resolutions on important matters relating
to the basics of management, such as
management policies, and the appointmentof Chief Executive Officer and Executive
Officers. Additionally, the Board of Directors
periodically received reports on businessresults and engaged in discussions as wellas promoted the development of appropriate
internal control and risk management
systems and supervised the effectiveness ofthe systems’ implementation.
The Executive Officers’ Meeting wasconvened 24 times to discuss importantmatters affecting the Hitachi Chemical Group,
combining the knowledge of all Executive
Officers so the Chief Executive Officer canmake accurate and prompt decisions.
In regards to other important meetings,
the Nominating Committee held 4 meetings,
the Audit Committee held 13 meetings, theCompensation Committee held 6 meetings,
the J-SOX Committee held 4 meetings andthe Compliance Management Committee
held 4 meetings.

86%(12 out of 14 meetings)

94%(15 out of 16 meetings)

100%(16 out of 16 meetings)* Elected at General Shareholders’ Meeting
held in June 2018.

Formulation of the 2021 Medium-term Management Plan

Some of the items
discussed at the Boardof Directors’ meetings in
FY2018

Measures to prevent a recurrences of inappropriate product testingat Hitachi Chemical
Conclusion of a final agreement for the acquisition of apceth
Biopharma GmbH

Ensuring the Effectiveness of Audits by the Audit Committee

AJF
Allied JB Friction Pvt. Ltd.

The Audit Committee consists of five
Directors including four Independent Outside
Directors, under whom three staff members inpositions equivalent or subordinate to generalmanagers of departments are assigned.
The Audit Committee holds a meeting every
month and determines audit policies, audit
execution plans, etc.
Additionally, the Audit Committee conducts
auditing activities including interviewing
Executive Officers, attending importantinternal meetings, and performing audits at
the head office, division, business sites andGroup companies. In fiscal year 2018, audits
were performed at five business sites, one
sales site office, and 34 Group companies.
We are also ensuring the effectivenessof auditing activities through collaboration
secured by frequent meetings and interviews
with the Independent Auditor and the Internal
Audit Section.

Onsite audit of friction material Group company (AJF) in India by Outside
Director Chieko Matsuda and Outside Director George Olcott

Evaluation of Effectiveness of the Board of Directors
Hitachi Chemical has been evaluating theeffectiveness of the Board of Directors every
year in order to ensure the effectiveness of theBoard’s management oversight function anddecision-making function, and based on theevaluation results, we take measures to improvegovernance every year.
In fiscal year 2018, we addressed issues
identified in the previous fiscal year’s
effectiveness evaluation and undertook
new initiatives that included revising theoperations of the Board of Directors in linewith the direction of medium- and long-term
management strategies.
For the fiscal year 2018 effectivenessevaluation, which was conducted in
March 2019, we added three questions
to the questionnaire, including one about
monitoring the strengthening of governanceand improvements to the quality assurance
system, after it came to light that inappropriate
product testing was carried out on some ofour products. Each Director conducted a selfassessment and wrote comments for each of
the questions, with the overall conclusion on
effectiveness being that the Board of Directors
was “generally effective.” In fiscal year 2019,
we will take steps to improve effectivenessfurther based on the results of the effectivenessevaluation in fiscal year 2018.

Annual Report 201940

Corporate Governance

Overview of the Evaluation of Effectiveness of theBoard of Directors in FY2018
Overview

We conducted a self-evaluation of all ten Directors (including fiveOutside Directors) using a questionnaire in cooperation with outsideadvisors. Each Director carried out a self-evaluation and wrote
answers to 23 questions, including ones about the composition of theBoard of Directors and its operation. The results of the questionnaire
were analyzed and reported to the Board of Director’s Meeting in May
2019, which deliberated on them.

Results of Analysis
and Evaluation

As is shown below, the Board of Directors of the Company has been
confirmed to fulfill the roles and duties stipulated in the Guidelines
for the sustainable growth of the Group and the enhancement of its
corporate value as well as concluded that the Board of Directors was“generally effective” in fiscal year 2018.
1 Given that positive evaluations of effectiveness accounted for morethan half (52%) while negative evaluations made up a small fraction(11%) of the questionnaire results, we have determined that theeffectiveness of the Board of Directors has been generally secured.
2 As a result of the questionnaire, it was established that thefollowings are key issues to address in the future: management andbusiness strategies, and corporate ethics and risk management.
New questions are expected to help improve effectiveness by asking
questions in regards to monitoring management’s awareness of thecost of capital, and monitoring the strengthening of governance andimprovements to the quality assurance system.

Efforts to Improve
EffectivenessAs a result of performing the effectiveness evaluation, the Directors
expressed numerous opinions about issues and measures forincreasing effectiveness. The Company will ensure the effectiveness ofoperation method, the management oversight function, and decisionmaking function of the Board of Directors, and continue to achieve ahigh level of agility, objectivity, and transparency in its management byrevising the Guidelines and other matters in reference to the opinions
expressed by the Directors.

Questionnaire
Respondents undertake a selfevaluation (selection from three-point
evaluation) for each question in the
categories of “Structure and operationof the Board of Directors,”“Management strategies and businessstrategies,” “Corporate ethics and risk
management,” “Performancemonitoring and the evaluation andcompensation of Executive Officers,etc.” and “Dialogues withshareholders, etc.” and record thereasons and improvements. Threequestions, including “monitoring
management’s awareness of the costof capital” and “monitoring thestrengthening of governance andimprovements to the quality assurance
system,” “effectiveness of audits” wereadded to the questions, bringing thetotal number of questions to 23.

Implementation of Plan to Develop Successors
Hitachi Chemical is making efforts create“Leaders to Win” by securing the necessary
management leaders for achieving its growthstrategies globally on a group-wide basis.
In respect to the discovery and selectionof successor candidates for the Executive
Officers, while taking diversity into
consideration along with plans for candidate

41

development, the Nominating Committee
holds discussions and confirms candidates
based on the Hitachi Chemical Corporate
Governance Guidelines, The Board of
Directors Directors exercises continuous
oversight of the overall efforts by obtaining
advice from the Nominating Committee.

Roles of the Nominating
Committee

Discussion of human resources requirements for the President and CEO
Confirmation of the profile and development policy of candidates for
President and CEO
Confirmation of the individual development of candidates for the
President and CEO, and the status of their assignment

Roles of the Board of
Directors

Discussion of human resource requirements for the President andCEO and the development policy of candidates <consultation fromthe Nominating Committee>
Confirmation of the individual development of candidates for the
President and CEO, and the status of their assignment <report fromthe Nominating Committee>
Determination of appointment standards for Executive Officers
Overall process management and progress management ofcandidates for Executive Officer

For detailed information on the Plan toDevelop Successors, refer tothe Hitachi Chemical’s website About
Hitachi Chemical Corporate Profile
Corporate Governance Hitachi
Chemical Corporate Governance
Guidelines

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

For detailed information on reasons forselecting and dismissing Directors, referto the Hitachi Chemical website About
Hitachi Chemical Corporate Profile
Corporate Governance Hitachi
Chemical Corporate Governance
Guidelines

For the reasons for selecting Directors,
refer to P.45-46

For detailed information about
the standards for determining
independence, refer to the Hitachi
Chemical website About Hitachi
Chemical Corporate Profile
Corporate Governance Hitachi
Chemical Corporate Governance
Guidelines

Appointment and Dismissal of Directors, Executive Officers, and Independence ofOutside Directors
With regard to the appointment of Directors,
the Nominating Committee nominatescandidates based on its standards, and
the General Shareholders’ Meeting makes
decisions by resolution. Decisions regarding
the appointment and dismissal of Executive
Officers are made by the Board of Directors
based on standards set by the Board.
Independent Outside Directors are
independent from Hitachi Chemical and ask

questions, present opinions and give advice,
etc., as appropriate from the perspectiveof ensuring lawfulness, appropriatenessand efficiency of management and raising
corporate value based on their extensive
experience and knowledge at the Boardof Directors Meeting, etc. The Nominating
Committee determines the independence ofOutside Directors based on its standards forindependence.

Directors’ and Executive Officers’ Compensation
The Compensation Committee discusses
and determines the policy for thedetermination of Directors’ and Executive
Officers’ Compensation and the individualcompensation amounts on an annual basis.
The basic policy on compensation for
Directors and Executive Officers is to set thecompensation amounts at a competitive levelthat attracts diverse talents. Compensation
for Executive Officers is linked to businessperformance in order to provide them withmotivation to improve corporate value over
not only the short term, but also on themedium and long term.

Directors’ and Executive Officers’ Compensation (FY2018)
Compensation by category (Millions of yen)Type of management
position

Total compensation(Millions of yen)Monthly base salary

Performance-based
reward and term-end
bonus

Number of eligible
persons

Directors (excluding
Outside Directors)

186 (84)

162 (73)

24 (11)

12 (5)

Executive Officers

543

373

170

15

Total

729

535

194

27

Shareholding Status
For detailed information on cross-heldshares, refer to the Hitachi Chemical
website About Hitachi Chemical
Corporate Profile Corporate
Governance Hitachi Chemical
Corporate Governance Guidelines

Hitachi Chemical decides to hold sharesof other companies if we have determinedbased on the Hitachi Chemical Corporate
Governance Guidelines that there is a reason
for holding shares from the points of business
operation and that continued holding willcontribute to the enhancement of corporate
value. We do not hold shares of othercompanies merely for investment purposes.
As of the end of March 2019, we holdshares of 35 companies with a total amountof ¥7,923 million on the balance sheet.
Whether we can acquire shares of othercompanies is determined by the Executive
Executive Officers’ or Board of Directors
Meetings, which is the decision-making
body, in accordance with the Standards for
Submissions to the Board of Directors. We
also regularly check the aim and reasonabilityof the cross-held shares through deliberations
at the Executive Officers’ Meetings and report
the checking results to the Board of Directors.

Relationship with Parent Company and Ensuring Equality Among Shareholders
As a member of the Hitachi Group, Hitachi
Chemical continues to maintain cooperative
relationships with Hitachi, Ltd. and other
Hitachi Group companies through businessactivities such as management informationexchange, R&D, sharing product supply,and effectively uses management resources
including the Hitachi brand strength toincrease its corporate value.
In order to ensure independence inbusiness operations and transactions,
we also pay due consideration to ensurethat Directors, who concurrently serve as
Director of the parent company or its groupcompany, constitute a minority of the Boardof Directors, as well as developing measuresand an environment to ensure the rights ofshareholders and their equality, including
making it our policy to give consideration tominority shareholders.

Annual Report 201942

Compliance/Risk Management

Compliance / Risk Management
Thorough Practicing of Compliance
We define compliance as more than juststrict adherence to laws and regulations,and understand it to include observance ofindustry standards as well as employees’
routine activities to comply with andenhance corporate ethics and social norms.
Compliance is positioned at the heart ofHitachi Chemical’s CSR activities.
To advance and thoroughly practicecompliance, Hitachi Chemical has definedrule systems, organizational systems andimplementation items within the Hitachi
Chemical Group Global Compliance
Program. In fiscal year 2018, we revised the
Hitachi Chemical Group Codes of Conductthat specifically defines the type of behavior
that all Group employees should follow. In
addition to thoroughly following our Basics
and Ethics that we have always emphasized,
these revisions include contents about therole that we should play as a member of theinternational community.
Our employees are reminded of the Codesof Conduct through e-learning, recitation
sessions, and periodic meetings about casestudies. In the event of behavior that infringes
on the Codes of Conduct, the employee istrained on the importance of compliance,and may receive disciplinary action. In therare occurrence of a situation where laws
or regulations have been breached, theGroup immediately reports it to the relevant
departments and works with its legal counsel
to rapidly resolve the situation and prevent areoccurrence.
We have also designated every Octoberas Corporate Ethics Month, during which

a message from the top management istranslated into 12 languages and conveyed
to all employees, and a wide range ofawareness-raising activities are carried out.
Without exception, all employees aretrained on compliance and human rights
issues when entering the Company toreinforce compliance. In fiscal year 2018,
compliance training sessions were held 94
times with approximately 4,600 employees
attending.
Audits were conducted at Four companies
in Japan and Seven overseas companies,
and guidance and education were provided
to improve their compliance management
systems. In fiscal year 2019, there are plans
to audit 11 companies in Japan and overseas.
We have also set up the Global Hotline, awhistleblowing system through which reports
can be made in three languages (Japanese,
English and Chinese), with established pointsof contact. In fiscal year 2018, 53 inquiries/
reports were received Group-wide, andthe relevant departments worked together
to appropriately handle them. Overall,there were no serious breaches of laws or
regulations.
During the 2021 Medium-term Management
Plan, Hitachi Chemical will rebuild its
compliance systems for the purpose ofreinforcing corporate governance globally.
The Group will constantly improve internal
control systems and work diligently to prevent
compliance infractions by conducting audits
led by regional headquarters, holding regional
compliance meetings, and strengthen its
efforts for compliance training for managers.

Adhering to the Anti-trust Act andCompetition Laws of Each Country
Hitachi Chemical has positioned compliance with the Anti-trust
Act and the competition laws of each country as a priority incompliance management. We have placed an Anti-trust Officer
in each department and each Group company and they interact
with customers, in addition to the President and CEO directly
addressing all employees about the importance of adhering tolaws and regulations during the Corporate Ethics Month. When
there are concerns about even a slight breach of the Antitrust Act, employees are obliged to record the details in the
Compliance Information Record Notebook. All these details areaudited twice a year by the division responsible for compliance.
In July 2018, an attorney was invited to give a presentation
about the Anti-trust Act to all employees at the Company anddomestic Group companies.

43

For detailed information about thoroughpracticing of compliance,
refer to the Hitachi Chemical website
About Hitachi Chemical CSR
Governance and CSR Management
Compliance

Measures to Prevent a Reoccurrence of Inappropriate
Product Testing at Hitachi Chemical
As measures to prevent a reoccurrence of inappropriate product testingthat was discovered in fiscal year 2018, the Company is reviewing its BasicManagement Policies to clarify management’s stance on quality assurance, and
the President and CEO keeps emphasizing to all employees the importance ofpreventing a reoccurrence. In addition, in fiscal year 2018, we revised the Five
Compliance Rules to raise awareness of them again among all employees. To
improve and reinforce the quality assurance system, we appointed a CQO (Chief
Quality Officer), created the Quality Assurance Headquarters and the Quality
Headquarters. Moreover, we endeavored to improve the effectiveness of thesesystems while spreading awareness of the in-house whistleblowing system’s
purpose to all employees.
For fiscal year 2019 onward, Hitachi Chemical will conduct quality audits, build
our product inspection-related systems that removes human involvement asmuch as possible, and reform its corporate culture into one where complianceinfractions do not occur.

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

In its broad range of global business activities, Hitachi Chemical thoroughly practices compliance and has
been strengthening its risk management to avoid obstacles to its business activities caused by various risks.

Strengthening Risk Management

For detailed information about businessrelated risks,refer to the Hitachi Chemical website
Investor Relations IR LibraryFinancial Section

Identificationof risks
Identification of majorrisks and divisionspecific risks

Evaluationof risks

Monitoring
Internal audits androutine self-audits

Risk Management
Process

Summary of risks
and evaluation of
their impact

Risk control
Risk financing

Institutionalizationand organization(response by eachdivision) Education,
disciplinary actions,drillsExpansion of internal
reserves, insurance
policies

Main Risks and Countermeasures

BCP
Business Continuity Planning

Hitachi Chemical requires its officers andemployees to keep an eye on various
risks and act mindfully for preventing suchrisks from arising. In regards to risks that
may have a particularly substantial impact
on management, we have establishedcountermeasures by making their financial
impact visible in the form of a risk assessment
table based on scenarios specifying the risk
types, responding division, scale of damage,and frequency of occurrence through risk
assessment. These are confirmed andreported to the Executive Officers’ Meeting
and are also described as Business-related
Risks in the Securities Reports.
Having established the Auditing Officeand the Risk Management Department as
independent organizations that report directly
to the President and CEO, we are making
efforts to further improve governance systems
from the viewpoint of highly independentinternal audits by the Auditing Office, as
well as from the viewpoints of compliance,business continuity, export controls by the
Risk Management Department.
In addition, Hitachi Chemical appointed a
CRO (Chief Risk Officer) in fiscal year 2018 as an
Executive Officer in charge of controlling risks.

Category

Main risks

Countermeasures

Health & safety
Business continuity

Damage caused by earthquakes
and tsunamis
Infectious diseases, pandemics

Develop manuals on initial response based on the needs of the business site,
formulate BCP and conduct drills, make alternate production arrangements,
support preparedness of overseas Group companies

Stable revenue

Recession, fall in demand,
intensified competition
Failure to detect product defects,
leaks to outside

Formulate medium/long-term strategies, dynamic business operations foreach business division, thorough application of quality management systems,
stringently enforce manufacturing processes, inspections

Unfair trading (bid rigging, bribery) Promote audit, education, and various compliance programs, thoroughly
Social responsibility Leakage of customer or client
manage information through the development of rules and self-auditing, evaluate
information
information security, and execute measures to improve information security

Developing product inspection-related systems with minimal human involvement
Aim: Use automation to eliminate opportunities for employees to manipulate inspection data and inspection reports
Goals: Finish automation at Hitachi Chemical by the end of fiscal year 2020 and at Group companies by the end of fiscal year 2022 (planned investments 12-15 billion yen)

Reform the corporate culture into one where compliance breaches do not occur
Implementation item

Strengthening
compliance training

Continue messaging from top management, improve communications between senior management and employees
Specialcomplianceclasses

Implement workshop-based trainingby job rank for all employees on
preventing a reoccurrence od
inappropriate incidents

Specialist Practice-oriented training to prevent
professional recurrence targeting QA, sales, development &manufacturing divisions (the first line of defense)
training

etc.

Strengthen work rules related to compliance breaches

Annual Report 201944

Board of Directors (As of 30th July 2019)

Kazuyuki Tanaka

George Olcott

Masayuki Sarumaru

Richard Dyck

Chieko Matsuda

front row, the 2nd from the leftback row, the 1st from the leftback row, the 3rd from the leftback row, the 2nd from the rightfront row, the 1st from the right

Chairman of the Board

Outside Director

Outside Director

Outside Director

Outside Director

Chairman of the Nominating Committee

Nominating Committee Member

Nominating Committee Member

Audit Committee Member

Nominating Committee Member

Audit Committee Member

Audit Committee Member

Compensation Committee Member

Compensation Committee Member

Chairperson of the Audit Committee

Independent Director

Independent Director

Independent Director

Independent Director

Dr. Olcott possesses abundantspecialist knowledge relating tohuman resources development andcorporate governance in global
management and wide-ranging
insight cultivated as a manager. It
is expected that the functions of theBoard of Directors will be enhancedby him supervising the execution of
the duties of Executive Officers, etc.
based on such knowledge and insightfrom a standpoint that is independentof the Hitachi Group.

Mr. Sarumaru possesses abundant
experience and wide-ranging insight
as a global manager. It is expectedthat the functions of the Board of
Directors will be enhanced by him
supervising the execution of theduties of Executive Officers, etc.
based on such experience and insightfrom a standpoint that is independentof the Hitachi Group.

Dr. Dyck possesses abundantspecialist knowledge relating tosemiconductors and wide-ranging
insight cultivated as a manager. It
is expected that the functions of theBoard of Directors will be enhancedby him supervising the execution of
the duties of Executive Officers, etc.
based on such knowledge and insightfrom a standpoint that is independentof the Hitachi Group.

Dr. Matsuda possesses abundantspecialist knowledge relating tobusiness administration, accounting
and finance, as well as wide-ranging
insight cultivated as a university
professor and as a manager. It is
expected that the functions of theBoard of Directors will be enhancedby her supervising the execution of
the duties of Executive Officers, etc.
based on such knowledge and insightfrom a standpoint that is independentof the Hitachi Group.

Compensation Committee Member

Reasons for selection
Mr. Tanaka possesses abundant
experience and excellent
management talent as the managerof the Company and other HitachiGroup companies. He is expected topursue the sharing of information asa member of the Board of Directors
and to enhance the decision-making
function of the Board of Directors.

Significant concurrently held positions—

45

Guest Professor, Faculty of Business
and Commerce, Keio University,
Outside Director of The Dai-ichi
Life Insurance Co., Ltd., Outside
Director of DENSO Corporation, Nonexecutive Director of JPMorgan
Japanese Investment Trust plc

Chairman of YKK Corporation

Representative Director of TGK K.K.

Professor, Graduate School ofManagement, Tokyo Metropolitan
University, Professor, Facultyof Economics and Business
Administration, Tokyo Metropolitan
University, Outside Corporate
Auditor of Kirin Holdings Co., Ltd.,
Outside Director of SATO HOLDINGSCORPORATION, Outside Director of
Foster Electric Co., Ltd.

At a Glance

Top Message

Our Strategy

Our Initiatives

GovernanceP05 - P08

P09 - P14

P15 - P28

P29 - P38

P39 - P46

Yoshihito Kitamatsu Hisashi Maruyama
front row, the 1st from the left

front row, the 2nd from the right

Mamoru Morita

Hiroyuki Yamashita

back row, the 2nd from the leftback row, the 1st from the right

Director

Director

Director

Director

Audit Committee Member

Chairman of the Compensation Committee

Nominating Committee Member

Taken at the Innovation Center of
the Company, in Chiyoda-ku, Tokyo

Compensation Committee Member

Having been involved in accounting
and finance operations, as well as
management, in Hitachi, Ltd. andother Hitachi Group companies,
Mr. Kitamatsu possesses abundant
experience and a proven trackrecord. He is expected to supervise
the execution of the duties of
Executive Officers, etc. based onsuch abundant experience and thattrack record and to enhance thefunctions of the Board of Directors.

Having being involved in the
management of the Company and the
Hitachi Chemical Group companies,
Mr. Maruyama possesses abundant
experience, a proven track recordand excellent management execution
ability. He is expected to pursue
the sharing of information as amember of the Board of Directors
and to enhance the decision-making
function of the Board of Directors.

Having being involved in management
strategy for the entire Hitachi Groupin Hitachi, Ltd., Mr. Morita possesses
group-wide global experienceand wide-ranging insight. He is
expected that the functions of theBoard of Directors will be enhancedby him reflecting such experienceand insight in the management of
Hitachi Chemical Group from a broad
perspective.

——

Vice President and Executive Officer
of Hitachi, Ltd.

Having being involved in the
management of the information andcommunication business and themobility business, which are corebusinesses of the Company, andthe management of an overseas
group company of the Company, Mr.
Yamashita possesses wide-ranging
business experience and knowledge.
He is expected to pursue the sharing
of information as a member of theBoard of Directors and to enhancethe decision-making function of theBoard of Directors.

—

Annual Report 201946

GranTokyo South Tower, 9-2, Marunouchi 1-chome,
Chiyoda-ku, Tokyo, 100-6606, Japan
Phone: 81-3-5533-7000 Fax: 81-3-5533-7077

www.hitachi-chem.co.jp/english
Click the link below for inquiries.
www.hitachi-chem.co.jp/english/contact/index.html

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