Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Mid-term Management Plan 2024

Materiality

Value CreationBusiness Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data24

Financial Strategies

CFO Message

Digital Strategy

Digital transformation (DX), which uses digital technology to solve problems and transformsociety for the better, is drawing increased worldwide demand as various social challenges
come to light. Hitachi moved swiftly to focus on the Social Innovation Business, which aims toimprove quality of life (QoL) and contribute to sustainable social and economic development
by leveraging know-how and ideas with data and digital technology at its core. In April 2022,

it established Hitachi Digital in Silicon Valley to further accelerate Lumada’s expansion into
the global DX market. Serving as a command post, Hitachi Digital will formulate and execute
Hitachi’s global Groupwide digital strategy and target growth by creating synergies through thecross-fertilization of OT (control and operation technology), IT, and products.

Overview of LumadaConcept
Launched in 2016, Lumada is a coined term that combines the words “illuminate” and “data.” It
expresses Hitachi’s desire to create value from data using digital technology to meet the needsof customers and society, as well as to help address issues and grow our businesses.

Customers and partners

OT assets

IT assets

Field Data

2 Domain expertise (solutions and customer cases)
Hitachi has knowledge and expertise in a wide range of industries and businesses, including
electric power, railways, manufacturing, and finance, as well as digital solutions that have proven
their value through co-creation with customers. To enable rapid deployment and utilization ofthese assets, we gather universal solutions and customer cases as models and accumulatethem into Lumada. The number and scope of applicable fields are growing every year, andHitachi is using Lumada’s accumulated customer cases and solutions to quickly propose andprovide solutions to resolve issues faced by customers and society.

Business Data

Co-creation with customers and partners(methodologies)

Domain expertise(solutions and customer cases)

Digital innovation platformLumada Overview

1 Digital innovation platform
Lumada’s digital innovation platform brings together advanced digital technologies, such as AI
and analytics. It uses AI tools and other technologies implemented on the cloud (cyberspace) tovisualize and analyze data gathered from the real world, then feed back solutions to the real worldin real time. The digital innovation platform creates and accelerates this cycle. It’s “openness” isstrong point of Lumada architecture. It connects not only Hitachi’s original technologies, but also
other companies’ products and platforms so that it can provide combination of multiple digitaltechnologies, products, and platforms.

3 Co-creation with customers and partners (methodologies)
Hitachi has created value in various forms by activating co-creation with customers and partners
through the following three initiatives. With GlobalLogic joining our ranks in July 2021, we
have gained two new capabilities—design and digital engineering—enabling us to understand
upstream issues and create solutions to them more quickly.

Ways to Accelerate Co-creation
LumadaAlliance
Program

Together with partners who agree with the purpose of our Social Innovation Business, weare building an ecosystem to accelerate open innovation. This ecosystem is expanding, withapproximately 50 participating partners and 50 other candidate companies in discussions tojoin as of March 31, 2022.

LumadaInnovation HubIn April 2021, we opened Lumada Innovation Hub in Tokyo as a flagship base to accelerateinnovation by sharing wisdom and ideas with our customers and partners. It will accelerate
DX by serving as a hub to connect diverse domestic and international co-creation sites andhuman resources. As of March 31, 2022, over 5,100 people from more than 300 companies
have used the service, making it a place for active innovation.

LumadaSolution Hub

We provide Lumada solutions that combine technologies and know-how cultivated throughco-creation with our customers, as well as mechanisms to promote the reuse of applications.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Make the Social Innovation
Business more
profitable with Lumada

Mid-term
ManagementPlan 2018• 2016Lumada global launch• 2017
Acquisition of Sullair

25

Human Resources Strategies

Financial Strategies

CFO Message

Lumada Performance Highlights

Efforts to Strengthen Lumada

Provide an IoT
platform (Lumada)to take the Social Innovation
Business to the next stage

Data

Corporate Governance• 2019Acquisition of JR Automation
Launch of Lumada Solution HubDigital engineering

System integration

Connected productsManaged services

Adjusted EBITA ratio

Strengthen Lumada
to accelerate the Social
Innovation Business
Mid-term
Management
Plan 2021

Lumada Business revenues *Excludes listed subsidiaries

Mid-term
Management
Plan 2024

16%
13%

12%

2,700.0 billion yen

1,870.0 billion yen• 2022
Establishment of Hitachi Digital LLC
Establishment of GlobalLogic Japan

1,393.0 billion yen• 2020Acquisition of ABB’s power grid business (now Hitachi Energy)
Made Hitachi High-Tech a wholly owned subsidiary
Acquisition of FusioTech
Launch of Lumada Alliance Program• 2021
Acquisition of GlobalLogic
Opening of Lumada Innovation Hub in Tokyo

FY2021(result)

FY2022(forecast)

Hitachi Astemo

1%Digital Systems &Services

45%

External evaluations
2021• Received DX Grand Prix award in “Digital Transformation Brand 2021”• Named a leader in the “2021 Gartner® Magic Quadrant™ for Industrial IoT Platforms” report (second consecutive year)2022• Received DX Grand Prix award in“Digital Transformation Brand 2022” (second consecutive year)*Gartner Disclaimer: Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only
those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organizationand should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular purpose.
Gartner and Magic Quadrant are registered trademarks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein withpermission. All rights reserved.

FY2024(target)FY2021
Lumada Business:
Revenue Breakdownby Segment
ConnectiveIndustries

38%

Green Energy &Mobility

16%

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with StakeholdersMateriality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data26

Financial Strategies

CFO Message

Evolution of Lumada
Shift to Cyclical Business Model
As the term VUCA* implies, we are in an era of rapid change, symbolized by technologicaladvances, diversification of customers’ lifestyles and values, and market volatility, while
the focus of business is shifting from the sale of goods to subscription-type solutions, andservice-type businesses are emerging at an ever-increasing rate. To address such changesin customer needs and business conditions, we will evolve Lumada into a cyclical businessmodel that continuously provides value by utilizing digital technologies, such as data analysis
and AI. Specifically, as shown on the right, Lumada will continuously implement a cycle ofunderstanding customer issues (PLAN: first quadrant), creating and implementing solutions(BUILD: second quadrant), operating (OPERATE: third quadrant), and maintaining (MAINTAIN:fourth quadrant) to enhance value for our customers. In this way, we will continue increasing
value for customers.

Secure data management
and hybrid cloud support
Hitachi Vantara, Hitachi Systems, etc.
MAINTAINManaged services

Design thinking and digital engineering skills are extremely effective in capturing the needs andchallenges of customers and society, incorporating them into agile solutions, and increasing
value for customers. With this in mind, we acquired GlobalLogic, which has design thinking anddigital engineering capabilities. To date, we have strengthened and developed our business byleveraging our customer base and capabilities in each of the four quadrants. With the additionof GlobalLogic, we can now connect each quadrant more seamlessly and accelerate the cycle
continuously. We have also expanded our global footprint. We will leverage this cycle to capture
repeat orders and grow Lumada in response to the expanding market.
Leveraging the strengths of Hitachi Energy, Hitachi Vantara, and GlobalLogic, we are alreadyproducing outcomes from OT and IT synergy projects and have initiated a cycle of digitalbusiness development, co-provisioning, demonstration, and implementation.

Digital engineering

PLAN

Understand our customers’
management challengesDesign Thinking

Predictive MaintenanceOperate, maintain,
and assess for the next step

AI tools / Methodologies /Customer Cases / Solutions

Develop solutions with
IT/OT/Products
Digital Twin

Remote/Automation

Implement solutions*Acronym for “volatility,” “uncertainty,” “complexity,” and “ambiguity” (coined term)

Leveraging GlobalLogic’s Capabilities

Design thinking,digital engineering capabilities
GlobalLogic, etc.

OPERATE

Connected products

Product, OT knowledge, customer base
Hitachi Energy, Hitachi Rail, JR Automation, etc.

System integration

BUILD

Highly reliable system integration
Hitachi Vantara, Hitachi Solutions, etc.

Cycle Configuration
Digital engineering business: Driving problem resolution through design thinking
System integration business: Building IoT systems for data collection and analysis
Connected products business: Improving productivity and reducing operating costs by introducing
Internet-connected products and remote/automated solutions
Managed services business: Using operation monitoring and predictive failure diagnosis to achieveadvances in operation and maintenance while creating and embracing new business opportunities insuch areas as ticketing and digital payment utilizing secure data management
Hitachi’s StrengthsHitachi’s major strength, which other companies cannot immediately emulate, is its ability toprovide continuous value to customers and society by linking the capabilities of each quadrant.
In addition to GlobalLogic’s design thinking and engineering capabilities, such capabilities
include the system integration capabilities that our Front Business Unit, Hitachi Solutions,and Hitachi Vantara have developed over many years in Japan and overseas, as well as thecustomer bases and expertise of Hitachi Energy, Hitachi Rail, and JR Automation and thehybrid cloud support of Hitachi Vantara and Hitachi Systems.

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data27

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Hitachi Digital: Spearheading Development and Execution of Digital Strategies across the Hitachi GroupIn April 2022, we established Hitachi Digital as a command post to accelerate the deploymentof Lumada globally.
Hitachi Digital is based in North America, where the market is particularly large. Targeting
the rapidly growing global DX market, it will spearhead the formulation and execution ofHitachi’s Groupwide digital strategy. In North America, the speed of progress and evolution oftechnologies and solutions is extremely high, so Hitachi Digital will play a role in incorporating
best local practices and promoting the expansion of Lumada globally. In addition to Hitachi
Vantara and GlobalLogic, we will accelerate the expansion of Lumada across the Hitachi Groupby driving synergy co-creation with group companies in the OT sector, including Hitachi Energy,Hitachi Rail, and JR Automation.
To this end, the Digital Systems & Services (DSS) sector plans to invest 200 billion yen in growing
Lumada under Mid-term Management Plan 2024. For example, we will look to invest in creatingsynergies with Hitachi Energy and Hitachi Rail, as well as go-to-market initiatives, such as green
transformation (GX) of social infrastructure, while leveraging Hitachi’s own assets to develop
solutions and attract digital talent.

Hitachi Digital will lead the development and implementationof the digital strategies across the Hitachi Group

Provide customers of all the Hitachi Group withinnovative values based on OT × IT × ProductsInterview with CEO of Hitachi DigitalMy mission is to expand the scale of Lumada’s business in the Hitachi Group from 1.4
trillion yen to 2.7 trillion yen. The challenging part of this mission is to grow Lumada’s
business in fields where its presence is not high, such as the Green Energy & Mobility
and Connective Industries sectors.
As a former member of Hitachi’s Control System Platform Division, I have gained personal
experience in OT, and I was also involved with Hitachi Global Life Solutions, which
focuses on consumer electronics (products). One of my important roles is to expand new
business opportunities fields that bring together OT/products and digital technologies.
Using differing business timelines, business models, and KPIs, I will continue striving toconnect OT/products and digital to achieve business successes.
I will chair a Board meeting attended by the CEOs of Hitachi Vantara, GlobalLogic, Hitachi
Energy, Hitachi Rail, and other companies. At the meeting,
we will share each company’s digital strategy, determine
areas of focus and investment, and make decisions on howto approach customers and develop sales and marketing
activities.

Jun Taniguchi,
Vice President and Executive Officer,
CEO of Hitachi Digital LLC

Green Energy & Mobility
Connective Industries
Hitachi Astemo

Digital Systems & Services

Hitachi Digital
Develop and implement the digital strategies across the Hitachi Group
Organize Groupwide projects with locally-led decisions
to accelerate the speed of value creation and provision

Investments in growth for the global expansion of the Lumada businessContinuously invest in the resources and capabilities necessary forbusiness expansion at each quadrant of the customer’s problem-solving cycle
Co-creation, Digital engineering

Global delivery

Cloud, Managed services

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value CreationMateriality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data28Financial Strategies

CFO Message

Our Approach to Lumada’s Business Expansion
From the perspectives of customers’ digital utilization and Hitachi’s business opportunities, we will broadly divide our approach into the following two target areas.

Target Area 1Target Area 2In the technology, financial services, retail, telecommunications, and media industries, wherecustomers are increasingly using digital technology, the DSS sector will take the lead inapproaching GlobalLogic’s customer base. Meanwhile, Hitachi Vantara and GlobalLogic will
collaborate to jointly develop powerful IT solutions and expand their business through crossselling. In fiscal 2021, we combined GlobalLogic’s design thinking and digital engineering
services with Hitachi Vantara’s expertise in cloud services and system operation andmaintenance, enabling us to provide end-to-end solutions that meet customers’ DX needs.

In industries with large assets, such as energy, mobility, automobiles, manufacturing, andhealthcare, we expect digital technology to be the driver of future growth. Here, we will
combine OT, IT, and products to provide customers with end-to-end solutions and services,
including grid automation, MaaS, Industrial Internet of things (IIoT), and digital healthcare,demonstrating the true power of “One Hitachi.” For example, Hitachi Energy, Hitachi Vantara,and GlobalLogic are working together to expand digital solutions in the energy sector byupgrading asset management software and developing next-generation energy platforms.

Lumada Synergy Case Study
Comments from Project Leaders (Hitachi Energy and Hitachi Vantara)

Asset Management Innovation

PLAN

Remote/Automation

Implement solutions

Remote and automatic inspection offacilities using “AI image diagnostics”

Scaling

Power utilities

APM: Asset Performance Management

Railways

Digital Twin

Implementation of facilities
diagnosis and management
systems by “digital twin”

BUILD

OPERATE

MAINTAIN

Hitachi Energy, Hitachi Vantara, and GlobalLogic have launched a project to promote nextgeneration green digital services by leveraging their respective strengths. Targeting the facility
asset management segment of the social infrastructure, public utilities, and manufacturingindustries, the three companies aim to provide end-to-end services covering everything from
customer experience design to solution development, delivery, and maintenance. Among theirinitiatives, Hitachi Energy and Hitachi Vantara took the lead in collaborating on a projectcalled “Lumada Asset Management” in fiscal 2020. Here, Hitachi Energy has integrated DigitalEnterprise, a suite of asset and field operational management solutions provided mainly to electric
power companies, into Lumada, and both companies are now offering large-scale solutions
and engaging in marketing activities targeting the electric power sector in North America andother regions. GlobalLogic joined the project in July 2021, leveraging its design thinking anddigital engineering expertise to provide product development and service design capabilities.
This has strengthened Lumada Asset
Providing condition-based
Optimizing facilities cost byservices by using
Management, which is now expanding“APM modeling” Understand the customers’ “Design thinking”
management challenges
its business with the development
Predictive
Design Thinking
Maintenanceof facility inspection solutions using
Operate, maintain,
Develop solutions withdiagnostic imaging.
and assess for the next step
IT/OT/Products

Buildings, Data centers

The partnership with Hitachi Vantara is a collaboration in go-tomarket as well as product development support. Traditionally,
Hitachi Energy has focused on customers in the utility andtransportation sectors, but through our collaboration with Hitachi
Vantara, we have been able to strengthen our presence in sectors
such as mining, as well as expand into other manufacturingindustries where we had little or no presence.
Bryan Friehauf,
Just looking back over the past year, we have been able to reach Senior Vice President,a large number of customers. Hitachi Vantara has been a strong Enterprise Software
Solutions, Hitachi Energy
value-delivery partner for Hitachi Energy.
We are working together in three areas. First, on initiatives thatcomplement each other’s Lumada software capabilities. This
includes Hitachi Energy’s Asset & Works Management software, andHitachi Vantara’s IoT-related capabilities that connect devices anddata to gain actionable insights. These software capabilities are very
complementary, and are industry leading elements of Lumada.
The second is an effort to accelerate and extend the development of Phil Gruber,
both companies’ capabilities. GlobalLogic is also collaborating on this. Energy Industry Leader,
The third is the market deployment of these capabilities. The sales Hitachi Vantara
forces from Hitachi Energy and Hitachi Vantara are working together
on this.