The Hitachi Group’s Growth Strategy

Story of Value Creation in the IT Sector
The use of digital technologies such as 5G, AI, IoT and robots is essential for companies aiming to continuously raise their corporate
value amid dramatic environmental changes and a focus on digital transformation, or the revolutionization of corporate management
through digital technology, is rising even further. In Japan, where the birthrate is rapidly declining and the population is aging at an
alarming rate, IT-related market is expected to be necessary for improvement in productivity and work-style reforms.

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

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

42%

FY2018 Revenues
Services & Platforms

29%

2,600.0

10.8%

338.0

2,121.6

35 %IoT platform

230.1

Data analytics
AI
Cloud service
Security
IT products (storage server)
Control systems

FY2018 (Results)

FY2021 (Target)

FY2018 (Results)

EBIT (¥ billion)/EBIT ratio (%)
12.5%

325.0

FY2021 (Target)

ROIC
Maintaining high level despite the investment
to expand global digital business10.0%

billionFront Business

65%

Financial systems
IT for banking, insurance andsecurities
Public systems
IT for public offices, municipalities
and educational institutions
Systems for social infrastructure
IT for power generation/energy,transport and communication carriers
Defense systems
IT functions commonly used for allcompanies
Application development,
engineering, operation andmaintenance, project management
and quality assurance* Defense systems are included in"others" for accounting

19.6%
15.0%

212.6

FY2018 (Results)

FY2018 (Results)¥2,121.6

13.0%

FY2021 (Target)

FY2021 (Target)

Note: Figures for each subsegment include intersegment transactions.

Vision and Targets under the 2021 Mid-term Management Plan

Growth Strategies under the 2021 Mid-term Management Plan

Accelerate customer innovation with advanced IT

Digital transformation, which involves attempting to produce

In the IT Sector, we will meet the expectations of customers in Japanreforms in corporate management and business models, isand overseas with the power of digital technology, achieve a

receiving an increasing amount of attention. Under these conditions,sustainable society and aim to become a top-class global solution

mobile payment systems utilized in mobile phone networks, which

provider. Moving forward, we will aim to improve social value throughhave a global penetration rate of more than 100%, are becoming

advanced digital solutions operations in the financial and social

commonplace in people’s lives and are becoming gigantic

infrastructure fields. At the same time, we will strive to create

infrastructures that generate large amounts of data every day. In

environmental value by raising environmental efficiency throughout theaddition, new discoveries and expansion are expected in a wide

lifecycle of our products and services.

range of domains within the X-Tech (crosstech) market, where
FinTech, HR Tech and other digital technologies are used todevelop new services in various fields and industries and transform
industry structure itself. Furthermore, we anticipate growth in theinformation and communication technology-related market moving

54

Hitachi Integrated Report 2019

forward. Under these circumstances, we have steadily improved
profitability and created the cash necessary for growth investmentin the IT Sector by reinforcing front functions and manufacturing
capabilities through reorganization of SI businesses; withdrawing
f ro m o r c o n c l u d i n g l o w - p ro f i t b u s i n e s s e s s u c h a s t h ecommunication network equipment business; and reducing loss
cost through thorough and enhanced project management. Moving
forward, we will continue to expand the Lumada business, whichacts as the core of growth, and invest one trillion yen over the three
years covered by the 2021 Mid-term Management Plan toaccelerate global expansion.

Acceleration of Global Expansion
Previously, in the IT Sector, we established Hitachi Vantara in 2017,
followed by Hitachi Global Digital Holdings in 2018. Also, in 2018,
we acquired REAN Cloud, a cloud-related service provider in the
United States, and, in 2019, we started collaboration in the digitalbusiness with Virtusa, a global IT service company in the UnitedStates. We have also established a joint venture with State Bank ofIndia, the largest state-owned commercial bank in India, and areworking to develop platforms for cutting-edge next-generation
digital payment services. Over the three years covered by the 2021
Mid-term Management Plan, we will invest approximately ¥830
billion into efforts aimed at further strengthening our overseas

Expansion of the Lumada Business
The Lumada business will serve as a growth engine for all of Hitachi

business and will target further business expansion through M&A
and other initiatives.

through the utilization of data and co-creation with customers andpartners. The digital tools and wide-ranging industry and business

Collaborative Creation of Value within the IT Sector

expertise used to make this possible are being condensed into
customer cases adjusted so they can be reused by many

Lumada plays a core role in our efforts to provide social, environmental

customers.

and economic value and to achieve social innovation. On the other

Lumada’s customer cases have been accumulated as “workplace

hand, Hitachi cannot achieve objectives related to the SDGs andknowledge” of “OT × IT × Products,” which Hitachi has refinedSociety 5.0 on its own. We believe that these objectives can only bethrough its customer-centered policies. By using Lumada as aachieved through co-creation with a wide range of customers andstarting point, we can minimize customization and develop andpartners.

implement speedy solutions. Furthermore, the ability to expand

For example, since 2017, we have been supporting the digitization

Lumada into a wide range of areas, such as mobility, smart life,of subsidy payment operations and other financial services offered

energy and industry, is a major factor that distinguishes Hitachi fromby the state-owned Vietnam Post. In fiscal 2018, we expanded theits competitors.

scope of this digitization to include social security subsidy andWe worked to expand digital solutions using Lumada during thepension payment operations and are currently promoting further

three years covered by the 2018 Mid-term Management Plan,

expansion on a nationwide scale. Through this co-creation, Hitachi

launching the business globally in 2016 and investing about ¥100

will combine its technologies with Vietnam Post’s services to improvebillion into the launch of related businesses. Currently, we havethe quality of people’s lives. We aim to help improve convenience foramassed more than 650 customer cases (as of the end of fiscal

6 million subsidy recipients starting in 2020.

2018), which are examples of co-creation with users. On the other

Together with our customers and partners, we will form a Lumada-hand, we must refine Lumada’s customer cases and the solutions

centered ecosystem that enables expertise, resources and skills tothat embody them on an ongoing basis as the management andbe shared while further accelerating social innovation.

business issues facing our customers continue to change
constantly. As we move forward, we will strive to expand theLumada business by accumulating new customer cases andsolutions through co-creation with customers and partners.
Over the three years covered by the 2021 Mid-term Management
Plan, we will continue to invest ¥150 billion in the Lumada businessand related projects, aiming to expand the use of Lumada in othersectors and to develop and expand the digital specialists/humancapital essential to the acceleration of the Lumada business. In
fiscal 2021, we will increase our number of digital specialists to
30,000.

55

The Hitachi Group’s Growth Strategy

Story of Value Creation in the Energy Sector
The world’s energy demand continues to expand against a backdrop of population growth and economic development, as well
as social innovation such as the recent expansion in the scale of data centers and the spread of electric vehicles. On the other
hand, serious power shortages in developing countries remain a problem and one billion or more people are forced to live without
electricity. Furthermore, movements to reduce CO2 emissions and decarbonize are picking up speed throughout the world in the
midst of response to global climate change. Hitachi will respond to these issues with energy solutions that leverage the strengths of“OT × IT × Products” in business fields such as renewable energy and power grids.

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

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

More than
1,700
1,700.011%

456.6

More than
1,520

304.2
171.6

More than 180

FY2018 (Results)

FY2021 (Target)

FY2018 Revenues

More than10%80%¥456.6billion*1
Energy BU

More than
170.0
7.9％

Nuclear
Energy BU

62%Power grid (14%)

38%

Substation, breakers, transformer

Nuclear power plant (ABWR)
Remotely operated vehicle*2

35.9Services (24%)

Fuel transport and storage

Control system maintenanceservices

casks

FY2018 (Results)

EBIT (¥ billion)/EBIT ratio (%)

ROIC

FY2021 (Target)

Renewable Energy Solutions (16%)
Mega solar*3

More than
170.0

Others (8%)

7.5%
5.8%

More than
10％
FY2018 (Results)(254.8)(55.8%)FY2018 (Results)

FY2021 (Target)

FY2021 (Target)

Energy BU
Nuclear Energy BU*1 Includes the control systems business, which is posted in IT Sector*2 Developed as operations of International Research Institute for Nuclear Decommissioning. This development
was conducted using business expense subsidies provided by the Agency for Natural Resources and Energy
in connection with decommissioning efforts and water pollution countermeasures.
*3 FY2018 figures except one-time expenses.

Vision and Targets under the 2021 Mid-term Management Plan
Providing energy solutions that contribute to a stable energy
supply and efficient facility management
The energy business forms the core of the Social Innovation Businessand contributes to the achievement of the SDGs. In the Energy Sector,
we will provide energy solutions that make use of the strengths of “OT× IT × Products,” such as nuclear power generation systems,
renewable power generation systems, power grid systems forreceiving and transforming, transmitting and distributing electricity,

The Chugoku Electric Power Company, Inc.’s Shimane Nuclear Power Station
Unit 3, under construction

predictive diagnostics for equipment and remote monitoring services.
Providing these solutions will enable us to contribute to a stable energy
supply for customers, efficient facility management and the cutting of
CO2 emissions, as we work toward a low carbon or decarbonizedsociety.

Ultra-high voltage gas insulated switchgear (UHV GIS)

56

Hitachi Integrated Report 2019

Growth Strategies under the 2021 Mid-term Management Plan

In the renewable energy business, Hitachi will strengthen its

Previously, in the Energy Sector, we have been converting our

combining its services and Enercon’s wind turbines to develop windbusiness portfolio in response to changes in the market environment

power solution business, which will stabilize operation and reducesurrounding energy while promoting the launch of high-value-added

maintenance costs.

partnership with Germany-based wind turbine manufacturer Enercon,

service businesses and the enhancement of the solution business. In
the future, the power transmission and distribution market is expected

Power grid businessto expand significantly both in Japan and globally against a backdrop

In the power grid business, we will promote the expansion ofof the spread of renewable energy and the expansion of distributed

businesses in industrial fields, including the expanding data centers

power supply. In response to these projections, we plan to acquireand electrification of factories and the provision of solutions related to

ABB’s power grid business during the first half of 2020. Digitalelectric vehicles. In the HVDC (High Voltage Direct Current)

technology is indispensable for the achievement of advanced energy

transmission business, we will conduct active development related to

management, and power grids are an area in which Hitachi can fully

the offshore wind power market and interregional and international

utilize its digital technology. Hitachi’s energy business had been

DC power transmission. In addition, we will work on the development

primarily concentrated in Japan. However, we will accelerate global

and deployment of new solutions that fuse DC transmission andbusiness expansion by utilizing the expertise and resources of thedigital technologies.

power grid business of ABB which has the largest share of the global
power grid market. At the same time, we will also focus on
strengthening and expanding our solution and service businesses

Further Demonstration of Our Competitive
Advantageusing Lumada. In addition, Hitachi will continue to engage in initiatives

Taking advantage of its “OT × IT × Products” strengths, Hitachi will

aimed at providing a stable energy source through its nuclear energy

provide solutions, including power generation and power gridbusiness while using its advanced technological capabilities andsystems, to all customers involved in energy production, distribution

abundant knowledge to contribute to the decommissioning of theand consumption. Furthermore, following the acquisition of ABB’s

Fukushima Daiichi Nuclear Power Plant. Furthermore, we will use thesepower grid business, which has the largest share in the global

same attributes to promote construction that is compliant with newmarket, we will accelerate new innovation by combining its products

regulatory standards and aims to support the early resumption ofand software with Lumada.

operations at domestic nuclear power plants.

Enhancement and Expansion of the Solution andService Businesses Using Lumada

Collaborative Creation of Value within the Energy Sector

In the energy solution business, we received orders for a management

Promotion of open innovation

platform for high-temperature parts for gas turbines used in privately

Hitachi is promoting industry-academia collaboration in pursuit of new

owned industrial power generation equipment in 2019. This platform

value creation in the Energy Sector. Targeting the realization of Society

uses Lumada to improve the efficiency of inspection and maintenance5.0, we are working to create a new vision and produce newwork while raising the maintenance capabilities of operators. Following

innovation at the "Hitachi the University of Tokyo Laboratory", which wethe acquisition of ABB’s power grid business, we will aim to develop

established with the University of Tokyo in 2015. In the Energy Sector,

solutions on a global scale by utilizing its customer base, engineering,

we are building a platform with the goal of simulating long-term energy

technologies and systems.

supply and demand. These simulations will allow different renewableenergy implementation methods to be evaluated and verified, enabling

Service businessauthorities to determine which method is most effective in terms of

In 2017, we concluded contracts in the service business withachieving the goals of the Paris Agreement.

customers. Through these agreements, we will provide solutions that

Hitachi will contribute to social, environmental and economic values bycombine power generation systems with integrated energy andexpanding its provision of energy solutions that utilize Lumada,equipment management services to provide total solutions for energy

including grid and renewable energy solutions, energy management

conservation issues. Moving forward, we will combine Lumada withsolutions and energy conservation and decarbonization solutions.

our on-site capabilities and digital technologies to develop a variety ofFurthermore, we will aim to contribute to the management of 25% ofservice solutions that improve the efficiency of inspection planning

the world’s substations and the supply of stable energy to about 1.8

upgrade and accelerate maintenance and provide predictive

billion people.

diagnostics aimed at preventing failure, as well as remote monitoring.

57

The Hitachi Group’s Growth Strategy

Story of Value Creation in the Industry Sector
In the world of industry, the speed and complexity of market changes caused by factors such as climate change and resource shortages
are increasing along with the working-age population decreases and global competition intensifies. Under these circumstances, thecreation of new services and innovations using advanced digital technologies, such as AI, IoT and big data analysis technologies, is indemand in a variety of different fields. As a result of this demand, the global IoT market is expected to experience a high rate of growth.

Results and Targets*1
Revenues (¥ billion)/
Overseas revenue ratio (%)

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

30%
22%

843.6
251.8
169.1
419.8
FY2018 (Results)

1,000.0
348.0
181.5
470.5
FY2021(Target)

FY2018 Revenues¥843.6

Industrial
Products Business

50 %

9.1%

91.0
6.9％

30.5

58.2

16.0

12.7
12.7

billionIndustry &Distribution BU

Mass-production business (32%)
Air compressors

45.1

32.9

Drive systems

Water &
Environment BU

Marking systems

FY2018 (Results)

FY2021(Target)

Power distribution equipment, etc.

ROIC

Drive systems
Pumps

86.0
56.6
9.4
14.5
32.9
FY2018 (Results)

31.9
16.0
39.3
FY2021(Target)

solution business*2

Radial compressors

8.6%
6.7%

10.8%

Transport systems, etc.

9.0%
FY2018 (Results)

FY2021(Target)

Industry & Distribution BU
Water & Environment BU
Industrial Products Business*1 The impact of a large-scale overseas Engineering, Procurement, Construction (EPC) project of the Industry& Distribution BU has been excluded. Figures for Hitachi Plant Services and Hitachi Plant Mechanics, whichwere transferred in FY2019 from the Industry & Distribution BU to the Water & Environment BU and Hitachi
Industrial Products, respectively, were revised retroactively. Figures for each subsegment include intersegment
transactions. Figures for each BU include the control systems business, which is posted in the IT Sector.
*2 Air conditioning and water treatment facilities for factories, social infrastructure, etc.

Vision and Targets under the 2021 Mid-term Management Plan

seamless solutions that achieve overall optimization. The keys to achieving“Increasing the efficiency of customers’ production and processing

simultaneously possesses products, OT and IT; the use of Lumada andsystems,” “providing safe and secure water environments” androbotic SI, which drives digital innovation; and the construction of value“reducing CO2 emissions”

chains that range from management to workplace and from procurement toIn the Industry Sector, we aim to become the best solution partner for

manufacturing while spanning across fields such as logistics, sales, services

customers in the industrial field by utilizing our strengths in “Products ×and maintenance. With these keys in place, we will aim to become the best

OT × IT.” Furthermore, we will create social and environmental value by

solution partner for customers in the field of industry.

these goals are the Industry Sector, which is a business entity that

“increasing the efficiency of customers’ production and processing
Improving the Overall Value of Customer Businesses

systems” through the provision of solutions that contribute to

Maximize environmental value Maximize social value

distribution fields; “providing safe and secure water environments” to
70 million people per day worldwide using water and sewage
infrastructure and seawater desalination technology; and “reducing
CO2 emissions” through energy-saving products.

Growth Strategies under the 2021 Mid-term Management PlanAs the world changes and customer needs diversify and become morehigh-level, we face various issues that arise between the workplace,

Total seamless solutions

productivity and quality improvements in the manufacturing andCyber space

Management

Manage data
mentManagement

Manage data
ment

Workplace

WorkplaceManagement
data

huMan
Method Material
MachineWorkplace 4M data

huMan
Method Material
MachineWorkplace 4M*4 data

Management

Manage data
ment

Total seamlesssolutions

WorkplaceManagement
data
huMan
Method Material
MachineWorkplace 4M data

Managementthese issues as “boundaries.” By connecting cyber spaces and real spaces

WorkplacehuMan
Method Material
MachineWorkplace 4M data

Real space

using digital technology, we will solve “boundary” issues and provide total

Hitachi Integrated Report 2019

Vision of the Industry Sector*3 Supply Chain Management (SCM)*4 4M: huMan, Machine, Material and Method

huMan
Method Material
MachineWorkplace 4M data

management and the supply chain. In the Industry Sector, we recognize

58

20 %

Water supply and sewage, utility

Built-to-order business (18%)

EBIT (¥ billion)/EBIT ratio (%)

30 %Digital solution business

Global SCM*3
network

Management

WorkplaceCollaborative Creation of Value within the Industry Sector
Total Seamless Solutions that Solve “Boundary” Issues
In the Industry Sector, we will provide total seamless solutions while
focusing on four next-generation solutions (manufacturing, logistics,
maintenance and utility) and connected products, thereby helping to
improve the overall value of our customers’ businesses.
One Lumada solution contributing to the achievement of these goals
is the digital twin solution, which was launched in November 2018. The
solution facilitates AI analysis and simulation by using an advanced
data model to link manufacturing workplace OT and IT data in cyber
space, supporting the optimization of the entire production process.
Data Modeling of Business Operations and 4M and the
Optimization of Production Processes through Digital Twin

Strengthening of OT Area through the Acquisitionof the Robotic SI BusinessIn the Industry Sector, we believe that the manufacturing industry will
evolve from “manufacturing through people and machines” to“manufacturing through people and robots” before progressing to“manufacturing that connects management with the workplace.”
Under these circumstances, we have decided that OT areas related to
the Robotic SI business, which accumulates field data, will become
increasingly important in addition to rising needs for advanced andoptimized manufacturing conducted using robots. In accordance withthis judgment, we reached acquisition agreements in 2019 with JR
Automation, a United States-based robotic SI business operator, andJapan-based KEC.
The industrial world is facing a growing need for automation due tolabor shortages and rising labor costs, and the robotic SI market is
expected to grow rapidly as a result. In the Industry Sector, we will
work to expand the Robotic SI business on a global scale by mutually
utilizing the resources of JR Automation, KEC and Hitachi Industrial
Equipment Systems and the research and development capabilities ofHitachi.
In the Industry Sector, we will globally develop Lumada solutions thatutilize digital technology based on 4M data obtained workplace from
customers by acquiring technology, expertise and customer bases
from these two companies in the robotic SI market. This will enable us

Production
plan

Parts

to contribute to the improvement of our customers' management andProduction

Products

Conceptual diagram of the digital twin solution

to help raise the overall values of their businesses through seamlesscollaboration between workplace and management.

One example of the application of Lumada at manufacturing workplaceis our collaboration with the AMADA Group, a major metalworking
machinery manufacturer. After delivering servo motors used in pressing
machines, we constructed a tooling IoT production line by applying
robotics in 2017. We also contributed to the improvement of productivity
and operational efficiency in 2019, when we built Assembly Navigation
System with the goal of upgrading manufacturing workplaces.

KEC’s Robotic SI business

In Pursuit of Further Growth in the Industry Sector
In the Industry Sector, we will strengthen and expand total seamlesssolutions that leverage the strengths of “Products × OT × IT” andaccelerate and enhance global expansion in pursuit of further growth.
Assembly Navigation System at the AMADA Group’s Fujinomiya Works

Furthermore, we will aim to become a business entity that provides
high added value by expanding recurring business*5 and improving

Furthermore, because of the importance of connected products in
the Industry Sector, in 2017, we worked to increase our global strength
in terms of connected products by acquiring Sullair, an air compressor

capital efficiency.
*5 Cycling business that exists after sale service market and continual replace demand such as replacement
parts.

manufacturer in the United States.

59

The Hitachi Group’s Growth Strategy

Story of Value Creation in the Mobility Sector
Global population is growing and urbanization is advancing rapidly, so that the proportion of people living in urban areas is
expected to rise to 68% by 2050, from around 55% today. In addition, the negative impact from climate change is causing
environmental, economic and social damages. Against this backdrop, in the mobility realm, the demand for clean and highly
efficient mobility solutions such as one for faster and more environmentally friendly intercity transportation and alleviation of
dependency on car use within city centers, and smart solution to manage the people flow in high-rise buildings.

Results and Targets
Revenues (¥ billion)/
Overseas revenue ratio (%)
82%

80%

Building Systems

616.5*1

9.8%

8.1%

55%

1,270.0
650.0*1

124.8
100.2

61.8

46.3*1

*1

620.0

54.0

63.0

FY2018 (Results)

FY2021 (Target)

FY2018 (Results)

FY2021 (Target)

142.6

80.8*1

78.5

13.6%

13.1%

Building Systems BU
Railway Systems BU*1 Figures for Railway Systems BU include the control systems business, which is posted in the IT segment.

Our Ideal under the 2021 Mid-term Management Plan

51.1%

billionericasAm9.9%

37.9%

Interlocking

ETCS*

Satellite Train Control

Driverless

CBTC*

Facility Control

Components
TMS** CBTC：Communications-Based Train Control
TMS：Traffic Management System
ETCS：European Train Control System

Elevators

Rolling Stock

Jap
an

A

Railway Systems
Business Unit
M

EA

62.

%
27.8

FY2021 (Target)

FY2021 (Target)

57.7%

Moving walkways

E

FY2018 (Results)¥616.5

Sale / Manufactureof E&E

Escalators

Building equipment management services

Signalling& Turnkey
FY2018 (Results)

64.1

E&E Modernization

Building Systems
Business Unit

FY2018 Revenues

*1

54.3

42.3%

C
PA

135.1

Building
Servicesbillion

ROIC

11.2%

10.9%

¥621.6
E&E maintenance services

621.6

EBIT (¥ billion)/EBIT ratio (%)

APAC/Others 4.4%

FY2018 Revenues

China 52.5%

1,238.1

Adjusted operating income (¥ billion)/
Adjusted operating income ratio (%)

J a p a 4 3.1 %n

57%

Railway Systems

Principal Products and Services

Very High Speed
Shinkansen
CommuterIntercity
LRV
Metro
Monorail
Components

3%Service &Maintenance11.0 %RS Maintenance
RS Refurbishing
Signalling Operation &Management
Asset Management

Growth Strategies under the 2021 Mid-term Management Plan

Providing People with Safe, Secure and Comfortable

In the Building Systems Business Unit, we expand technologicallyTransportation Services

advanced and competitive products and services, which include theIn the Mobility Sector, we deliver social value by providing people withworld’s fastest elevator (according to our research as of September

safe, secure and comfortable transportation services, and products2019) with the speed of 1,260 meters per minute, and Lumada

and services for urban spaces such as buildings. At the same time, wesolutions leveraging Hitachi Group’s robust resources on digitalcreate environmental value by realizing transportation services thattechnologies such as Internet of Things (IoT) and artificial intelligence.

have a low environmental impact and contribute to, for example,

Meanwhile, in the Railway Systems Business Unit, we realize thereducing CO2 emissions.

differentiation from other competitors by providing total solutions
spanning the manufacture of rolling stock to operational control, IC
ticketing and seat reservation system, and solutions utilizing IoT anddigital technologies for operation optimization, driverless operationand digital ticketing.

60

Hitachi Integrated Report 2019

Building Systems Business Unit

operation, and digital ticketing utilizing location information and other

The market for elevators and escalators (E&E) is expected to continue

data to realize automatic payments via smartphones. In addition to

expanding steadily. Particularly high rates of growth are expected in thefurther reinforcing services and solutions such as these, we will

Asian market, especially in India, which has the world’s second largest

augment the value for customers and provide safe, secure andmarket scale. In the largest market, China, the expected growth area

comfortable transportation services.

has been shifted from new installation to maintenance andIn January 2019, we acquired Ansaldo STS (now Hitachi Rail STS),

modernization of E&E. In Japan, the demand for E&E modernization is

an Italian leader in railway signaling systems, converting the company

expanding and the expectation for new solutions leveraging digitalto a wholly owned subsidiary and delisting it. In addition to further

technologies for workers and tenants in buildings is increasing.

enhancing our strength in the signaling and turnkey businesses, we

Against this backdrop, the Building Systems Business Unit has

expect this move to generate synergies through organizational

achieved growth globally based on its sophisticated products andoptimization and increased production efficiency, allowing us to further

technologies, which are exemplified by the top share (Hitachi research)

expand our global operations.

of order received in fiscal 2018 by unit in China, the world’s largest
market for new installation of E&E, accounting for more than 50% of
the total. Going forward, we plan to combine manufacturing and salesof E&E with building services to realize business growth and increased
profitability. To this end, we are stepping up investment centering on
digitalization. Specifically, we are accelerating investment in a global
control center that functions as a basement for providing leading-edgebuilding services, such as a sophisticated remote monitoring service
which utilizes digital technologies and a solution which realizes efficientand comfortable movement by using sensors in buildings andanalyzing the flow of people.
In addition, in Asia and Middle East, where demand for new

Value Co-Creation in the Mobility Sector

installation of E&E is surging, we are deploying our sales and service
bases, and expanding our business through maximizing the capacity

In the Building Systems Business Unit, we are working on enhancing ourutilization of factories in China and utilizing sophisticated maintenanceproducts and services through the analysis of the data gathered fromand modernization technologies which we have developed in Japan.

elevators, escalators and building equipment, increasing added value ofmaintenance services such as sophisticated remote monitoring andcontrol, providing data to building owners and managers, and creating
new businesses leveraging Lumada.
By positioning the global control center as a core competence anddeploying new solutions leveraging Lumada to the customer base wehave built in E&E business, we aim to develop our business further andrealize the expansion of building service business other than E&E anddifferentiation from manufacturers specializing in E&E.
In the Railway Systems Business Unit, for Denmark’s Copenhagen

Railway Systems Business Unit

Metro we are working on the maximization of transportation capability,

Demand in the railway market is expected to expand throughout thecongestion alleviation and cost reduction through detecting demand

world thanks to economic development. Growth, mainly for rollingbased on the number of people waiting at station platforms and realizing

stock, signaling system and control system, is expected in Europe,

autonomous and flexible operation. With core products such as this, we

Middle East, Africa and Americas.

aim to expand business in the urban transport market in Europe, where

In fiscal 2018, the Railway Systems Business Unit set records forbusiness volume is the highest in the world. Demand is also expected torolling stock deliveries and orders, revenue and adjusted operating

flourish in Americas. There, we aim to secure growth opportunities byincome ratio, highlighting our efforts to build a firm global business

utilizing existing manufacturing bases and leveraging our market

platform. In the future, we intend to move forward with rolling stock,presence in services and maintenance.

signaling system and turnkey business as core businesses. We willIn the Mobility Sector, through social innovation businesses such asalso concentrate investment in digital technologies and IoT to enhancethese, we will provide people around the world with products andour competitiveness further. We are encouraging our Dynamic

services that are safe, secure, comfortable and environmentally friendly.

Headway, which optimizes operations based on demand, autonomous

61

The Hitachi Group’s Growth Strategy

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

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

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

More than 60%
42%1,816.0

More than 2,100.0

More than 210.0
5％

971.0

1,200.01,700.0

485.0More than 500.0
More than 400.0

38.0
22.4
33.0

More than 40.0

360.0
FY2018 (Results)

FY2021 (Target)

FY2018 (Results)

FY2021 (Target)

85.3

More than 44.0

ROIC
More than 15%

More than 10%

145.5

More than
120.0

93.4

EBIT (¥ billion)/EBIT ratio (%)
8%

FY2018 Revenues

Healthcare¥1.8

trillion
Automotive
Systems

20%

Diagnostic systems
Treatment systems

Smart Life &Eco-friendly Systems

53 %Powertrain
Chassis parts
Safety systems

27%

Home appliances
Air-conditioning systems

More than 210.0
10.0%More than
120

29.5
30.7

More than 50.0
More than 44.0

FY2018 (Results)

FY2021 (Target)

FY2018 (Results)

FY2021 (Target)

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

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

Accomplishing business structural reform in support of our next

navigation, automotive lithium-ion battery and cargo handling materials

stage of growth through digital technology

businesses were sold as non-core businesses.

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

We have promoted business structural reforms in the Smart Life Sector

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

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

both procurement and manufacturing. As a first step toward these goals,

Mid-term Management Plan, we will accomplish business structural

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

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

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

business model for Lumada and develop our digital service business,

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

market environment, where the shift to electric brakes is under way.
Competition in product development utilizing electrification and automation
technologies is intensifying both in the automotive system business and

Growth Strategies under the 2021 Mid-term Management Plan

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

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

Automotive Systems, Ltd., during fiscal 2018, ushering in structural

production and quality improvement using digital technologies.

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

62

corporate organization, the Research & Development Group of Hitachi acts

Hitachi Integrated Report 2019

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

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

development efficiency and improving operations through the use of Lumada.

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

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

The Smart Life & Eco-friendly Systems business, which has a longtechnology portfolio, which the Research and Development Group of

history of developing products from consumer perspectives, is a core

Hitachi and Hitachi High-Technologies have built.

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

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

invasiveness (generally, invasiveness refers to stimuli that can disrupt

which involves coming up with methods for improving our lives without

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

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

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

this focus, we integrated Mitsubishi Electric Corporation’s particle

which had been handling design and manufacturing. This merger led

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

venturing into challenging new fields.

the development of technologies that greatly reduce equipment

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

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

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

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

Healthcare businessLife Sector creates social, environmental and economic values by

Many hidden and unmet needs exist within the healthcare businesscreating communities that are easy to live in, which helps improve thefield, and high rates of growth are expected to continue in the future.

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

On the other hand, technology in the existing diagnostic imaging

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

autonomous driving technologies. Furthermore, we will contribute to

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

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

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