Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

SectorStrategies

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Front Business
982.5 billion yen

Services & Platforms

2,389.0

Development of digital technologies
such as AI and analytics

Cloud Services Platform BU:
Cloud services, security,
IT products (storage, servers)

35%

FY2022
Revenues

Provision of digital engineeringand cloud-related services thatdrives Lumada●

IT Services
886.5 billion yen

billion yen

31%

IT Services

Front Business

Development and operation of IT and digital solutions

Building and operation of mission-critical IT and digital systems●

Hitachi Systems, Ltd: System operation, monitoring, andmaintenance and one-stop services covering the entire IT life cycle●

Financial Institutions BU: Development and operation of mission-critical systems
and financial solutions for banks, insurance companies, and securities companies●

Hitachi Solutions, Ltd: Solutions for productivity
improvement and new business creation through combination of
packages and services●

Social Infrastructure Systems BU: Government agencies, defense, local
governments, electric power, transportation sector, etc.
Systems for social infrastructure, building and operation of control systems, digital solutions

Business Performance (Billions of yen)
Adj. EBITA ratio

12.3%

12.6%

14%
CAGR 7%*2（2,600.0）*3

2,450.0
2,389.0

Revenues

1,200.0
Lumada revenues

ROIC*1 Announced on July 28, 2023

Hitachi Integrated Report 2023

Sector Strategies

Market Environment

Services & Platforms
950.0 billion yen 34%

Digital Engineering BU:
Experience design,
digital engineering

CFO Message

Data

Digital Systems & Services

Business Structure●

Financial Strategy

Governance859.0

1,000.0

FY2022 (result)

FY2023 (forecast)*1

8.3%

8.2%

*2 FY2021-FY2024 CAGR

FY2024 (target)*3 In parentheses, revenues are calculated from CAGR.

Aiming to solve increasingly complex management issues and create new business, demand for DX isexpected to continue to increase in the future. The global DX market
from 2022 to 2024 is projected to
expand at an average annual growth rate of 17%.
Moreover, DX initiatives aimed at business growth in Japan will also expand across various fields, with theutilization and spread of cloud and digital technologies expected to accelerate further.

Strengths
Over many years, the DSS sector has cultivated development and operating capabilities for highly reliable
mission-critical systems in the areas of finance, government, electric power and transportation. The
solutions, services and technologies that make DX possible, along with the numerous IT and digital talentin Japan and overseas, also serve as strengths of DSS.
To accelerate the expansion of the Lumada business, we have developed a global service delivery systemthat provides innovative digital solutions created with the design and digital engineering capabilities of
GlobalLogic in a highly reliable and efficient cloud environment. We will further strengthen the digital
resources and capabilities supporting the growth of the Lumada business while striving to further enhance
the profitability of our traditional core businesses, including our business foundations in the development
and operation of mission-critical systems, as well as the products business.

Growth Strategies
Based on Lumada’s customer co-creation framework , we will position digital engineering as our starting
point in an effort to provide end-to-end services from system integration to managed services, and solve theissues faced by customers and society. In addition to business streamlining and cost savings, we will deliver
new value that achieves business growth for customers, including enhancement of the customer experience(CX) and transformations of business models.
Aiming for further growth, we will continually reinforce our business foundations including enhanced talentthrough GlobalLogic’s excellent hiring and training schemes globally and bolt-on M&A, expansion of thealliances with hyperscalers, virtualization and automated operation of storage in which Hitachi excels and theprovision of highly reliable and efficient hybrid cloud solutions made possible by advanced data governance.
In our core business, we will address the needs to innovate and modernize mission-critical systems byleveraging our solid customer base and technological capabilities that enable us to handle large-scale andhighly complex projects. We will also strongly promote the shift to a service-oriented (recurring) businessmodel and achieve improved development efficiency through the use of low-code/no-code technologies
and generative AI , in an effort to further increase profitability.

33

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

SectorStrategies

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Nuclear Energy BU
171.5 billion yen

7%

Railway Systems BU
736.0 billion yen

Hitachi Power
Solutions110.8 billion yen

FY2022
Revenues30%

4%2,469.9billion yen
Nuclear Energy BUPower Grids BU
1,438.7 billion yen

Nuclear power plant ABWR
●Fuel debris removal technologies●Nuclear fuel cycle●

59%

Railway Systems BU
Rolling stock●Signalling & Control●Services and maintenance●Turnkey solutions

Power Grids BU

Hitachi Power Solutions

Automation systems●HVDC (High-voltage direct current)●GIS (Gas insulated switchgears)●Transformers●

Wind power solution●Distributed energy resources●Energy & Facility management as a Service●Engineering and services●

Business Performance (Billions of yen)
6.6%

6.7%

Adj. EBITA ratio

9%
CAGR 13%*2（2,900.0）*3

2,580.0
2,469.9

ROIC*1 Announced on July 28, 2023

Hitachi Integrated Report 2023

Sector Strategies

318.0

370.0

FY2022 (result)

FY2023 (forecast)*1

4.3%

3.6%

*2 FY2021-FY2024 CAGR

Market Environment
Net zero remains a critical global challenge with the drive for clean energy and mobility. Over the last two
years, demand was strong with several key drivers, for example, recovery from COVID-19 and energy
independence from geopolitical issues. In addition, the business model is now shifting toward long-term
engagement. For instance, Hitachi Energy was awarded a long-term framework contract with its partner
to enable the customer’s long-term capacity expansion to accelerate the energy transition.
It will also
allow Hitachi to make a timely decision on capital allocation. In the green mobility market, rethinking how
conventional transportation systems transform, the rise of DX and GX is generating and expanding newmarkets that is driven by data. In particular, cutting-edge and demand-side markets including smart mobility,
energy management services and energy storage solutions are expected to grow rapidly.
In terms of economic forecast, the conversion to green energy is expected to expand by up to 1.5 trillion
U.S.$, while the conversion to green mobility will increase by up to 2.7 trillion U.S.$ by 2030.
By continuing to invest in the “Green Energy and Mobility”, Hitachi is making major strides in a fluid anddynamic market environment.

Strengths
Through divestment and investment, Hitachi has been transforming its portfolio that is competitive in atargeted market and has a global footprint. Especially, rail systems and power grids are in a global leading
position in terms of technology and footprint. By leveraging shch a huge global footprint, Hitachi aims to
be a lifetime partner with our customers to address their issues and pain points throughout the product/system life cycle. We believe that digitalization by using Lumada is a key for the success, and we havethe greatest partner within Hitachi, that is, the DSS sector. Combining domain knowledge, experiencesand expertise with IT capability, driven by data, we believe that we can create business cases for ourcustomers that resolve customers’ challenges.

Growth Strategies

Revenues

Lumada revenues

CFO Message

Data

Green Energy & Mobility

Business Structure●

Financial Strategy

Governance

440.0
FY2024 (target)*3 In parentheses, revenues are calculated from CAGR.

The basis of our strategy is transformation and sustainability. With strong demand, we developed record
high order backlog. Although our main focus in the next couple of years will be delivering such orders, wewill start transformation of our business model to achieve sustainable growth. Key areas for transformation
are our services as well as digitally enabled solutions together with Hitachi Digital.
Internally, we will pursue green transformation in the Hitachi Group supported by the DSS sector. That
will enable the best use of energy, assets and resources. The internal effort will be our offerings for ourcustomers. Our “sell together” approach with GlobalLogic differentiates us from peers and that is our value
proposition. We can collaborate and create synergy within Hitachi and minimize interfaces for co-creation.
None of our peers can provide such a seamless approach and our strategic structure can deliver solutions
for customers.

34

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

SectorStrategies

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Connective Industries

Business Structure
Industrial Digital BU
361.5 billion yen 12%

Building Systems BU
891.0 billion yen 30%

FY2022
Revenues

Water & Environment BU
186.5 billion yen 6%

2,975.2

Industrial Products Business451.1 billion yen 15%

Hitachi Global Life Solutions
392.3 billion yen 13%

billion yen

Industry Group

Industry Group
Industry and distribution solutions, robotic SI● Water supply and sewerage, utility
solutions● Custom-made industrial equipment(process compressors, automated guided
robots, drive systems, etc.)● Mass-produced industrial equipment (aircompressors, marking systems, power
distribution equipment, etc.)

Advanced
Technology Group●●

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

Urban Group●●

Growth Strategies(1) Evolution and expansion of the Total Seamless Solution using the Lumada
framework for collaborative creation with customers

Hitachi High-Tech
674.2 billion yen 23%

Advanced Technology Group●

Hitachi brings together its unrivaled, industry-leading products, including elevators,
escalators, home appliances, air-conditioning equipment, measurement and analysis
equipment, medical equipment and industrial equipment, and provides the Total
Seamless Solution in which it digitally connects its products and solves boundary issues that arise between workplaces
and management, the supply chain and different fields. In a society that is rapidly becoming more complex, it is more
important than ever to solve issues with “domain SI” gained through collaborative creation with customers, which connects
workplaces to management and takes advantage of Hitachi’s proprietary technologies and extensive empirical knowledge,in all layers. Hitachi connects things and makes a difference, thereby providing differentiated value.

Strengths

Urban GroupElevators, escalators andbuilding services
Home appliances andair-conditioning systems

We aim to evolve and expand the Total Seamless Solution using the Lumada framework for collaborative creation withtaking advantage of the strength that comes from having products, OT and IT. Expanding the scope ofcustomers,
applications of the Total Seamless Solution from industry to the urban and healthcare fields and to the green field, thesector plans to expand Lumada revenues at a CAGR of 28%*2 in fiscal 2024.
* Examples of the Total Seamless Solution: Reform and evolution of distribution and delivery operations

Business Performance (Billions of yen)
10.5%

11.0%

12%
CAGR 4%*2（3,100.0）*3

Adj. EBITA ratio

3,000.0
2,975.2

ROIC

783.0

910.0

FY2022 (result)

FY2023 (forecast)*1

10.8%

11.3%

1,100.0
FY2024 (target)*1 Announced on July 28, 2023 *2 FY2021-FY2024 CAGR *3 In parentheses, revenues are calculated from CAGR.

We develop businesses globally based on industry-leading competitive products andAs social issues become more andexpand them by capturing each growing market.
more complex and complicated and are being shared by different fields, investment inindustrial digital transformation and automation is accelerating in the area of industry. Meanwhile, the semiconductor
market is expected to grow in the medium to long term. In the healthcare field, markets for diagnosis and therapy
equipment in cutting-edge fields are growing steadily. In the urban field, the elevator and escalator market remains steady,while the smart building market is expected to expand significantly in the medium to long term.

MarketEnvironment

Initiatives in the healthcare field

Initiatives to build a hydrogen and ammonia supply chain(2) Strengthening recurring businessWe aim to strengthen recurring businessthrough horizontal deployment and sharing recurring business expertise
between businesses. We will evolve our its recurring business model from providing product services based on 0.9
million units of connected products to deepening solutions, where we will continue to develop and deepen solutions
according to customers’ new needs, to achieve recurring business revenues of 880 billion yen and a CAGR of 8%*2
in fiscal 2024.
* Examples of recurring business: Smart building solutions

Revenues
Lumada revenues

Making the retailing supply chain carbon-neutral

Medical solution service platform(3) Accelerating global growth
We plan to increase our overseas revenue ratio from 47% in fiscal 2021 to 52% in fiscal 2024. We aim to achieve a
CAGR of 15%*2 in North America by strengthening key businesses, including investment.
in the North American industry field, we have accelerated the development of the
To expand the global business,
Total Seamless Solution by using the air compressors of Hitachi Global Air Power (formerly Sullair), advancing the fusionof robotic SI and digital solutions at JR Automation, which have built the foundations of their business through M&A,
and leveraging the marking systems of Telesis Technologies and MES/SCADA*4, where Flexware Innovation, which was
acquired in 2022, is strong. In the semiconductor field, we will deepen collaborative creation with customers by utilizing
bases near global customers and will strengthen the fusion of semiconductor manufacturing equipment and measurement
equipment with digital. In the healthcare field, we will strengthen the molecular diagnosis business and particle therapy
systems, particularly in North America.
*4 MES: Manufacturing Execution System; SCADA: Supervisory Control And Data Acquisition35