Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

CEO Message

Hitachi is Constantly Growing Thanks to
Our Employees and Technology
Accelerating Transformation ThroughMode Change for Growth

Hitachi is finishing up a decade-long structural reform and has begun moving towards
sincere growth. I was determined when I became CEO in April 2022, during the launch of theMid-term Management Plan 2024, to take the baton and continue Hitachi’s transformation,emphasizing the history and values assembled by Hitachi since its founding.
We will continue to build a Hitachi that is always changing thanks to our employees andtechnology while also reconfirming our DNA of transformation that has led us to continue
restructuring in accordance with social changes.

President & CEO

Keiji Kojima

Data

10

Financial Strategies

CFO Message

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data11

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Reconfirmation of History and Values for the Next Decade
Since its establishment in 1910, Hitachi has grown together with the development of society and the economy, operating under a foundational
Mission set by founder Namihei Odaira: “Contribute to society through the development of superior, original technology and products.” With thisguiding principle, we have resolved issues facing society through the development of technologies and products that support social infrastructure.
As a student, I visited Hitachi’s Central Research Laboratory in Tokyo for the first time. I remember being impressed that Hitachi appreciatedtechnology above all else, which made me decide to begin my career with the company as a researcher. I was heavily involved in databaseresearch during that time and once again realized the company’s unique attitude towards valued technology. Hitachi’s culture of superior
performance and unparalleled functionality inspires me to never compromise. Hitachi has continued to grow while championing the ideas
passed down from those who came before us. We proudly continue developing new technologies and pioneering services that support social
infrastructure—that is, enhancing people’s lives.
Hitachi is also an organization that can cope with social changes and continuously transform without fear. Our vision of being a Social Innovation
Business as promoted by previous CEOs enabled us to come out of the red following the global financial crisis. To avoid future financial issues,
we shifted back to the true DNA of Hitachi and continue to seek transformation and strategize to solve future social issues. Lumada is a great
symbol of this as it was launched in 2016 to offer solutions that deal with the shift towards digitalization in society that we are experiencing today.
The Lumada concept started when I was CTO in 2014, when it was predicted that the Internet of Things would be the next big social trend.
We created a business model framework that offers value by collaborating with customers and leveraging Hitachi’s rich IT and OT (operationaltechnologies) expertise and technologies. We called this system, inspired by the wisdom of Silicon Valley’s cutting-edge people, “Lumada.” In
addition to data analytics and the knowledge of AI specialists, we also incorporated cultural anthropology, experience design and a variety ofother viewpoints to construct the concept of “people (customers).” Hitachi’s Lumada was finally launched in 2016, not only as a system to run
applications or software on platforms but also as a framework for co-creation too. In addition to expanding the Social Innovation Business, Hitachi
took on the challenge of making a major transformation over the past decade and growing the Lumada business since 2016.
I believe there is a great resemblance between Hitachi and a tree that is constantly evolving. Hitachi’s
biggest strength is its ability to grow and transform to continuously solve social issues. In order forthe tree to continue to grow without weakening, we must change our business, shedding light on
Hitachi’s branches and leaves, similar to the strategy we followed over the past decade. We have gone
through that pruning. What kind of fruit will this tree produce? What sort of buds will become part of the
new trunk? Instead of creating finite products that cannot be altered, Hitachi consistently co-createssolutions alongside society to meet current needs and improve quality of life. Hitachi’s legacy is definedby the fruit—or results—of that tree. I believe it is vital for this tree to change forms along the way andfor Hitachi to continue taking on new challenges.

Hitachiʼs Central ResearchLaboratory
Established as a primaryresearch laboratory in 1942.
Through its establishment,
comprehensive basic researchon electron microscopes andmore was strengthened from thestudy of prior developments andimprovements directly linked toproducts and further progress
was made in developing newproducts.

LumadaP.24

Experience Design
Designing around the userʼsexperience value (experience).

Hitachiʼs Design Thinking

https://www.hitachi.
com/rd/research/design/nexperience/design/Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data12Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

The Mid-term Management Plan 2021 Has Ended and the Groundwork for Growth over the Last Decade is Complete
The emergence of COVID-19 greatly affected social and economic activity worldwide during the three years between fiscal 2019 and 2021 in
the Mid-term Management Plan 2021. Since the second half of 2021, there have been shortages of semiconductors and the costs of materials
have skyrocketed. In 2022, the prices of resources, including crude oil and natural gas, have kept increasing due to the Russia-Ukraine situation,
which exposed us to new geopolitical risks.
The major social and economic changes caused by COVID-19 also affected Hitachi’s management. Nonetheless, we were able to achieve
an adjusted operating income ratio of 7.2% in fiscal 2021. Under these conditions, Hitachi has set the goal of achieving a sustainable society
through the Social Innovation Business in the Mid-term Plan Management 2021 and has established a comprehensive plan to build a businessfoundation for global growth. We built a solid management system through continued efforts and initiatives to improve profitability and believe thiswas a significant accomplishment for the Mid-term Management Plan 2021. We also continue to establish a strong business foundation, pushing
through with profitability improvements and structural improvements to achieve growth in the Social Innovation Business. To make Hitachi an evenstronger global competitor, we acquired GlobalLogic and ABB’s power grid business (now Hitachi Energy) while also deciding to sell publicly listed
subsidiaries including Hitachi Chemical, Hitachi Metals, and Hitachi Construction Machinery. I believe another accomplishment was establishinggoals during the groundwork for growth toward the Mid-term Management Plan 2024.

Mid-term Management Plan 2024̶Mode Change for Growth in the Next Decade
We positioned the three years of the Mid-term Management Plan 2024 as a mode change for growth to create paths allowing continuous growthover the next decade while also valuing prior transformations. Through the power of innovations for the future of society and the creation of value
by digital and green actions, we have changed our future course to focus mainly on growth.
“Creating a sustainable society through data and technology where each person
can actively participate while also protecting the earth.” People and the Earth are
key in our vision for the future. Based on our innovation strategy for 2050, we will
implement digital and green measures from the backcast approach to determine
the next steps.
Additionally, in the Mid-term Management Plan 2024, we took on the challengeof adequately explaining the Lumada framework once again. There are fourmonetization models in Lumada, and we recently strengthened our ability to workfrom any model with the acquisition of GlobalLogic. We believe that Lumada
can accelerate the process of problem solving and co-creation and we hope todemonstrate Hitachi’s potential for further growth through expanding the business.

GlobalLogic
A U.S.-based company
acquired by Hitachi in July
2021. GlobalLogic is aleading company in the digitalengineering service market.

https://www.globallogic.com/Hitachi Energy
Hitachi acquired the power gridbusiness from ABB, a heavy
electric company in Switzerland,and began operations in July
2020. The company name waschanged to its current name inOctober 2021. Hitachi Energy
offers systems, products, andservices of a leading global
standard for the transmissiontransformation of electric energy,including a high-voltage direct
current (HVDC) system allowing
for long-distance transmissionof energy on a large scale anda microgrid allowing for highly
reliable energy supply.

https://www.hitachienergy.
com/us/en
Mid-term Management Plan
2024: Digital, Green, andInnovation

P.22

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data13Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Creating an Organization Where Our Employees and Technology Produce Innovations for Customersʼ Next StepsHitachi is committed to solving social issues of the future through both our employees and technology. We understand that the next step ourcustomers want to take is focused on digital and green. Hitachi will solidly support these steps; Our Mid-term Management Plan 2024 will address
all growth opportunities in these sectors and support in refining the customers’ future decisions. It is vital to drive our business with technologicaladvancement, insights and vision from a medium- to long-term perspective. We are already making strategic moves to refine our digital and green
transformations through the acquisition of GlobalLogic and ABB’s power grid business (now Hitachi Energy), and we are thinking beyond thesetransformations as we move forward.
While Hitachi has always valued research and development, it is essential to understand technological trends and how they differ from aninnovation that changes the world. To convert technology into innovation, Hitachi believes it is imperative to foster human capital with vision,ideas and concepts and I will lead this growth by drawing from my experience in R&D. I am also confident that the strength of more than 300,000
employees in Hitachi will assist in delivering value to our customers and society. In order to respond to the various expectations and needs ofsociety, we will create value and greater promotion of DEI (Diversity, Equity and Inclusion) and co-creation.
We have also been working to strengthen employee engagement to create a culture where each employee takes responsibility for solving social
issues. We aim to be a company where employees are satisfied with their jobs and are proud to be a part. We will continue to be committedto including our employees in more significant discussions and consider what we can do together, as we are doing with PMI (Post-MergerIntegration) to fully utilize the knowledge of our new colleagues at GlobalLogic and Hitachi Energy.
When I was transferred to a startup in Silicon Valley, I had the chance to see Hitachi from the outside. At that time, I was interviewing about 10people every day to recruit human capital and I experienced firsthand how key leaders can flourish into outstanding and unique human capitaland ultimately guide an organization in a unified direction.
It helped me understand the importance of harmony, where various human capital unites under one leader to work together, and the value ofsincerity when facing customers and solving problems with integrity. Finally, the crucial role of having a pioneering spirit is to develop dedicatednew customers.
It was a valuable opportunity for me to understand the true meaning of the Hitachi Founding Spirit ofHarmony, Sincerity, and Pioneering Spirit and the role a leader should play. It was great to see Hitachi
employees willing to work in different settings and fields because they have a willingness to grow. It isbecoming even more important to make Hitachi a company people want to work for again.

DXDigital Transformation

GX
Green Transformation

DEI (Diversity, Equity andInclusion）

P.41

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data14

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Dealing with Complex Global Risks
We are in an age where it is challenging to predict how the social and economic environment will change. To accelerate and grow the Social
Innovation Business, Hitachi will not only collect information on potential upcoming risks, but also thoroughly prepare for and respond to themwhen they occur. It is often pointed out at meetings of the Board of Directors that it has become necessary not only to determine risks related tohuman rights, compliance, and other disasters, but also to prepare for comprehensive risk management due to the constant change in businessenvironment that includes financial risks as well.
Since April 2022, Hitachi has established a global risk governance structure with the CFO taking on the role of CRMO in order to identify therisks that might affect us in the near future. For example, with the situation in Ukraine this year, we responded based on BCP, with the safety ofour 7,000 GlobalLogic employees as our top priority. For Hitachi, having spread its business globally, it is essential to make risk management
preparations to increase our resilience to various risks.

Risk Management Structure

P.75

For a Stronger, Trusted Hitachi Through Dialogue with Stakeholders
As we promote our Social Innovation Business, Hitachi values the dialogue and co-creation with our diverse stakeholders, including customers,
governments, municipalities, academic organizations, and research organizations, to accurately understand the various social problems in eachcountry and region.
To accelerate and lead the initiatives towards decarbonization, a high-priority issue for society, Hitachi was inaugurated as a Principal Partner,
supporting the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) held in the U.K. in November
2021. Through discussions with our various stakeholders, including government officials and management from global companies, we haveshown our role as an innovator in the field of climate change and our strong commitment to realizing a decarbonized society.
We feel that the capital markets have been very supportive in providing us counsel on management through dialogue with institutional investors.
I realized that we could increase Hitachi’s corporate value through co-creation withinvestors, just as we can realize value for customers and society through co-creation.
And from a sustainability management perspective, I believe that dialogue and engagementwith a wide range of stakeholders is even more critical.
We have upheld a mode change for growth in the Mid-term Management Plan 2024 andwe will be focused on generating cash during these three years as a result of implementing
the plan. We will also expand our core free cash flows and enhance our shareholder
returns by improving our earning power and streamlining our balance sheet. We are
already planning a 200 billion yen buyback this fiscal year and we will continue to share theresults of our growth with our stakeholders and make further contributions to social andenvironmental values.

Generating Cash

P.45