Results of Value Creation

Information & Telecommunication Systems
Hitachi provides IT services that address customers’ diverse needs by combining
Hitachi’s extensive expertise in a diverse range of business fields, including financial
services, with advanced information technology. Our services cover the entire life cycleof systems, ranging from consulting to system integration, operation, maintenance,
Flash Storageand other support.
Share of Revenues

Overseas Revenue Ratio

Capital Expenditure by
Business Segment

Revenues and Profit(Billions of yen)(Completion basis)

20

%

30

%

Depreciation by
Business Segment

44.7

35.5

9.4%
7.7%
2,109.3

billion yen

48.0

6.9%

3.9%

15

billion yen

2,008.9

5.2%

R&D Expenditure by
Business Segment

billion yen

1,982.8

6.7%

Revenues

16

17

(FY)

Adjusted operating income ratio

EBIT ratio

Main Products and Services
Systems integration, consulting, cloud services, servers, storage, software, telecommunications & networks, ATMs

Segment Performance
Revenues increased 1% to ¥2,008.9 billion, as compared withthe year ended March 31, 2017, due mainly to higher revenues from system integration business in Japan and theimpact of foreign currency translation.
Adjusted operating income increased ¥36.2 billion to¥189.2 billion, as compared with the year ended March 31,
2017, due mainly to profitability improvement in system

Examples ofDigital Solutions

integration business in Japan and the effect of structuralreform for the IT platform & products business.
EBIT increased ¥62.8 billion to ¥139.2 billion, as comparedwith the year ended March 31, 2017, due mainly to adecrease in business structural reform expenses as well as
the increase in adjusted operating income.

Human Flow Visualization Utilizing CCTV

In a collaborative creation project with Tokyu Corporation,
Hitachi has utilized Lumada technology to develop the“Eki-Shi Vision*” monitoring service for gauging passenger
congestion inside stations in real time based on CCTV
(Closed-Circuit Television) footage.
As of the end of July 2018, the service covers 74 Tokyu
Line stations, with plans to expand it to all stations on the
Tokyu rail network (excluding the Kodomonokuni Line andthe Setagaya Line) by the end of March 2019.
Analysis of images taken from CCTV using Hitachi’s
people flow analysis technology automatically detects
whether people are moving or stopped.
Each human image is replaced with a human-shaped
icon and the analysis results are sent at one-minuteintervals to the Tokyu Line smartphone app and cable TV
feed. By providing information on station congestion level tohelp Tokyu rail network users choose whether to wait totake a train or take an alternative route if there is significant
disruption, the service aims to relieve stress for users andenhance Tokyu rail network safety.
* Eki-Shi Vision is a registered trademark of Tokyu Corporation.

Normal rush hour

Service disruption

69

Social Infrastructure & Industrial Systems
Hitachi has a long and proven track record of high reliability in supporting people’s
daily lives through such products and services as rolling stock and train management
systems, power generation systems and transmission & distribution systems,
elevators and escalators, and water solutions. It also offers industrial solutions andequipment to enhance the sophistication of manufacturing workplaces. Hitachi
utilizes digital technologies to provide optimum solutions in addressing the issues

Class 800 train for the Intercity Express
Programme (IEP)

and diversifying needs of customers worldwide.

Overseas Revenue Ratio

Share of Revenues

Capital Expenditure by
Business Segment(Completion basis)

23

%

43

%

Depreciation by
Business Segment

30.0

79.9

billion yen

56.1(Billions of yen)
2,333.1

2,331.9

3.5%

3.3%

2,375.0
4.9%
4.3%

R&D Expenditure by
Business Segment

billion yen

Revenues and Profit

1.2%
–0.9%

15

billion yen

Revenues
EBIT ratio

16

17

(FY)

Adjusted operating income ratio

Main Products and Services
Manufacturing and logistics systems, water treatment systems, industrial machinery, elevators, escalators, railway systems, nuclear and renewableenergy power generation systems, transmission & distribution systems

Segment Performance
Revenues increased 2% to ¥2,375.0 billion, as compared withthe year ended March 31, 2017, despite lower revenues fromthe power & energy business and shrink of less profitablebusiness in industry & distribution field. This mainly reflected
increased revenues from the railway systems business for the
U.K. and that in the industrial products business due to theacquisition of Sullair brand air compressor business.
Adjusted operating income increased ¥38.5 billion to¥115.5 billion, as compared with the year ended March 31,
2017, due mainly to an improvement in profitability of

Examples ofDigital Solutions

Smart Manufacturing Solutions

In recent years, amid rapidly changing business conditions,manufacturers need to develop greater competitiveness to
respond to trends such as increasingly fierce global
competition, more diverse user requirements, anddigitalization. Hitachi is providing smart manufacturingsolutions based on Lumada to help customers in the
manufacturing sector address these major challenges.
One example is the development of the high-efficiency
production model established at Omika Works into Lumada
solutions. Hitachi offers innovative solutions that contributeto higher manufacturing productivity through IoT-enabledvisualization of manufacturing workplace and related
70

business for the industry & distribution field, power & energy
business and industrial products business, despite a decreasein average sales price and an increase in procurement cost inelevators and escalators business in China.
EBIT was ¥101.2 billion, an improvement of ¥121.2 billion
from the year ended March 31, 2017, because of the absenceof impairment loss recognized in the preceding fiscal year in
relation to the uranium enrichment business at an equitymethod associate in the U.S.

workflow, or the adoption of simulator to optimize production planning.
Hitachi is also developing solutions in collaborative
creation with customers, such as initiatives to reinforce
quality by building systems for detecting abnormal operator
actions or facility operations at production sites using
image-analysis technology. For customers focusing on skills
transfer within the workforce, Hitachi is also building
systems that use cameras and sensors to capture theexpertise of veteran technicians in digital form as part ofefforts to develop personnel and improve quality assurance.

Results of Value Creation

Electronic Systems & Equipment
Drawing on the Hitachi Group’s advanced technologies, Hitachi provides systems
supporting the information society, including semiconductor manufacturing
equipment, measurement and analysis equipment, broadcasting and video systems,
wireless communications and information systems, and healthcare solutions that
Particle beam therapy

support healthy lifestyles.
Share of Revenues

Overseas Revenue Ratio

Capital Expenditure by
Business Segment

Revenues and Profit(Billions of yen)
8.2%

(Completion basis)

11

%

59

%

Depreciation by
Business Segment

14.7

19.4

7.0%

billion yen

5.9%
5.7%
1,127.6

5.7%
1,170.3

8.0%

1,086.5

R&D Expenditure by
Business Segment

billion yen

52.1

15

billion yen

Revenues

16

17

(FY)

Adjusted operating income ratio

EBIT ratio

Main Products and Services
Semiconductor manufacturing equipment, measurement and analysis equipment, advanced industrial products, medical equipment

Segment Performance
Revenues decreased 7% to ¥1,086.5 billion, as comparedwith the year ended March 31, 2017, due mainly to theimpact of deconsolidation of Hitachi Koki Co., Ltd. (nowKoki Holdings Co., Ltd.) in the preceding fiscal year,
despite higher sales of semiconductor manufacturing
equipment at Hitachi Kokusai Electric Inc. and Hitachi
High-Technologies Corporation.
Adjusted operating income increased ¥5.3 billion to¥86.9 billion, as compared with the year ended March

Examples ofDigital Solutions

31, 2017, due mainly to an increase in profit of Hitachi Kokusai
Electric Inc. as a result of higher sales of semiconductor
manufacturing equipment.
EBIT increased ¥22.0 billion to ¥88.8 billion, as
compared with the year ended March 31, 2017, due
mainly to the increased adjusted operating income aswell as a decrease in business structural reform
expenses of Hitachi Kokusai Electric Inc.

Predictive Maintenance Service for Superconducting MRI Systems

Superconducting MRI systems use powerful superconducting magnets to image the brain or other internalorgans. Costs can quickly mount up if these machines
unexpectedly break down, due to the need to reschedulescans and undertake emergency repairs. Hitachi hasdeveloped AI technology to predict potential breakdowns
months in advance by analyzing vast amounts of sensor
data acquired from superconducting MRI systems. Thispredictive maintenance service can help to reduce machine
downtime, improving the efficiency of diagnostic procedures within the hospital and ensuring that patients canreceive MRI scans with peace of mind. Going forward,
Hitachi plans to expand predictive maintenance services
to further improve the degree of machine utilization andhospital management by promoting greater utilization ofdigital data.

* The Company transferred all shares of Hitachi Kokusai Electric Inc. stock owned by the Company on May 31, 2018, and then, the Company partially re-acquired
shares of Hitachi Kokusai Electric Inc. stock on June 4, 2018. As a result, Hitachi Kokusai Electric Inc. turned into an equity-method associate of the Company.

71

Construction Machinery
Leveraging decades of technological expertise and know-how, Hitachi offers solutions
that address the needs of a broad range of industries, including civil engineering andconstruction, building and structural demolition, and mining and excavation. Hitachi
also handles the sale, servicing, and maintenance of hydraulic excavators and other
Hitachi Construction Machinery’s ultralarge hydraulic excavator and mining
dump truck

construction machinery to provide integrated solutions globally.
Share of Revenues

Overseas Revenue Ratio

Capital Expenditure by
Business Segment

Revenues and Profit(Billions of yen)(Completion basis)

9

%

80

%

Depreciation by
Business Segment

18.5

959.1
10.1%
758.3

753.9

billion yen

R&D Expenditure by
Business Segment

3.4%

3.5%

3.0%

32.2

billion yen

24.0

3.0%

15

billion yen

Revenues

9.6%

16

17

(FY)

Adjusted operating income ratio

EBIT ratio

Main Products and Services
Hydraulic excavators, wheel loaders, mining machinery

Segment Performance
Revenues increased 27% to ¥959.1 billion, as compared withthe year ended March 31, 2017, due mainly to increased
sales in China and other overseas countries, the effect ofcorporate acquisitions in Australia and the U.S. conducted by
Hitachi Construction Machinery Co., Ltd. in the preceding
fiscal year, and the impact of foreign currency translation.
Adjusted operating income increased ¥66.2 billion to ¥92.5
Examples ofDigital Solutions

Introduction of Integrated Energy/Facilities Data Management Service EMilia

In the Construction Machinery segment, Hitachi has
deployed EMilia, an integrated management service forenergy/facilities data management, at five production plants
in Japan making hydraulic excavators and wheel loaders.
EMilia is a Lumada solution that can realize benefits such asenergy savings, improved operational efficiency andenhanced business continuity planning (BCP) through thecentralized management of energy and facilities data frommultiple sites. The EMilia system collects and visualizes
power-related data from monitoring points on around
14,000 breakers installed on the roughly 1,000 pieces ofcapital equipment located in Hitachi Construction Machinery’s
domestic production plants. The analysis and managementof power data at this level enables finer control, cutting
peak power and realizing other savings through reductions
in standby power consumption. In the future, Hitachi aims
to develop EMilia to realize even smarter factories, basedon the collection and analysis of production management72billion, as compared with the year ended March 31, 2017, due
mainly to the increased revenues because of higher sales andthe effect of the corporate acquisitions.
EBIT increased ¥74.3 billion to ¥97.0 billion, as comparedwith the year ended March 31, 2017, due mainly to theincreased adjusted operating income as well as an increase inprofit of an equity-method associate.

data relating to areas such as product manufacturinghistory and facilities maintenance. This promises not only
to realize energy savings, but also to enable shorterproduction lead-times and predictive maintenance of
onsite facilities, based on real-time understanding of theenergy requirements of each machine, process andproduction line; the cost of production; and the incidence of
emergency repairs.

The Tsuchiura Plant has installed EMilia

Results of Value Creation

High Functional Materials & Components
Hitachi draws on its wealth of technological expertise and know-how to provide avariety of materials and components—such as semiconductor- and display-relatedmaterials, synthetic resin products, specialty steels, magnetic materials, casting
components, and wires and cables—that enable advanced functions in products forsuch sectors as autos, IT and consumer electronics, and industrial and social
infrastructure. Business operations are focused in Asia, North America, and Europe.

Overseas Revenue Ratio

Share of Revenues

Capital Expenditure by
Business Segment(Completion basis)

16

%

59

%

Depreciation by
Business Segment

72.7

131.3

Hitachi Metals’ Nd-Fe-B“NEOMAX ®” magnets

Revenues and Profit(Billions of yen)
1,564.0

1,657.5
1,464.6

9.8%
8.4%

billion yen
8.1%

8.2%

R&D Expenditure by
Business Segment

billion yen

48.5

6.0%

15

billion yen

7.4%

Revenues
EBIT ratio

16

17

(FY)

Adjusted operating income ratio

Main Products and Services
Semiconductor and display-related materials, circuit boards and materials, automotive parts, energy storage devices, specialty steel products, magnetic
materials and applications, functional components and equipment, wires, cables, and related products

Segment Performance
Revenues increased 13% to ¥1,657.5 billion, as comparedwith the year ended March 31, 2017, due mainly to increased
sales of electronics- and automotive-related products at
Hitachi Metals, Ltd. and Hitachi Chemical Company, Ltd., theeffect of acquisitions in Italy, etc. by Hitachi Chemical Company,
Ltd., and the increase in sales price linked to higher raw
material costs for Hitachi Metals, Ltd.
Adjusted operating income increased ¥1.9 billion to ¥121.8
billion, as compared with the year ended March 31, 2017,
due mainly to increased revenues, despite of Hitachi Metals,
Ltd. having a drop in profitability of heat-resistant exhaust

Examples ofDigital Solutions

casting components business and aluminum wheels business,and rise in raw materials prices.
EBIT decreased ¥24.6 billion to ¥98.6 billion, as comparedwith the year ended March 31, 2017, due mainly to recognitionof impairment loss at Hitachi Metals, Ltd. in relation todeteriorated profitability of the aluminum wheel business aswell as absence of gain on business reorganization and others
recorded in the previous fiscal year, and due to posting
expenses related to competition law and others at Hitachi
Chemical Company, Ltd.

Data-Visualization Solution to Prevent Inventory Shortfalls in Businesses with Short
Delivery Lead-Times and Seasonal Demand Patterns

To help prevent product lines running out of stock within a
rapidly changing business environment, characterized byshort delivery lead-times and seasonal demand volatility,
Hitachi Chemical developed its own data-visualization
solution. This case was registered as a Lumada customer
case in October 2017. Collecting real-time data on orders,inventories, and shipments from every site, the solution
integrates information across sites by using businessintelligence tools to show changes in volumes for every
product in dashboard format. To ensure full transparency,
the dashboard information is also continually displayedon monitors inside offices to promote early measures tomitigate the risk of product lines running out of stock. By
supporting more appropriate production planning andinventory management, the solution is helping to eliminate
such occurrences.

73

Automotive Systems
To contribute to the realization of an affluent society by creating new value-added
systems, products, and services through the harmonization of people, vehicles, andsociety, Hitachi is accelerating its technological development in the fields ofenvironment and safety. We will further develop our Advanced Vehicle Control
System, integrating our safety and information technologies with the Hitachi Group’ssocial infrastructure services to meet society’s needs for environmental conservation,

Hitachi Automotive Systems’ motor for a
hybrid vehicle

accident elimination, and traffic congestion reduction.

Share of Revenues

Overseas Revenue Ratio

Capital Expenditure by
Business Segment

Revenues and Profit(Billions of yen)(Completion basis)

10

%

58

%

Depreciation by
Business Segment

43.6

66.1

1,001.1

billion yen

R&D Expenditure by
Business Segment

billion yen

69.2

6.2%
5.4%

1,001.0

6.6%
5.7%

5.0%
4.2%

15

billion yen

992.2

Revenues
EBIT ratio

16

17

(FY)

Adjusted operating income ratio

Main Products and Services
Engine management systems, electric powertrain systems, drive control systems, car information systems

Segment Performance
Revenues increased 1% to ¥1,001.0 billion, as comparedwith the year ended March 31, 2017, due mainly toincreased sales in China, despite of sales decrease of
car information systems business and demand decreasein North America.
Adjusted operating income decreased ¥6.7 billion to¥49.5 billion, due mainly to profitability deterioration of

Examples ofDigital Solutions

Wireless Update Solution for Automotive Software

Software penetration in automobiles has increased in recent
years with the greater use of electronics. Timely postmanufacture updates to ECU*1 automotive control softwareare increasingly needed, too, either for security purposes oradding new functionality to vehicles connected to infrastructure enhancements. The Hitachi Group offers awireless solution for OTA*2 software updates.
This solution involves the distribution of automotive software updates from a datacenter known as the OTA center.

74

car information systems business and sales decrease in
North America of Clarion Co., Ltd.
EBIT decreased ¥23.4 billion to ¥42.4 billion, as comparedwith the year ended March 31, 2017, due mainly to thedecrease in adjusted operating income as well as absence ofgain on sales and disposals of fixed assets in the preceding
fiscal year.

The updated software is received by an onboard wirelessreceiver and transmitted to the ECU via a gateway board
fitted with chips that have OTA software update control andsecurity functions. In addition to this OTA software update
solution, the Hitachi Group is actively developing otherequipment and solutions to support wider commercializationof connected cars and other types of autonomous vehicles.
*1 ECU: Electronic Control Unit
*2 OTA: Over-the-Air

Results of Value Creation

Smart Life & Ecofriendly Systems
Hitachi provides solutions and services aimed at resolving lifestyle issues through its
home appliances, lighting and housing equipment, refrigeration and air-conditioning
products. Hitachi also contributes to the resolution of societal issues by helping
reduce environmental impact and making an ongoing effort to improve products’
Hitachi Appliances’ large-capacity refrigerator

energy efficiency.

Overseas Revenue Ratio

Share of Revenues

Capital Expenditure by
Business Segment

Revenues and Profit(Billions of yen)(Completion basis)

5

19

%

8.5

%

681.0

Depreciation by
Business Segment

R&D Expenditure by
Business Segment

8.7

7.2

billion yen

6.2%

billion yen

3.5%

557.3

4.0%

15

billion yen

Revenues

540.1

5.7%

16

6.2%
4.6%

17

(FY)

Adjusted operating income ratio

EBIT ratio

Main Products and Services
Refrigerator, washing machine, vacuum cleaner, residential air conditioner, air-conditioning equipment

Segment Performance
Revenues decreased 3% to ¥540.1 billion, as comparedwith the year ended March 31, 2017.
Adjusted operating income increased ¥2.6 billion to¥25.1 billion, due mainly to effects of cost reduction andstructural reform, despite the decline in revenues.
EBIT increased ¥1.5 billion to ¥33.3 billion, as compared
Examples ofDigital Solutions

with the year ended March 31, 2017, due mainly to theincrease in adjusted operating income and an increase inprofit of an equity-method associate on air compressor
business, despite the absence of gain on sales anddisposals of fixed assets posted in previous fiscal year.

Exiida Remote Monitoring Service Provides IoT Solution for Air-Conditioning

Since April 2018, Hitachi has been developing Exiida*1 as aservice business for creating new value and broadening thepossibilities for air-conditioning, based on the utilization ofvarious data and know-how relating to air-conditioning,heating, and cooling systems. This remote monitoring
service for commercial refrigeration and scroll & screw
chillers (including equipment for creating the chilled waterused in office or factory air-conditioning systems) can
enable predictive maintenance of such equipment bydetecting reliable indicators of pending malfunctions, basedon the application of machine learning over a certain period tonormal operating data collected from similar equipment.
The aim of the service is to curtail opportunity losses forcustomers due to unexpected breakdowns in air-conditioning or other heating and cooling systems. Building on theequipment maintenance expertise amassed by Hitachi todate, Exiida data analysis is based on patented Hitachitechnology that utilizes the LSC*2 classification approach.
*1 The name “Exiida” incorporates the elements of Expansion (as a prefix),Internet, Individuality and Data to express the concept of addressing thechallenge of creating new value through the connection of Hitachi
air-conditioning or other heating and cooling systems to the Internet.
*2 LSC: Local Subspace Classifier (a type of classification protocol)

Exiida Remote Monitoring Service (With Predictive Maintenance Function)
Customer equipment
Monitored equipment

Exiida remote monitoring service
Remote monitoring system

Predictive maintenance function (optional)

Learning data
Operational data
Refrigerator

Scroll & screw chiller

Data analysis
Evaluation data

Fault occurs (notification)

Customer-managed

Fault predicted (notification)

75