Information & Control
Systems Business Strategy
Hitachi IR Day 2011

June 16, 2011

Yutaka Saito
Vice President and Executive Officer
President & CEO
Information & Control Systems Company
Hitachi, Ltd.
© Hitachi, Ltd. 2011. All rights reserved.

Information & Control Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Business Policy and Growth Strategy
4. Business Performance Trends and Targets
5. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

1-1

Positioning of the Information & Control Systems
Company

Revenues by Business Field

Social Innovation BusinessInformation &Telecommunication
Systems Company

Power Systems
Company

Industrial & Social
Infrastructure
Systems Company

Rail Systems
CompanyPower
Systems
35 %SocialInfrastructure &Industrial
Systems, etc.
45%

Railway
Systems
20 %Information & Control Systems Company
FY2010consolidated revenues:¥233.2 billion**Revenues are included separately for the Information & Telecommunication Systems Company,
the Power Systems Company, the Industrial & Social Infrastructure Systems Company and the Rail Systems Company

Provide optimal systems to operate and manage social infrastructure.
Drive the Social Innovation Business with solutions fusing informationand control technologies.
© Hitachi, Ltd. 2011. All rights reserved.

3

1-2 Business Overview
Wide application scope from information to control systems
Power Systems

Social Infrastructure &Industrial Systems

Railway Systems

From system proposals to MONOZUKURI

Traffic control
systems

Power generation(Thermal/pumped hydro),powertransmission and distribution
monitoring and control systems

Seat reservation
systems

Road traffic control systems
Water supply and sewage
monitoring and control systems

Frequency conversion
Systems

Steel/industrial control systems

Direct current transmission
systems

Electic CIS solution
AMI systems

Railway IC card systems
Digital signage systems

Earthquake
Occurrence

Safety confirmation systems“Anpi-no-Ban’nin”

Control System Technologies and Information System Technologies
Simulation and analysis technologies

Control systems middleware

Autonomous decentralized system architectureHigh-speed transaction processing

Large-scale, high-reliability databases

Platforms and Components
Information platforms
Servers

Finger vein
Authentication
access-control
systemControl components
Control servers

EIC integrated
controllers

Power electronics products
UPS*

High-voltage inverters Power converters* AMI : Advanced Meter Infrastructure* EIC: Electricity, Instrumentation, Computer•UPS ： Uninterruptible Power Supply•CIS: Customer Information System© Hitachi, Ltd. 2011. All rights reserved.

4

1-3 System Examples (1)Power Systems

Railway Systems

Kyushu Electric Power Co., Inc.
electricity transmission IT system

JR Kyushu Shinkansen centralized
operations management system

Overview of Customer Response Process

Site
Customer

2010年3月稼働
Operatesfrom May 2010
Call center

InquiryGPS-equipped
mobile terminal(All lines in March 2011 and the start of through services）
KyushuShinkansen

Sanyo
Shinkansen

Electricity Distribution
IT system

Request,problemLocation system
Core information
database
Facility
information
systemTransmission
equipment

Closest employee

Information control
platform
CF-1000/FT

Operations
base

Site response to report input■Support customer promptly and accurately bymapping on-site workers with GPS-equipped
Hand-held device.

■Achieves high reliability and high-speed processing
by employing built-in redundancy in system structureand fault tolerant (FT) systems■Fulfill “On-site Concluding Operations” utilizing
mobile terminals.

■ Formulate high-level operational function as asystem by aligning train schedule management(information system) and real-time automatic trackcontrol (control system).

© Hitachi, Ltd. 2011. All rights reserved.

5

1-4 System Examples (2)Social Infrastructure Systems

Industrial Systems

Kashiwa City Water Department
Water distribution control system

Mori Building Energy Web system
Contributes to the area withsurplus electricity created byenergy conservation in buildings

Central control room
Pressure
distribution screen
Energy-saving
efforts can bemonitored on
the Interne
Upgraded March 2010

■Yielded approx. 8% energy savings and stablewater distribution to the entire city fromreservoirs in 7 locations.
■Plan to offer globally as outstanding
Japanese water management technology(Raises efficiency, lowers leakage rate)

Operates fromMay 2011■Offer to other parties jointly with Mori Building■Offering cloud-based environmental
information management services compliant
with the 2010 amendments to the Law
Concerning the Rational Use of Energy to
Funabashi city, Zen-Noh, Starbucks,
Asahi Glass Co., Ltd. and other parties.

© Hitachi, Ltd. 2011. All rights reserved.

6

Information & Control Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Business Policy and Growth Strategy
4. Business Performance Trends and Targets
5. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

2-1Market Trends—Information and Control Systems
MarketContinuous expansion in the global social infrastructure systems market
Increasing needs for next-generation
infrastructure systems

Increasing global demand forinfrastructure systems
Infrastructure Information and Control Systems Market*(Trillion yen)

15

12.6
10

8.9

Expectations for resilient and restorable
infrastructure following the Great East Japan
Earthquake(Community-led, safe and secure towns,
renewable energy utilization, etc.)

Social infrastructure &industrial systems

Social infrastructure &industrial systems

5

Expand Social Innovation Business
Railway systems

by providing total solutions fusing

Railway systems
Power systems

2009

Large-scale urban development in developing
countries and investments to upgrade
infrastructure in industrialized nations to create a
low-carbon society(Smart grids, high-speed railways, etc.)

information andPower systems

2015

control technologies(Year)*Information & Control Systems Company estimates based on Global Water Market 2008, UNFE Worldwide Rail Market Study,
DOE/EIA International Energy Outlook, etc.
© Hitachi, Ltd. 2011. All rights reserved.

8

2-2 Demand for Social Infrastructure
Safe, secure, and comfortable society that is eco-friendly

EnergyMobility

Renewable Energy

Smart Navigation
StoresFinancial
institutions

Smart Grids

Recyclingfacilities

Next-generation
citiesBuildings

Energy stations

Publicfacilities

Stations
HotelsHousesCommunity Energy
Management

Smart Mobility

Factories

Schools

Hospitals

Communications

Water
Data centers

EnergyHome Energy
Management

Transportation
Control

ＩＴ

Reclaimed Water
Management
Intelligent Water

Water, Recycle

Next-generation infrastructure systems that connect social infrastructures and life with IT© Hitachi, Ltd. 2011. All rights reserved.

92-3 Competitive Environment
Realize Balance between Comfort(Life) and Efficiency (Infrastructures) with Information and Control Solutions

Equipment

Control

Automation

Information

GE

Hitachi

ABB■ Group companies havebeen developing
businesses, collaborating
in a wide range of fields

Siemens
IBM
Information &Telecommunication
Systems Company

HitachiInformation & Control
Systems Company
Power Systems Company
Industrial & Social
Infrastructure Systems
Company
Rail Systems Company■ The Information & Control
Systems Company
provides one-stop totalsolutions from control
systems to information
systems.

© Hitachi, Ltd. 2011. All rights reserved.

10

Information & Control Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Business Policy and Growth Strategy
4. Business Performance Trends and Targets
5. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

3-1 Business Policy and Growth Strategy
Develop solutions that fuse information and control in global growth markets
Growth strategies■Promote the totalsolution businessbased on informationand control
technologies

Action Plans■ Power Systems: Promote next-generation smart grid solutions,extending from power generation,transmission and distribution to consumer
systems■ Railway Systems: Promote total solutions for railways, extending
from railway control to passenger services■ Social Infrastructure & Industrial Systems: Develop next-generation infrastructure
systems business- Introduce total water environment systems extending from water desalination to use and reuse- Use plant information to increase efficiency and automation of operations and maintenance■ Expand business inglobal growthmarkets■ Develop regionally, centered on the social infrastructure systems
market in emerging countries (such as China and India)■ Accelerate localization of manufacturing, sales and services■ Respond to demand for upgrading infrastructure
in industrialized nations- Enter the smart grid market starting from demonstration projects- Introduce next-generation infrastructure systems to contribute toJapan’s rebuild following the Great East Japan Earthquake■ Proceed to makestrategic
investments■ Reinforce business base
■ Promote development of core business platforms© Hitachi, Ltd. 2011. All rights reserved.

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3-2

Promoting the Total Solution Business (1)Power Systems

Promote next-generation smart grid solutions, extending frompower generation, transmission and distribution to consumer systems
Business Initiatives
Provide next-generation solutions
for smart grids(System analysis, EMS, DMS,AMI , Storage battery control,
EV charging, etc.)
Promote demonstration projects
and international standardizationof solutions(Hawaii, Spain, etc.)
Contribute to Japan’s rebuilding
centered on energy infrastructure(Future city model projects, etc.)
EMS : Energy Management System
DMS : Distribution Management System
EV: Electric Vehicle
EAM : Enterprise Asset Management
BEMS : Building Energy Management System
HEMS : Home Energy Management System

Power system infrastructure
Large-scale integrated power supply
Wind power

Solar power

Information

Increased business efficiency
of operators
Optimal control of entire power
gridEnterprise asset management(EAM)
Sales support systems

Transmission grid
EMS

DMS

Electricity Transformer
substations

Information

Distribution grid

Storage battery
control systems

EV-EMSElectricity
AMI
BEMS/HEMS

EV charging
management system
Respond to the increase of
distributed power sources
and EVs

Visualization of demand
Enhanced consumer services© Hitachi, Ltd. 2011. All rights reserved.

13

3-3

Promoting the Total Solution Business (1)Power Systems

Example: Spain

Demonstration of smart city in Europe, where power supply has been deregulated■ EV / Green Mobility promoting project(joint project with Mitsubishi Corporation& Mitsubishi Heavy Industries, Ltd. )Project Scheme
Mitsubishi Corporation

Test demonstration of large scale EV installation& dissemination model in collaboration with
Smartcity Malaga project.

Overall management/Global launch support

Provide Electricity Management System aligning
existing system and EV center.

Hitachi, Ltd.

Demonstrate information control platform thatrealizes optimally-controlled Smart City related
infrastructures

Mitsubishi Heavy Industries, Ltd.
Build the infrastructures such as EV,
recharger, etc.

Enhanceconvenience, minimize load on power gridＥＶ実証での情報制御基盤の活用■Form collaborative relationships
with local infrastructure companies

Power systems

M2M ： Machine to Machine

External systems

Information control platforms
M2M network
M2M adapters

M2M adapters

Batteries
F

Extend to Europe and Latin America
using partner companies’ networks

MalagaIT System / Electricity Management System, etc

EV center

Electricity major : Endesa, S.A.
Telecom major: Telefonica S.A.
IT service provider: Sadiel●

EV charging locations

EV

E
Encourage recharging at
low load times

Load leveling with storage
batteries, etc.

© Hitachi, Ltd. 2011. All rights reserved.

14

3-4

Promoting the Total Solution Business (1)Power Systems
Japan-U.S. Collaborative Demonstration Project for World

Example: Hawaii Leading Remote Island Smart Grids■Energy situation in Hawaii
Large-scale introduction of renewable energy(15%→40% /2012 Plan)

Maui● EV recharging location

Wind power generation

Effective introduction of EVs(Moving around island, tourist image)●■Establish model using large
volumes of renewable energy
Cutting-edge technology demonstration andbusiness model verification of smart grids that
anticipate future issues
Establish stabilized system tied with DMS and μDMS●●

Demonstration of new control and information network
EV center

Direct control of solar power generation device,EVs, water heaters, storage batteries and others
via M2M communications

Integrated DMS

Maui Electric

Information control platforms
M2M network

Installation of cutting edge cyber security measures
Evaluate economic viability with experts

e-parkingStoragebatteries

Develop international standards through this joint
project and extend to similar remote islands andsubtropics●●

Power gridequipment
Equipment control

Charging control

Solar power
generation

Water
heatersμDMS EV rechargers
Load and voltage informationcollection
Equipment control in homes© Hitachi, Ltd. 2011. All rights reserved.

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3-5

Promoting the Total Solution Business (1)Railway Systems

Promote total solutions for railways, extending from railway control
to passenger services
Onboard equipment

Business initiatives

Onboard guidancesystemRailway transportation
operation

Wayside and onboard
communications

Strengthen domestic railway systems
business through collaborative
creation with customers

controlIT(Traffic control, seat reservations, etc.)

Transportation
Planning
Traffic control
Rolling stock
maintenance

Customer services(Urban transportation, subway IC cards)

IT

control
IT(U.K. IEP rolling stock maintenance, etc.)

Enter smart city and IC card system
markets with public transport IC
cards

Ｚ control

Seat reservations
Digital signage
Public transport
IC cards

Develop traffic control andmaintenance services overseas inpartnership with the Rail Systems
CompanyUrbantransportation
services

IT

Product
Sales
Electronic
money

IT

Lifestyle services for smart cities
IEP ： Intercity Express Programme© Hitachi, Ltd. 2011. All rights reserved.

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3-6 Expanding Business in Global Growth Markets (1)Develop regionally, centered on the social infrastructure systems market in emerging countries

Americas, Europe

China
Strengthen local bases to expand control
systems business(Steel plant, thermal power, wind power, water
treatment and storage battery)

Promote smart city projects to establish
solution and extend business(Tianjin, Guangzhou, Dalian, etc.)

Enter smart grid market based on
demonstration projects and extend toother areas(Hawaii, Spain, etc.)

Enter railway traffic control andmaintenance service systems business incollaboration with rolling stock business(U.K. IEP business, etc.)(Billion yen)

India, Asia (Excluding China)

Overseas Revenue Targets by Region

150

Enter plant control systems business(Steel, thermal power, power electronics, etc.)

Expand social infrastructure businessin step with industrial infrastructurebusiness

100

China

50

India, Asia

(Delhi Mumbai Industrial Corridor (Dahej) project in India)

Americas,
Europe, etc.

0
FY2010FY2015© Hitachi, Ltd. 2011. All rights reserved.

17

3-7 Expanding Business in Global Growth Markets (2)Accelerate localization of manufacturing, sales and services in emerging country markets■Establish frameworks for developing, providing
and maintaining highly reliable systems stably(Localize with view to local consumption of
local production)
Accelerate business development and entry
into urban development market , utilizing local
bases (Sales, engineering, manufacturing, SI)

Enhance production technologies
Utilize IT to standardize
MONOZUKURI processes, quality
management
Build global production framework(Achieve best production mix)

Promote localization
China

India
Southeast
Asia

Localize production, assemblyand SI(Joint ventures, partnerships)
Utilize Hitachi Group
companies’ partner sales
networks

BrazilEnter growth markets by establishing local bases after China
SI ： System Integration© Hitachi, Ltd. 2011. All rights reserved.

18

3-8 Expanding Business in Global Growth Markets (3)China

Promote Demonstration Projects to enter Smart City and Smart Grid Market

現状計画（100億→15年：400億）
Strengthen local bases to expand control system business■Reinforce local engineering resource
Increase the number of SE
Establish local development force incooperation with HCR&D■Enhance production capability of powerelectronics devices
Converter, UPS, etc.
■Establish JVs with local leading companies toexpand business of infrastructure control system
Establishment of solution and extending
by promoting smart city actual project■Promoting smart city projects
Sino-Singapore Tianjin Eco-City[Revenue target: at least ¥40 billion (FY2015)]■ China business bases(DCS/power electronics)
Beijing
Dalian■ Sales bases■● ★
★
● Manufacturing
Xiuchang
Tianjinand engineering●(Power grid)bases● Shanghai★ Major smart city
(Steelplant
controlsystems)●
projects
Chengdu(Power electronics)★
Guangzhou

Sino-Singapore Tianjin Eco-City

Began receiving orders for HEMS and battery
storage systems (Sept. 2010)

Cooperating in building
Guangzhou Knowledge City (January 2011)
Cooperating in Social Innovation Business,
etc., in Dalian City (May 2011)
HCR&D： Hitachi （China） Research ＆ Development Cororation

DCS：Distributed Control System

Eco-friendly
model city
Provision ofentire energy
management
systems© Hitachi, Ltd. 2011. All rights reserved.

19

3-9 Expanding Business in Global Growth Markets (4)India

Expand business domains through entry from plant control systems businessEnter plant control systems market■Offer power electronics and its application
control system suit for stable plant operations
and energy conservation■Develop local capabilities through partnering[Revenue target: at least ¥40 billion (FY2015)]

Delhi Mumbai Industrial Corridor project(Feasibility study for mega industrial
infrastructure development)

Local production :Power electronics
Local engineering :DCS for thermal power plant
Electrical machinery control systems

Delhi

■
Expand social infrastructure business in step withindustrial infrastructure development projects

Kolkata(Steel plant control system)▲● Ahmadabad(Power Electronics)■Promote total solution business extending
from electric power, water treatment, transportation
and IT in cooperation with Hitachi Group companies(Delhi Mumbai Industrial Corridor project)■Expand business domains stating from rollingmill control systems for major steelmakers●

MumbaiBangalore
●
(DCS)

▲

Nagpur(Steel plant
control system)■ Sales office/ HQ▲Maintenance office●Manufacturing plant andEngineering office(Major order for hot mill system from Tata Steel: June 2011)
FS : Feasibility Study© Hitachi, Ltd. 2011. All rights reserved.

20

3-10 Promoting Strategic Investments
Bolster business base and Develop platforms

Key Investments
Bolster business baseSelf verification of EMS
solar power generation, storage
battery system
AMI, μDMS, information control
platform

Strengthen BCP response(Production, infrastructure, lifelines,
etc.)■ Demonstrate dispersed EMS thatenhances BCP■ Boost Smart City / Smart Grid businessbased on the outcomes of internal andexternal demonstration and comprehensive
verification of new solutions■ Contribute to Hitachi city Future City Project
PCS for solar power generation

Rapid battery chargers for EV
storage battery

Develop platforms

Develop information control system
platforms for supporting social
infrastructure
Solar panels

Develop administrative platforms
for supporting social infrastructure
operation and maintenance

Smart meter/ μDMS（*） conceptual drawing

EMS ： Energy Management System
BCP ： Business Continuity Plan

Solar panels

General management center

informationelectricity
Dispersed EMS© Hitachi, Ltd. 2011. All rights reserved.

21

Information & Control Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Business Policy and Growth Strategy
4. Business Performance Trends and Targets
5. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

4 Business Performance Trends and Targets
Revenues(Billion yen)

35%

Overseas revenue ratio (%)

400

20%
7%

7%

9%

233.2

235

300
232.9

350
Social infrastructure &industrial systems, etc.

250

200
Railwaysystems

100～～

Power systems

0

FY2009FY2010FY2011
Forecast

FY2012Plan

FY2015Plan* Revenues are included separately for the Information & Telecommunication Systems Company,
the Power Systems Company, the Industrial & Social Infrastructure Systems Company and the Rail Systems Company© Hitachi, Ltd. 2011. All rights reserved.

23

Information & Control Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Business Policy and Growth Strategy
4. Business Performance Trends and Targets
5. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

5 Conclusion

FY2015 Targets
Revenues: ¥350.0 billion
Overseas revenue ratio: 35%

Drive the Social Innovation
Business by providing total solutions
fusing information and control© Hitachi, Ltd. 2011. All rights reserved.

25

Cautionary Statement
Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking
statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or
current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify“forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ
materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of
future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to:■economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in the
major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;■exchange rate fluctuations of the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly against the U.S. dollar and the euro;■uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;■uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write down equity securities that it holds;■the potential for significant losses on Hitachi’s investments in equity method affiliates;■increased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Components & Devices and the DigitalMedia & Consumer Products segments;■uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance for such products;■rapid technological innovation;■the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales;■fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum and synthetic resins or shortages of materials, parts and components;■fluctuations in product demand and industry capacity;■uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or shortages of materials, partsand components;■uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;■uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness and other cost reduction
measures;■general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe, including, without
limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract terms and conditions and labor relations;■uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and development of certain key products;■uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;■uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may become parties;■the possibility of incurring expenses resulting from any defects in products or services of Hitachi;■the possibility of disruption of Hitachi’s operations in Japan by earthquakes, tsunamis or other natural disasters, including the possibility of continuing adverse effects on Hitachi’s operations as a result of theearthquake and tsunami that struck northeastern Japan on March 11, 2011;■uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers;■uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit related costs; and■uncertainty as to Hitachi’s ability to attract and retain skilled personnel.

The factors listed above are not all-inclusive and are in addition to other factors contained in Hitachi’s periodic filings with the U.S. Securities and Exchange Commission and in othermaterials published by Hitachi.

© Hitachi, Ltd. 2011. All rights reserved.

26