Urban Planning and Development Systems
Business Strategy
Hitachi IR Day 2011

June 16, 2011

Toshio Ikemura
Vice President and Executive Officer
President & CEO
Urban Planning and Development Systems Company
Hitachi, Ltd.
© Hitachi, Ltd. 2011. All rights reserved.

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview and Market Trends
2. Business Strategy (Japan)

3. Business Strategy (Overseas)
4. Business Performance Trends and Targets© Hitachi, Ltd. 2011. All rights reserved.

1-1 Business Overview
Building FM*
business, etc. (28%)

Elevator andEscalator business (72%)

Security

Manufacture, sales, installation,
maintenance and modernizationof elevators and escalators

Video surveillance systems
Room access control systems

FY2010Consolidated
revenues¥404.5 billion

Energy saving
Energy saving assessment
Energy saving control

Building facility maintenance* FM: Facility Management

Value Chain of
Urban Planning and Development Systems Company
Development

Order

DesignManufacture

Installation

MaintenanceModernization© Hitachi, Ltd. 2011. All rights reserved.

3

1-2 Market Trends *Hitachi estimates
Elevator and Escalator Market Size

Building FM Market Size

(Thousand units)(Japan, Trillion yen)

Japan

501
400

210

Asian belt zone

470
192

504
182

543
191

Other

Apr. 2010
Increasing demand
from enforcement of therevised Energy
Conservation Law

578
193

1.0
200

1.27

1.17

1.21

FY2008FY2009 FY2010

1.35

1.43

367

269

261

305

335

22

17

17

17

18

FY2008FY2009FY2010FY2011FY20120.5

0.0
FY2011 FY2012

Elevators and escalators business:
Expansion in the Asian belt zone
Flat or slight growth in Japan, Europe, the U.S. and elsewhere
Building FM business:
Increasing energy-saving needs(Visualization of energy usage, need for energy usage reduction)© Hitachi, Ltd. 2011. All rights reserved.

4

1-3 Growth Strategy
Japan
Elevators and Escalators
Strengthen and expand elevator and escalator modernization business tomeet growing refurbishment demand.

Building FM
Provide high-value-added services for whole buildings linked to products ofenergy saving and security.

Overseas
Elevators and Escalators
Focus on the Asian belt zone where market growth is expected

Expand business for new elevators and escalators by strengthening regional
HQ framework© Hitachi, Ltd. 2011. All rights reserved.

5

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview and Market Trends
2. Business Strategy (Japan)

3. Business Strategy (Overseas)
4. Business Performance Trends and Targets© Hitachi, Ltd. 2011. All rights reserved.

Business Strategy
2-1 (Japan)

Elevator and Escalator Business
Demand associated with restoration andrebuilding after
the Great East Japan Earthquake
Respond quickly to restoration and rebuilding demand indisaster-stricken areas, particularly the Tohoku region■Hitachi’s elevators and escalators
Comparison of Modernization Orders
and New Equipment Orders*Unit base year FY2008=100

Modernization
New equipment< > Modernization ratio

Strengthen Modernization business
Expand sales of renewal products that respond to
demand for greater energy conservation
Strengthen sales and engineering structure

Building FM Business
Provide products and services to respondto energy-saving demand〈20〉 〈30〉 〈33〉 〈34〉 〈35〉

104

100
85

114

81
69

80

59

54

20

26

27

Expand existing business by launching BIVALE,
a cloud type integrated building control system

35

74

40

FY2008 FY2009 FY2010 FY2011 FY2012© Hitachi, Ltd. 2011. All rights reserved.

7

2-2 Elevators and Escalators Business
Providing rapid and ongoing support for restoration and rebuilding efforts
Rapid initial response
Leveraged benefits of nationwide disaster response drills tosend 118 support personnel to disaster-stricken areas on March 11.
(A total of 2,000 people provided support in the month after the disaster)

Ongoing support for restoration and rebuilding efforts
Take the lead in responding quickly to projects with ahighly public aspect such as airports, hospitals,
government offices and commercial facilities

Strengthen modernization Business aligned to energy saving needs
Reinforce lineup for reducing power consumption
Elevators: Install inverter and LED ceiling lights
Escalators: Control operating speed by installing inverter© Hitachi, Ltd. 2011. All rights reserved.

8

2-3 Building FM Business
Strengthen response to energy-reduction and energy-saving demand.
Offer support for saving energy via the BIVALE, a cloud type
Integrated building control system
Build cloud systems utilizing existing service infrastructure
Remotely control energy use for each tenant from control centers

Customer buildings

Customer centers
Remote surveillance
24 hours,
365 days a year

Facility data, etc.
Air-conditioning equipment,
lighting equipment

Security

Tenant-specific control of
air-conditioning, lighting,security and other equipment

Each tenant
Building facility
control instructions
Energy saving assessment
Suggestion of modernization

Network

Branches and offices

Service response© Hitachi, Ltd. 2011. All rights reserved.

9

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview and Market Trends
2. Business Strategy (Japan)

3. Business Strategy (Overseas)
4. Business Performance Trends and Targets© Hitachi, Ltd. 2011. All rights reserved.

Market Trends
3-1 (Global
Elevators and Escalators Market)

FY2010→FY2012 New Equipment Market Trends(Thousand units, Hitachi estimates)

252

14

304

504

16

33

27

Middle East305
12

FY2012

Asia belt zone
demand305
thousandunits〈100〉367
thousandunits〈120〉Hitachi orders

〈100〉

〈137〉

Global

China

India

FY2010578

367 Asianbelt zone

14

Southeast Asia

FY2010FY2012Asian belt zone
Asian belt zone accounts for around 60%
of world demand Approx.
60% of total world
demand and approx. 80%
of demand growth*< >: Base year of FY2010=100

Expand business in Asian belt zone by concentrating resources© Hitachi, Ltd. 2011. All rights reserved.

11

Business Strategy
3-2 (Global
Elevator and Escalator Market)

China
Bolster production system further in line with order expansion
Expand and upgrade sales and service bases with an eye on
expanding the maintenance business.

Southeast Asia, India and Middle East
Strengthen business structure led by Asia regional HQ(Hitachi Elevator Asia Pte. Ltd.); since October 2010
Expand business in India, Saudi Arabia and elsewhere,
where demand growth is expected.

Development, manufacturing and supply systems
Bring industry-leading products to market.
Achieve higher supply chain efficiency through base collaboration
Achieve locally led, speedy management and build a highly efficient business framework.
© Hitachi, Ltd. 2011. All rights reserved.

12

3-3 Regional Business Strategy (China)
Increase production capacity and expand andupgrade sales and service bases to respond to market needs.

Production system
Increase output further by lifting production capacity at existing bases andthrough construction of a new plantBases
Tianjin
Guangzhou
Shanghai
TianjinWestern region

Details
Raise production capacity of finished products
in FY2012
FY2010 plan: 45,000 units/year→Current plan: 50,000 units/year

Shanghai

Guangzhou(Parts)Manufacturing plants
Parts plants
Planned facilities

Guangzhou

Western
regionBolster cost-competitiveness through integrated
production of traction machines. (Commenced
operations in May 2011)
Scheduled to commence operations in 2012

Sales, construction and service bases
Strengthen business framework further through a sales
and service network that responds to demand and byraising maintenance contract rate.

FY2010 year-end 57 bases→ FY2011 year-end 69 bases© Hitachi, Ltd. 2011. All rights reserved.

13

Regional Business Strategy
3-4 (Southeast
Asia, India, Middle East)

Expand business by strengthening local project control centers

Hitachi Elevator Asia Pte. Ltd.
India

Thailand

Malaysia

Singapore

Philippines

Participation of regional HQ
staffs in management ofsubsidiaries (Since April 2011)

Hong
Kong

Other
Distributors

Develop personnel
Strengthen governance

Southeast Asia
Construct new factory in Thailand according to demand growth(Production capacity in 2012: 5,000 units)
Strengthen business by taking majority stake in a distributor (Philippines in March 2011).

India
Strengthen sales system by expanding bases in cities.
Existing bases (Delhi, Mumbai, Chennai) + new bases (Pune, Bangalore, Hyderabad)

Middle East
Strengthen sales system through stronger links with distributors (Saudi Arabia, etc.)© Hitachi, Ltd. 2011. All rights reserved.

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Business Strategy
3-5 (Development/ Manufacturing Delivery Framework)
Strengthen framework through cooperation among Japan, China andSoutheast Asia bases
Create highly efficient development / manufacturing and delivery frameworkaligned to market characteristics
Type

Development baseLocation

Main roles

Manufacturing baseDevelop flagship products
Japan

Tianjin
Mito works

Development

Shanghai

China

Develop world’s fastest elevators (1,080 m/minute)
Provide technologies to each baseDevelop high-speed elevators for China(-600m/minute)
Develop products for Asia and the Middle East

Singapore

Guangzhou

Low-cost elevators for new markets

BangkokJapan

Manufacturing

Elevators and escalators for Japan
Traction machines, control panels forhigh-speed, large-capacity elevators
Elevators and Escalators for China

China

Singapore

Escalators for Asia and the Middle East
Completed (Dec. 2010)
Shanghai elevator research tower

ThailandSingapore

Elevators for Asia and the Middle East
© Hitachi, Ltd. 2011. All rights reserved.

15

3-6 Large Orders Awarded
DONGGUAN TBA TOWER

Wuxi Guolian Financial Building

70-floor, 290 m-tall building
High-speed elevators: 22 units
A total of 60 elevators and escalators,
including 39 ultra-high-speed and high-speed
elevators, and 8 escalators

Al Hikmah Tower

Wuxi, Jiangsu

61-floor, 231 m-tall building
12 ultra-high-speed andhigh-speed elevators(China)

Dubai
（UAE）

Mumbai(India)Vivarea
44-floor,laxuary condominium
A total of 15 elevators andescalators, including
12 high-speed elevators

Dongguan,
Guangdong(China)Manila（Philippines）

Gramercy Residences
75-floor, 302 m-tall building(Tallest in Philippines)
10 ultra-high-speed andhigh-speed elevators© Hitachi, Ltd. 2011. All rights reserved.

16

Future Business Development
3-7 (Global
Elevator and Escalator Market)

Tianjin

China regional HQ(Guangzhou)

Japan

Shanghai

Kuwait
Delhi

Dubai

Guangzhou

MuscatHong Kong

JeddahBangkok
ManilaHo Chi Minh City
Kuala Lumpur

Singapore
Asia regional HQ(Singapore)Direction ofbusiness
expansion

Jakarta

China: Expand from coastal regions to inland areas
India: Expand from northern region to southern coastal region
New regions: Consider advancing into Turkey and North Africa© Hitachi, Ltd. 2011. All rights reserved.

17

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview and Market Trends
2. Business Strategy (Japan)

3. Business Strategy (Overseas)
4. Business Performance Trends and Targets© Hitachi, Ltd. 2011. All rights reserved.

4-1 Business Performance Trends
34%

36%

31%
Revenues(Billion yen)

28%

Operating income
ratio (%)
12

Overseas revenue ratio< >: Base year FY09 revenues=100
500

〈103〉
404.5

〈100〉
393.8

〈103〉
407.0

〈107〉
420.0

400

8

7.4%
300

10

7.6%

8.0%

6.7%

6

200

4

100

2

0

FY2009FY2010Elevator and escalator revenues

FY2011(Forecast)

Building FM business, etc. revenues

FY2012(Target)0Operating income ratio© Hitachi, Ltd. 2011. All rights reserved.

19

4-2 FY2010 Financial Results (Actual)
FY2010 Financial Results (Actual)
FY2009 (Actual)

Revenues

YoY(Billion yen)

FY2010 (Actual)

YoY

393.8

95％

404.5

103％

Elevator and escalator
business

280.3

97％

291.6

104％

Building FM business,
etc.

113.5

91％

112.9

99％

26.4

90％

30.0

114％

Operating income

Revenues

Overall revenues were better year on year despite lower revenues
caused by the Great East Japan Earthquake. This decrease was offset
by the overseas elevator and escalator business, particularly in China,
and other factors.

OperatingincomeOperating income rose year on year. Higher earnings from increased
revenues in the Chinese elevator and escalator business, cost cutting
and operating expense reductions offset lower earnings due to theimpact of the natural disaster.
© Hitachi, Ltd. 2011. All rights reserved.

20

4-3 FY2011 Financial Forecasts
FY2011 Financial Forecasts
FY2010 (Actual)

Revenues

YoY(Billion yen)

FY2011 (Forecasts)

YoY

404.5

103％

407.0

101％

Elevator and escalator
business

291.6

104％

300.0

103％

Building FM business,
etc.

112.9

99％

107.0

95％

30.0

114％

31.0

103％

Operating income

Revenues

Revenues are expected to rise slightly from FY2010. The decrease inrevenues caused by the impact of the Great East Japan Earthquake
should be offset by revenues from overseas elevators and escalators,
particularly in China.

OperatingincomeOperating income is expected to rise slightly from FY2010. Lower
earnings caused by the Great East Japan Earthquake should be offset
by higher earnings from increased revenues from overseas elevatorsand escalators, as well as cost cutting and operating expense
reductions.
© Hitachi, Ltd. 2011. All rights reserved.

21

4-4 FY2012 Targets

FY2012 Targets
Revenues: ¥420 billion
Overseas revenue ratio: 36%
Operating income ratio: 8%

Aim to expand business further, centered onoverseas business, to achieve FY2012 targets.
© Hitachi, Ltd. 2011. All rights reserved.

22

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.

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