Information & Control
Systems Business Strategy

June 9, 2010

Yutaka Saito
Vice President and Executive Officer
President & CEO,Information & Control Systems Company
Hitachi, Ltd.

Information & Control Systems Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Performance Targets
4. Growth Strategy
5. Conclusion

1-1. Positioning of the Information & Control Systems Company
Revenues by Business Field

Social Innovation
Segments
Information &Telecommunication
Systems

Power
Systems

SocialInfrastructure& Industrial
Systems

Information &Control Systems Company

SocialInfrastructure&
Industrial
Systems etc.

４８％

Power
Systems
３３％

Railway
Systems
１９％

FY2009 consolidated revenues (＊)¥232.9 billion(＊ ) Revenues are included separately those of Information & Telecommunication Systems Company, Power Systems Company,
and Social Infrastructure & Industrial Systems Company.

Provide optimal systems to operate and manage social infrastructure
Add value and use distinctive technologies to drive the Social Innovation Business© Hitachi, Ltd. 2010. All rights reserved.

21-2. Business Overview
Wide application scope from information to control systems
From system proposals to MONOZUKURI

Power Systems
Power systemmonitoring andcontrolSocial Infrastructure &Industrial Systems

Railway Systems

Customer service
supportManagement support

Traffic control

Thermal/nuclear
power
instrumentationand control

Water supply and Steel rolling
ITS and
ETC systems sewage monitor- mill control

Seat
reservations

ing and control

IC cards
boarding ticket
systems

Image
processing

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

Storages

Control components
Control servers EIC integrated controllers

Power electronics products
UPS

High-voltage inverters

Power converters© Hitachi, Ltd. 2010. All rights reserved.

31-3. Example Systems and Core Products and Technologies (1)Tokyo Area Urban Train Control System (ATOS)World’s largest real-time control system(Thousands of computers manage
about 300 train stations in 19 train sections)

Kofu

Omiya

Ikebukuro

Tachikawa

・Each subsystem functions autonomously
・Faults in one part do not affectthe entire system

System image

KuroisoJinbohara

Komagawa

Autonomous decentralized architecture

Hatori

RepairUeno

Addition

Chiba
MitakaShinjuku
Tokyo

Yokohama
Atami

Shinagawa

Subsystem→

Ofuna

PlannedKurihama

Supporting safe, secure and reliable train
operations in the Tokyo area, 24 hours a day.
(Controlling around 7,300 trains everyday,at minimum to 2-minute intervals)(Data collated by Hitachi from published data)■Progressive expansion of the system foreach station and train zone
(20 years since project launch and still expanding)■Systemization of complex control andbusiness operations(Division of work between station and center)■A highly reliable wide area network© Hitachi, Ltd. 2010. All rights reserved.

41-4. Example Systems and Core Products and Technologies (2)Shinkansen Traffic Control System
World’s first computer-controlled
traffic management system(1972 opening of Sanyo Shinkansen in Okayama)Supporting high-speed,high frequency, accurate,
safe Shinkansen traffic
Taiwan Shinkansen

Joetsu Shinkansen
Nagano Shinkansen

Sanyo Shinkansen
Kyushu Shinkansen

Tohoku Shinkansen

Tokaido Shinkansen■Business operation: Approx. 2,400 kilometers,
carrying approx. 860,000 people/day■Speed: 300 km/h Frequency: Approx.
1,000 trains/day■Average delay time per train: 0.6 min.
(FY2009 Tokaido Shinkansen Statistics,
including delays caused by natural and weather effects)

Highly reliable real-time control
technology■Built in redundancy in system structure andfault tolerant (FT) systems used for highreliability and high-speed processing■Systemization of high-level driving
functions
・Train schedule management and real-time
automatic track control
・Train schedule rearrangement based onschedule prediction

Fault tolerant systems■Fault tolerant andhigh-speed processing
13-year operation record

Information
control platform
CF-1000/FT■New model CF-1000/FT
Uses common hardware
and proprietary control
software to realize FT(Data collated by Hitachi from data published on Japan Railway company websites)© Hitachi, Ltd. 2010. All rights reserved.

5

Information & Control Systems Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Performance Targets
4. Growth Strategy
5. Conclusion

2-1. Market Trends –Information and Control Systems Market
Increasing demand for social infrastructure systems for creating a low-carbon society
Infrastructure Information and Control Systems Market*(Trillion yen)

20

18.7Trillion yen

Increasing sophistication of
Infrastructure in industrialized countries(Smart grid, high-speed rail,
U.S. “Green New Deal,” etc.)
Development of large-scale cities
in emerging countries-power, water,Industrial infrastructure, etc.

15
Socialinfrastructure &industrial systems

Safe, secure, comfortable, green

10

7.3Trillion yen
5Socialinfrastructure &industrial systems
Railway systems

0

Railway systems

Power systems

Power systems

2007

2025

* Information & Control Systems Company estimates based on
Global Water Market 2008, UNFE Worldwide Rail Market Study,
and DOE/EIA International Energy Outlook, etc.

(Years)Meet new needs byfusing informationand control technologies© Hitachi, Ltd. 2010. All rights reserved.

7

& Smooth –Fusing Information and
2-2. SmartControl Technologies
Connecting social infrastructure with life through services to provide solutions
that are safe, secure, comfortable and green
Socialinfrastructure

Next-generationtransportation systems

LifeIntelligent water systems

Operation automation

Supply–demand
controlSupportfor human activity

Automation

Optimization

Information

Smart grids

SmoothGreen mobility

Control Information

Smart

Realize a smart & smooth society throughinformation and control fusion system© Hitachi, Ltd. 2010. All rights reserved.

8

2-3. Smart & Smooth Solutions– (1) Railway Systems
Use control information to support human mobility and increase convenience
Efficient
operations

Improved service Environmentallyfriendly

Safe, Secure and Reliable
Collaborative creation withcustomers and use of IT technology

Digital signage■Fusing traffic control and
SaaS-type content distribution
services■Provision of train service
information to station users
improves convenience

Fusion of systems

Control system
Traffic control

Information system
IC cards boarding
ticket systems

Seat
reservations
SaaS ： Software as a Service© Hitachi, Ltd. 2010. All rights reserved.

92-3. Smart & Smooth Solutions– (2) Plant Systems
Applying knowledge extraction to plant information to automate
and raise efficiency of plant operation and maintenanceOperation / Monitoring / Control

Monitoring system

Plant management■Use data-mining technology with
control information and plantknow-how to extract andsystemize knowledge and rules

Enterprise asset management (EAM)

Knowledge/rules

Plant data

Equipment status data

Link information and control system
Control systems

Guidance

Progressively introduce for all kinds of plants,
including industrial and power generation

Operation information

Plant/
equipment

Plant■Achieve high efficiency ofoperation and maintenance,
raise operation rates
and reduce environmental load, etc.

Maintenance records
Compressors/coolers

Pumps

Transformer
substation/transformers

・Enterprise asset management (EAM)・Remote maintenance, operation guidance・Environmental management solutions, etc.

EAM ： Enterprise Asset Management© Hitachi, Ltd. 2010. All rights reserved.

102-4. Competitive Environment
Hitachi and others respond to new social infrastructure needs by strengthening their solutions
Equipment

Control

Automation

Information

Information

GE
ABB

Hitachi

Siemens■Group companies havebeen developing
businesses in collaboration
in a wide range of fields

IBM
Information &Telecommunication
Systems Company

HitachiInformation &Control
Systems
Company
Power Systems Company
Social Infrastructure &Industrial Systems Company■The Information & Control
Systems Company
provides solutions
that fuse information
with control.

© Hitachi, Ltd. 2010. All rights reserved.

11

Information & Control Systems Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Performance Targets
4. Growth Strategy
5. Conclusion

3. FY2009 Results and Medium-Term Targets
Business Policy

Develop solutions that fuse information andcontrol into global growth markets(Billion yen)

Revenue Target
３５０.０ Billion yen

300.0
２３２.９ Billion yen

200.0

100.0

SocialInfrastructure&
Industrial
Systems etc.

SocialInfrastructure&
Industrial
Systems etc.

社会・産業

FY2015 Targets

電力
Power
Systems

Revenue: ¥350.0 billion
Overseas revenue ratio:
35%

Railway Systems

FY2009Provide fused valued-added
systems throughcollaborative creation withcustomers
Further strengthen global
business base

Railway
Systems
鉄道

Power Systems

0

Key Initiatives for FY2010

FY2015© Hitachi, Ltd. 2010. All rights reserved.

13

Information & Control Systems Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Performance Targets
4. Growth Strategy
5. Conclusion

4-1. Growth Strategy(1)Develop solutions that fuse information and control in global growth markets

Strategies■Promote businesses involving collaborative
creation with customers
・Provide value-added solutions throughinformation-control fusion × knowledge
and experience

Action Plans■Provide solutions that fuse informationand control for railways■Provide complete systems by developing
a support package for plant operationand maintenance■Develop next-generation social
infrastructure systems by drawing on
the collective strengths of the Hitachi Group.

■Concentrate investment in joint R&D with
the Supervisory Office for Business
Coordination (energy, transport, etc.)■Collaboration with Smart City Business
Management Division. (Control of businesses
and development across the group)■Development of next-generation
smart grid solutions■Use urban development projects asa springboard for expanding into
global growth markets■Strengthen ties with governments tocreate projects. (Tianjin Eco-City, Delhi Mumbai
Industrial Corridor feasibility study, etc.)■Establish global manufacturing and SI bases■Actively propose inter-city high-speed rail plans・Respond to demand for urban developmentin emerging countries (China, India, etc.), andupgraded infrastructure in industrialized countries.
FS ： Feasibility Study SI ： System Integration© Hitachi, Ltd. 2010. All rights reserved.

15

4-2. Growth Strategy(2)Develop next-generation smart grid solutions■ Hitachi smart grid technologies
and solutions■ Developing next-generation
smart grid solutions© Hitachi, Ltd. 2010. All rights reserved.

16

4-3. Hitachi Smart Grid Technologies and Solutions
From control of power equipment and systems business operation systems
Hitachi contributes to the stable supply of power and overall optimizationof power distribution systems
Information
andcommunications
infrastructure

Back office systems
Front office systems

Monitoring andcontrol systems

・ Automated distribution system

Generation

・ Adjustable-speed
pumped storage power
generation system
・Secondary cell

Customer
communications
network

Monitoring and control
communications network

Transmission

Transformation

Customers

Distribution

Solar

Power andenergyinfrastructure

Power storage

・ Equipment management
system・ Customer information system
・ Meter data management
system・ Contact center system
・ Energy usage services

・ Transmission stabilization system
・ Transmission monitoring andcontrol system

Information andtelecommunications systems

Transmission
connection control

Distribution equipment

・ SVC
・ STATCOM・ HVDC

・ SVC for distribution
・ SVR
・ Loop balance controller
・ Amorphous transformer

・ Network devices

Consumer systems
・ AMI systems(cooperate with Osaki
Electric Co., Ltd.)・ Power conditioners,
rechargeable battery
STATCOM：STATic synchronous COMpensator
SVC：Static Var Compensator
HVDC：High Voltage Direct Current
SVR：Step Voltage Regulator
AMＩ : Advanced Metering Infrastructure© Hitachi, Ltd. 2010. All rights reserved.

17

4-4. Developing Next-generation Smart Grid Solutions
Total optimization of energy infrastructure through fusion of power and information technologies■ Develop next generation systems
and technologies that are
Smart & Smooth・ Develop next-generation gridstabilization technologies(Smart grid simulators, etc.)
・ Create safe, high-efficiency community
energy management system (CEMS)(DSM, EV linking, authentication
management)
・ Develop total AMI solutions(MDM, distribution equipment
management, further joint opertions
with Osaki Electric Co., Ltd)

Raising efficiency andautomating generation,transmission, and distribution
Mega-solar systems
Wind power
generation

Storagebatteries

Next-generation
次世代電力網の最終形
smart gridOperational
support for powercompanies

Total optimization ofdemand and supply
with smart grid
Solar power

Power plant

CEMS■ Accumulate technologies andstandardize through participationin demonstration projects (*)(*) With Japan Wind Development Co., Ltd. (Rokkasho Village),
and NEDO (New Mexico, U.S.) and others.
DMS ： Demand Side Management , EV：Electric Vehicle
MDM ： Meter Data Management
CEMS ： Community Energy Management System ,HEMS ： Home Energy Management System , BEMS ： Building Energy Management System ,EV link

BEMS/HEMSElectric
vehiclesNow

Smart community
Consumer services© Hitachi, Ltd. 2010. All rights reserved.

18

4-5. Growth Strategy(2)Penetration in Global Growth Markets■ Trends■ Activities in emerging countries■ Constructing Global Manufacturing
and SI Bases© Hitachi, Ltd. 2010. All rights reserved.

194-6. Penetration in Global Growth Markets (1) Trends
Large-scale projects are underway for building social infrastructure in emerging countries,and sophisticating infrastructure in industrialized countries

Europe and Africa
・High-speed railway
in the U.K.

China
National Development
and Reform Commission’smodel project for energy
saving and emission reduction
Eco-city development(Tianjin, etc.)
・ Railway network

U.S. and Canada
Smart grid demonstrative
projects (New Mexico, etc.)
・ Bolstering nuclear power
generation
・ High-speed railway network■ Emerging countries areundertaking urban construction
and infrastructure upgrades
simultaneously, aiming for economic
growth and low-carbon societies
India, South East Asia and the Middle East

Delhi Mumbai Industrial Corridor

Brazil・ High-speed railway© Hitachi, Ltd. 2010. All rights reserved.

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4-7. Penetration in Global Growth Markets (2) Emerging Countries
Participate in urban development and inter-city transport projects centered on systems
that coordinate information and control■Establish a business model throughparticipation in international
projects and demonstrative
projects

Participation in Tianjin Eco-City– a Strategic Cooperation Project(MOU signed on May 5, 2010)

BEMS/HEMS

Provide total solutions forurban energy management
・ Power transmission stabilization system
・ Advanced Metering Infrastructure (AMI)・ Community energy management (CEMS)
・ EV linking system, etc.

EV linking

CEMS• Supply anddemandcontrol• Information hub

Delhi Mumbai Industrial Corridor (DMIC)
Participation in joint project between Japan and India

Participate in consortiums forproviding total industrial
infrastructure (power,
water treatment, transport, etc.)
・ Look broadly at application potential for
information and control systems(MOU signed April 30, 2010)

AMＩ : Advanced Metering Infrastructure
CEMS ： Community Energy Management System , EV：Electric Vehicle
HEMS ： Home Energy Management System , BEMS ： Building Energy Management System ,© Hitachi, Ltd. 2010. All rights reserved.

21

4-8. Constructing Global Manufacturing and SI Bases
Promoting Local Operations

Advancement of Production Technology

・ Localization of production,assembly and SI

・ Advance production technology
using IT (visual production guidance,(through joint ventures andpartnerships)

RFID production management)

・ Standardize MONOZUKURI
processes and quality management

・ Use sales network of HitachiGroup company partners

China

Europe・ Railways
・ Thermal power・ Thermal power, Steel plants
・ Smart grids
・ Inverters

India
・ Thermal power, Steel plants
・ Inverters
・ Smart grids

U.S.
Business model・ Nuclear power・ Smart grids
・ Railways

Business sites in JapanCore
components

Technical support
Production management
Quality management

Overseas bases
Products
and services

Manufacturing
Procurement ofcomponents

Overseas customers

Brazil・ Steel plants
・ Railways

Establish a position as a solutions partner in growing markets
RFID ： Radio Frequency IDentification© Hitachi, Ltd. 2010. All rights reserved.

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Information & Control Systems Business Strategy

Contents
1. Business Overview
2. Market Trends
3. Performance Targets
4. Growth Strategy
5. Conclusion

5-1. Conclusion (1) Results
Revenues(Billion yen)Overseas revenue ratio
35%

400.0
7%

350.0

20%

7%
8%

300.0

249.7

232.9

250.0
220.0

200.0

SocialInfrastructure&
Industrial
Systems etc.

Railway
Systems

100.0

FY2008FY2009FY2010
Forecast

～
～

～
～

0

Power
Systems

FY2012Plan

FY2015
Target(＊ ) Revenues are included separately those of Information & Telecommunication Systems Company, Power Systems Company,
and Social Infrastructure & Industrial Systems Company.

© Hitachi, Ltd. 2010. All rights reserved.

24

5-2. Conclusion (2) Business Targets

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

We will drive the Social Innovation Businessthrough Smart & Smooth social infrastructure systems
that fuse information and control.
© Hitachi, Ltd. 2010. 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 investments in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in the majorindustrial sectors which Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;- exchange rate fluctuations for 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 Digital Media &Consumer Products segments;- uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technology 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;- 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;- 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 socio-economic and political conditions and the regulatory and trade environment of Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, including, without limitation, direct orIndirect restrictions by other nations on imports, or 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 or other natural disasters;- 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 and that of its customers;- uncertainty as to the accuracy of key assumptions Hitachi uses to valuate 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. 2010. All rights reserved.

26