Urban Planning andDevelopment Systems
Business Strategy

June 9, 2010

Hideaki Takahashi
Vice President and Executive Officer
President & CEO,Urban Planning and Development Systems Company
Hitachi, Ltd.

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends & Business Strategy (Japan)
3. Market Trends & Business Strategy (Overseas)
4. Business Performance Trends and Targets

1-1. Business Overview
Building ＦＭ*1 business, etc.(29%)

Elevator and Escalator business (71%)

Security
Video surveillance systems
Room access control systems

Energy saving
Energy saving assessment
Energy saving control
ESCO *2 business

FY2009Consolidated
revenues
393.8 billon. yen

Manufacture, sales,
installation, maintenanceand modernization ofelevators and escalators

Building Facility Maintenance*1 FM：Facility Management *2 ESCO：Energy Service Company

Business Lifecycle of Building Facility Products
Development

Order

DesignManufacture

Installation

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

2

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends & Business Strategy (Japan)
3. Market Trends & Business Strategy (Overseas)
4. Business Performance Trends and Targets

2-1. Market Trends (Japan)
Building FM Market Size (Trillion yen)

Elevator and Escalator Market Size (Thousand units)*Hitachi estimates Apr. 2010

*Hitachi estimates

20

22.0
16.8

17.4

19.0

Contraction frommarket downturn

Increasing demand fromenforcement of the revised
Energy Conservation Law

1.19

1.17

1.21

1.27

FY2008FY2009FY2010FY2011

20.2
1.0

10

1.35

0.5
FY2008 FY2009

FY2010FY2011FY20120.0

FY2012

Elevator and Escalator Business: Strengthen and expand modernization business,
strengthen maintenance business
Building FM Business: Strengthen and expand high-value-added services
for whole buildings leveraging elevator andescalator service infrastructure© Hitachi, Ltd. 2010. All rights reserved.

4

Strategy
2-2. Business(Japan: Elevators and Escalators/Building FM Business)

Elevator and Escalator BusinessContinue securing new equipment orders■Hitachi’s elevators and escalators
Comparison of Modernization
Orders and New Equipment Orders*Unit base year FY2008=100

・Secure top share in orders for large projects
Modernization

Strengthen modernization business tocounter falling new equipment demand
・Launch a method to shorten modernization time〈〉

New equipment

Modernization raito〈20〉 〈30〉 〈32〉 〈34〉 〈35〉Generate stable earnings by strengthening
maintenance business・Maintained units：Approx. 188,000 (FY2010 target)

100
85

Building FM Business

80

59

20

26

Provide services for whole buildings withenvironmental consideration
・Develop energy-saving services(assessment, control, renovation and maintenance)
・Offer high-value-added services (room access
control systems, video surveillance systems, etc.)

93
63

30

104
69

35

114

74

40

FY2008 FY2009 FY2010 FY2011 FY2012© Hitachi, Ltd. 2010. All rights reserved.

5Orders Awarded
2-3. Large(Japan: Elevators and Escalators)

Nakanoshima Festival Tower

Yokohama Mitsui Building[Owners][Owner]

The Asahi Shimbun
Company

Mitsui Fudosan Co., Ltd.

Asahi Building Co., Ltd.

153m

[Building Height]

30 floors above groundand 2 underground floors

200m[Building height]

39 floors above groundand 3 underground floors[Total floor area][Total floor area][Uses]

Approx. 146,000㎡

Approx. 90,187㎡
Offices, museum,[Uses]

commercial facilities, etc.

Offices, hall, etc.

[Scheduled completion][Scheduled completion]

End of 2011

Fall of 201228 elevators, 11 escalators

30 elevators, 2 escalators© Hitachi, Ltd. 2010. All rights reserved.

6

2-4. Building FM Business Model
Expand service business for whole buildings centered on energy saving
Expand and strengthen sales to customers to which the revised Energy Conservation Lawor the revised Tokyo Metropolitan Environment Security Ordinance is applied
Make full use of existing service infrastructure (Customer centers, service network)

Customers to which the revised
Law or Ordinance is applied

Customer centers
Network

Remote monitoring
Lighting equipment,
air-conditioning equipment, etc.
Energy-saving assessment
and renovation proposals
Service response, regular maintenance

Building facility data

・Data collection and storage
・Remote surveillance 24
hours, 365 days a year

350 branch, office, etc. locations nationwide

Strengthen and expand FM business for whole buildings
including elevators & escalators and security systems from an energy-saving angle© Hitachi, Ltd. 2010. All rights reserved.

7

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends & Business Strategy (Japan)
3. Market Trends & Business Strategy (Overseas)
4. Business Performance Trends and Targets

Trends
3-1. Market(Global Elevator and Escalator Market)
New Equipment Market Trends

266(Thousand units, Hitachi estimate)

212
92

89

22

20

RussiaEurope

14

22

17
17

China

Middle East

20

23

North America

2Africa

30

35

10

13

*〈 〉: Base year of FY2009=100
FY2009FY2012

Total global
demand470 thousandunits

538 thousand
units

Demand intarget regions

283 thousand
units
<100>

351 thousand
units
<124>

Hitachi orders

<100>

<136>

Southeast Asia
India

2

2

Oceania22

South America

Japan

2

19

Aiming to expand orders at higher rate than growth in demand in “the Asian Belt Zone”© Hitachi, Ltd. 2010. All rights reserved.

93-2. Business Strategy (Overseas: Policy)
China: Growth strategy that considers risk
Strengthen business by regional HQ system, Hitachi Elevator (China)
Enhance order handling and manufacturing system from coastal to inland
China and expand maintenance business

Southeast Asia, India and Middle East: Growth strategy emphasizing profitability
Strengthen and expand business by establishing Asia regional HQ

Development, manufacturing and supply systems
Build a highly efficient global business framework

Promptly meet local needs and raise profitability
by enhancing regional HQ systems in China and Asia

© Hitachi, Ltd. 2010. All rights reserved.

10

3-3. Business Strategy (Overseas: China)
Expand business in China
Manufacturing plants
Parts plants

Northeast and North

Planned facilities
Tianjin
Northwest
and Southwest
East
Shanghaiand Central
Shanghai plant

South
Guangzhou

Sales, installation andmaintenance bases
RegionNo. of Bases

Northeast and North

16

East and Central

16

South

19

Northwest andSouthwest

12

Hong Kong and Macau

3

FY2009 48 bases→FY2010 66 bases

Reinforce production capacity to respond to demand growth

New plants planned for inland China in FY2012 (FY2009 35,000 units → FY2012 45,000 units)

Strengthen maintenance business(Maintained units: FY2009 70,000 units → FY2012 125,000 units)© Hitachi, Ltd. 2010. All rights reserved.

113-4. Business Strategy (Overseas: Other Regions)
Implementing Measures to expand business by Asia regional HQSoutheast Asia
Strengthen modernization business in regions with aging elevators (Singapore)
Reinforce sales capabilities by taking major stakes in agencies(Philippines, Indonesia and Vietnam)

India
Expand orders in already entered regions (Delhi, Mumbai and Chennai)

Middle East
Shift regional focus to Saudi Arabia and UAE (Abu Dhabi)
where demand is strong
Expand orders through stronger tie-ups with agencies in UAE,
Saudi Arabia and Kuwait

North Africa (Maghreb* nations)
FY2010—Begin examining market entry*Maghreb: Northwest African region, including Algeria, Morocco, and Tunisia© Hitachi, Ltd. 2010. All rights reserved.

123-5. Business Strategy (Global Development)
Highly efficient development framework in 4 locations (Japan, China and Singapore)
Accelerate development of world’s No. 1 products and cost-competitive products
Guangzhou

Location

Role

Japan

■Develop world’s No. 1
Products
・World’s fastest elevators
・High-speed and large-capacity
elevators

China■Develop mass produced
products
・Cost-competitive products■Develop high-speed elevators
・Develop for Chinese market

Singapore■Develop products forSoutheast Asia, Middle Eastand India
・Develop products catering toeach country’s market

Mito
works

Singapore

Shanghai(Open 2010)© Hitachi, Ltd. 2010. All rights reserved.

13

Strategy
3-6. Business(Global Manufacturing and Supply Framework)

Build a highly efficient global manufacturing and supply framework
Establish optimal design and development framework
Product supply framework

Beijing

TianjinJapan

KuwaitRiyadhJeddahShanghai
Dubai
Abu Dhabi

Delhi

Guangzhou
MumbaiBangkokHong Kong
ManilaChennai

Ho Chi Minh

：Manufacturing and assembly plants
Kuala Lumpur：Parts plants：Planned new plants：Sales bases

Singapore
Jakarta

Expand businesses in India and Middle Eastby cooperation among Japan, China and Singapore© Hitachi, Ltd. 2010. All rights reserved.

14Orders Awarded
3-7. Large(Overseas: Elevators and Escalators)
New Countryside Building in the Sky
・ 600m/min Elevators: 3 units
・ 480m/min Elevators: 2 units
A total of 33 elevatorsand escalators

Wuxi (China)
Abu Dhabi
ADIC
HEAD QUARTERS
・Elevators: 25 units
・Escalators: 4 units(UAE)

Shenzhen(China)Kuala Lumpur(Malaysia)

MRCB LOT348
LOT-A
・Elevators: 44 units

Shenzhen
Stock Exchange・Elevators: 54 units© Hitachi, Ltd. 2010. All rights reserved.

15

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Market Trends & Business Strategy (Japan)
3. Market Trends & Business Strategy (Overseas)
4. Business Performance Trends and Targets

4-1. Business Performance Trends
30%
29%

Overseas revenue ratio

28%
Revenues(Billion yen)

600.0

27%
25%

500.0

400.0

〈95〉
375.9

*

Operating profit margin (%)：Excluding forex impact (Converted at FY09 average rate)〈 〉：Base year FY09 revenues: 100

〈105〉
413.0

〈100〉
393.8

99
〈96〉
380.0

12

108
〈104〉
410.0

10

8
8%

6.7%

300.0

6.9%

6

200.0

4

100.0

2

0

0
FY2007

FY2008Elevator and escalator revenues

FY2009FY2010 est.

Building FM business, etc. revenues

FY2012 plan
Operating profit margin© Hitachi, Ltd. 2010. All rights reserved.

174-2. FY2009 Financial Results
FY2009 Financial Results
FY2008 (Actual)(Billion yen)

Revenues

YoY

FY2009 (Actual)(Billion yen)

YoY

413.0

110%

393.8

95%

Elevator and escalator
business

287.6

106%

280.3

97%

Building FM business, etc.

125.4

119%

113.5

91%

29.2

106%

26.4

90%

Operating income

Revenues fell year over year as a whole
due to the impact of a market downturn on the Japanese elevator
Revenues& escalator business and building FM business despite firm
revenues in the Chinese elevator & escalator business.
Operating income declined overall due to lower earnings because ofoperating lower revenues in the Japanese elevator & escalator business andincome building FM business despite sales growth in China andimplementing measures to improve profits, such as cost reduction.
© Hitachi, Ltd. 2010. All rights reserved.

18

4-3. FY2010 Financial Forecast
FY2010 Financial Forecast
FY2009 (Billion yen)

RevenuesYoY

FY2010 (Est.) (Billion yen)

YoY

393.8

95%

380.0

96%

Elevator and escalator
business

280.3

97%

270.0

96%

Building FM business, etc.

113.5

91%

110.0

97%

26.4

90%

26.4

100%

Operating income

Revenues are likely to fall year over year due to the impact ofmarket downturn on the Japanese elevator & escalator business
Revenues
and building FM business despite firm revenues in the Chinese
Elevator & escalator business.
Work to generate earnings on a par with FY2009 by reducing costs andoperating other actions even though lower volumes and falling prices in bothincomethe elevator & escalator and building FM businesses are expected.
© Hitachi, Ltd. 2010. All rights reserved.

19

4-4. FY2012 Targets

FY2012 Targets
Revenues 410.0 billion yen
Overseas revenue ratio 30%
Operating profit margin 8%

Strengthen and expand the FM business for whole buildings
in Japan, including elevators and escalators.
Reinforce the overseas elevator and escalator businessin the “Asian Belt Zone,” especially in China.
© Hitachi, Ltd. 2010. All rights reserved.

20

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.

21