Urban Planning and Development Systems
Business Strategy
Hitachi IR Day 2012

June 14, 2012

Toshio Ikemura
Vice President and Executive Officer
Infrastructure Systems Group
President & CEO
Urban Planning and Development Systems Company
Hitachi, Ltd.
© Hitachi, Ltd. 2012. All rights reserved.

Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Global Position and Growth
3. Business Strategy
4. Business Performance Outlook and Targets© Hitachi, Ltd. 2012. All rights reserved.

1-1 Business Overview
Building FM*
business, etc. (26%)

Elevator andEscalator business (74%)
Manufacture, sales, installation,
maintenance and modernizationof elevators and escalators

Energy saving
Energy savingassessment
Energy saving control

Security
Video surveillance systems
Room access control systems

FY2011
ConsolidatedRevenues¥ 417.3 billion

Building facility
maintenance*FM：Facility Management

Development of the Building FM businessStarting fromthe Elevatorand Escalator
business

Energy saving (visualize, assess and control)
Security (monitoring cameras, crime anddisaster prevention)
Facility maintenance, emergency breakdown
response
Modernization (air-conditioning equipment, lighting
equipment and power transmission and distribution)Providewholebuilding
solution© Hitachi, Ltd. 2012. All rights reserved.

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1-2 Business Overview
Value Chain of Urban Planning and Development Systems CompanyDevelopment

Sales

DesignManufacture

construction

MaintenanceModernization

Three Core Values
Development• High-performance product development capabilities(Develop unrivaled products)• Globally developed production system
Manufacture

Maintenance(Supply products from optimal locations to global markets based on
local production for local consumption)• Industry-leading service infrastructure and high-value-added
services(remote monitoring, diagnosis and control using predictive
diagnosis technology)© Hitachi, Ltd. 2012. All rights reserved.

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1-3 Business Overview
Main development, manufacturing sales and service bases
Istanbul

JapanTianjin
ChengduShanghai

KuwaitJeddahDubai

MuscatDelhi

China regional HQ(Guangzhou)

Guangzhou
Bangkok

ManilaHo Chi Minh CityRegional HQ
Development and design bases
Manufacturing and assembly plants
Parts plants
Sales and service bases

Kuala Lumpur

Singapore
Asia regional HQ(Singapore)

Jakarta

Promote globalization of value chain© Hitachi, Ltd. 2012. All rights reserved.

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1-4 Delivery RecordJapanShiodome City CenterHeight: 215 m (43 floors)
Ultra-high-speed elevators(Speed: 540 m/min)Roppongi Hills
Height: 238 m(54 floors)

Double-deck,
ultra-high-speed,large capacityelevators(Speed: 300 m/min,capacity 44 persons)Overseas
Al Hamra Mixed-Use Complex(Kuwait)
Height: 412 m (77 floors)
Ultra-high-speed elevators(Speed: 600 m/min :Fastest in the Middle East)

Shanghai World
Financial Center (China)
Height: 492 m(101 floors)

Double-deck,
ultra-high-speed,large capacity elevators(Speed: 480 m/min,capacity 48 persons)© Hitachi, Ltd. 2012. All rights reserved.

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Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Global Position and Growth
3. Business Strategy
4. Business Performance Outlook and Targets© Hitachi, Ltd. 2012. All rights reserved.

2-1 Global Position
Hitachi's Positioning (Elevators and Escalators) and Targets
Average growth rate for revenues(average over past 3 years)(FY 2015)

HitachiOverseas Company B

Overseas Company A

Japanese Company E
０％Overseas Company C
Japanese Company F

Overseas Company D*Circle: scale of revenues

10％

Operating income ratio （Average over past 3 years）

Become one of the world's top 3 in FY2015© Hitachi, Ltd. 2012. All rights reserved.

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2-2 Promote “Hitachi Smart Transformation Project"
Growth Strategy
Expand business in China, the world‘s largest market(aim to be No. 1 elevator and escalator manufacturer)

Develop competitive products in global markets
Strengthen links with distributors and partners around the world

Cost Structure Reforms
Production cost

• Localize production, allocate operations globally• Promote less engineering

Direct materials cost

• Expand global procurement• Develop products less susceptible to rising price ofraw materials

Indirect Cost

• Integrate core systems globally• Reallocate business resources to growth fields

Build strong earnings base© Hitachi, Ltd. 2012. All rights reserved.

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Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Global Position and Growth
3. Business Strategy
4. Business Performance Outlook and Targets© Hitachi, Ltd. 2012. All rights reserved.

3-1 Market Trends (Elevators and Escalators)
FY2012→FY2015 New Installation Market Trends (Thousand units, Hitachi estimates)
400340161918Japan
720

18

The Middle East3347

China

India
FY2012FY2015

Asian beltzone demand
units

442
thousandunits
<100>

520
thousandunits<118>

Hitachi order
received units

<100>

<140>

1415

Southeast Asia

Global

619

442

520

Asian belt
zone

FY2012 FY2015

Asian belt zone
accounts for around
72% of world demand*< >: Base year of FY2012=100

Focus on business expansion in Asian belt zone
© Hitachi, Ltd. 2012. All rights reserved.

113-2 Global Strategy (Elevators and Escalators)
FY2015 target: 12% global share
China
Aim to be No. 1 in China (No. 1 in terms of market share, brand value and customer satisfaction)n Achieve top share in the new installation market by strengthening sales,
service and manufacturing frameworksn Raise brand value by developing and introducing the world’s No. 1
products

Southeast Asia, India and the Middle East
Expand orders by expanding and enhancing product lineup

New Regions
Penetrate new markets by cooperating with distributors and partners

Japan
Expand elevator and escalator modernization business© Hitachi, Ltd. 2012. All rights reserved.

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3-3 Global Strategy (China)
Expand business to achieve No. 1 share in the new installation market
Strengthen sales and service capabilitiesn Expand and upgrade sales and service bases(No. of bases: As of March 31, 2012: 65 bases→ As of March 31, 2013: 79 bases)n Introduce elevators in for low income housing
n Secure stable earnings by enhancing
the maintenance business

Enhance production systemn Expand production capabilities bystrengthening networks among 4 bases(Guangzhou, Shanghai, Tianjin and Chengdu)
n Increase local production of high-speed andultra-high-speed elevators

Manufacturing plants
Parts plants

Tianjin

New plantShanghaiChengdu• Respond to increasing demandin the Western region

Guangzhou• Established a new escalator
manufacturing company• Integrate production bases
for traction machines

New installation order received units: FY2012 50,000 units→FY2015 69,000 units
Production capacity: FY2012 50,000 units→FY2015 74,000 units© Hitachi, Ltd. 2012. All rights reserved.

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3-4 Global Strategy (China)
Raise brand value by developing and introducing the world’s No. 1 products
Develop faster elevators in response to demand for the construction ofhigher and larger buildings→Develop and launch the world’s fastest elevators (1,000 m/min class)

Change of Elevator Speed in Major Projects

2007
Guangzhou
R&F Center2008
Shanghai World
Financial Center2010
Long Wish HotelInternational

2015

Develop and launch
1,000 m/min classelevators

360m/min

480m/min

600m/minIncrease presence and expand business in the Chinese market© Hitachi, Ltd. 2012. All rights reserved.

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3-5 Global Strategy (Southeast Asia, India and the Middle East)
Expand orders by expanding and enhancing product lineup
Expand and enhance product portfolion Launch standard-model medium
speed elevators→Produce at new Thailand plant,
supply to each region

Enhance production systemn Make the new Thailand plant an Asian core plant→Expand production capacity to 5,000 units(FY2013)

Cooperate with distributors worldwideand establish JVs
Delhi

High-end models
HighMiddle
East

Middle-class models

ThailandMarket price

India

Standard models
Kuala Lumpur

Target Segment
Manufacturing andassembly plants

Specifications and performance

HighSingapore

Main sales bases

Expand new installation orders in Southeast Asia, India and the Middle East

（FY2012 2,000 units ⇒ FY2015 5,600 units）© Hitachi, Ltd. 2012. All rights reserved.

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3-6 Global Strategy (Future Business Development)
Penetrate the new equipment market by cooperating with distributors and partners
Istanbul

TianjinChengduShanghai
Kuwait
Delhi

Dubai

Guangzhou

MuscatJeddahBangkok

China regional HQ(Guangzhou)
ManilaHo Chi Minh City
Regional HQ
Manufacturing plants,
assembly plant and parts plants
Sales and service bases

Direction ofbusinessexpansion

Kuala Lumpur

Singapore
Asia regional HQ(Singapore)

Jakarta

China:

Expand from coastal regions to inland areas

India:

Expand from northern region to southern coastal region

New regions: Consider advancing into Central and Eastern Europe and Central Asia
© Hitachi, Ltd. 2012. All rights reserved.

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3-7 Global Strategy (Japan)
Market Environment
Modernization market is expanding
due to increased number of aging
elevators
New installation market is flatn Hitachi’s Elevators and Escalators
Comparison of Modernization andnew installation order received units
New installation < > Modernization ratio
Modernization(Thousand units)〈34〉 〈37〉 〈41〉 〈45〉 〈50〉11.0

Business Strategy

7.1

8.1

Strengthen modernization businessn Launch models specifically for modernizationn Develop the fastest method for the modernizing
elevator control systems

4.7

Enhance the maintenance businessn Refine preventive maintenance by improving
predictive diagnosis precision, etc.

2.4

5.1

3.0

8.8

9.8
5.5

5.2

3.6

5.4

4.4

5.5

FY2011 FY2012 FY2013 FY2014 FY2015

Expand orders for modernization (FY2012 3,000 units⇒FY2015 5,500 units)© Hitachi, Ltd. 2012. All rights reserved.

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3-8 Building FM Business Strategy
Energy-saving market trends
Increased demand for energy and power saving due to tight electricity supplies
after the Great East Japan Earthquaken Energy-saving framework by user sizeUserFramework for energy saving

Large scale• Usage regulations imposed by the revised
Energy Conservation Law (Since April 2010)

Small andmediumscale• Subsidized project for promoting introduction ofBEMS*1 (Since April 2012)

For small to medium-sizedbuildings
Expand energy-saving market

Business Strategy
Develop energy-saving business for whole buildings by offering a cloud type
integrated building control system BIVALE*2 targeting small to medium-sizedbuildings
n Participate in BEMS aggregator business (Cooperate with Infrastructure Systems Company)

FY2015 energy-saving business scale: At least ¥30.0 billion in revenues*1 BEMS: Building Energy Management System*2 BIVALE:Building Value Leader© Hitachi, Ltd. 2012. All rights reserved.

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Urban Planning and Development Systems
Business Strategy

Contents
1. Business Overview
2. Global Position and Growth
3. Business Strategy
4. Business Performance Outlook and Targets© Hitachi, Ltd. 2012. All rights reserved.

4-1 FY2011 Actual / FY2012 Forecast(Billion yen)

FY2011
Previous
forecast

Revenues(Overseas revenue ratio)

Operating income(Operating income ratio)

FY2012Previoustarget

ActualYoY

407.0(34%)

417.3
(34%)

103%-420.0(36%)

425.0(36%)

102%-

31.0(7.6%)

31.8(7.6%)

106%-(8.0%)

34.0(8.0%)

107%-Forecast

YoYRevenues• Generated higher revenues in FY2011 as a whole due to strong performance ofoverseas elevator and escalator business, particularly in China.
• Projecting higher revenues for FY2012

Operatingincome• Despite the negative impact due to much higher rare earth prices, Thailand floods andyen’s appreciation, higher operating income was achieved in FY2011 as a whole with highincrease of elevators and escalator revenues and reduced operating expenses.
• Projecting higher operating income for FY2012© Hitachi, Ltd. 2012. All rights reserved.

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4-2 Business Performance Trends
43%〜Overseas revenue ratio
36%34%[36%][34%]
Revenues(Billion yen)

Operating incomeratio(%)

31%

12500.0
500.0

404.5

[407.0]Over 10% 10425.0[420.0]〜417.3

8400.0

7.4%

7.6%

8.0%

300.0

6

200.0

4100.0

2FY2010
Elevator and escalator revenues

FY2011FY2012 Forecast

Building FM business, etc. revenues〜0FY2015 Target0

Operating income ratio*[ ]：Previous forecasts or targets announced on June 16, 2011
© Hitachi, Ltd. 2012. All rights reserved.

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4-3 FY2015 Targets

FY2015 Targets
Revenues: ¥500.0 billion
Overseas revenue ratio: 43%
Operating income ratio: Over10%

Aim to expand business further, centered on overseas business,
and actively promote the “Hitachi Smart Transformation Project.”© Hitachi, Ltd. 2012. All rights reserved.

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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 notdirectly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions whichindicate 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 “forwardlooking 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 notlimited to:neconomic 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;
nexchange rate fluctuations of the yen against 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;
nuncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;nuncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds;
nthe potential for significant losses on Hitachi’s investments in equity method affiliates;
nincreased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Digital Media &Consumer Products segments;
nuncertainty 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 acceptancefor such products;
nrapid technological innovation;nthe 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;
nfluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals,
or shortages of materials, parts and components;nfluctuations in product demand and industry capacity;
nuncertainty 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, parts and components;
nuncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;nuncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitivenessand other cost reduction measures;
ngeneral socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States andEurope, 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;nuncertainty 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 certainkey products;
nuncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;
nuncertainty 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;
nthe possibility of incurring expenses resulting from any defects in products or services of Hitachi;nthe possibility of disruption of Hitachi’s operations by earthquakes, tsunamis or other natural disasters;
nuncertainty 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;
nuncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit-related costs; andnuncertainty 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 other materials published by Hitachi.

© Hitachi, Ltd. 2012. All rights reserved.

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