Hitachi Appliances, Inc.
Business Strategy

June 9, 2010

Takazumi Ishizu
President and Director
Hitachi Appliances, Inc.

Hitachi Appliances, Inc. Business Strategy

Contents
1. Business Overview
2. Management Policy
3. Home Appliances Business
4. Air Conditioning Business5. Conclusion

1-1. Revenues by Major Businesses
All-electric housing business

Homeuse

FY2009Consolidatedrevenues¥445.7 billion
Electrical homeappliances

Commercialuse

Hitachi Appliances’ Mission
Provide social and lifestyleinfrastructure in the air
conditioning and home appliances
fieldsHome appliances Air conditioning
Business(47%)
Business(53%)© Hitachi Appliances, Inc. 2010. All rights reserved.

21-2. Air Conditioning Business Product Lineup
A broad product lineup from home air conditioning systems to industrial air-conditioning systems.

Industrial use
Commercial use (Shops, buildings, etc.)
Home use
Room air conditioners

Packaged air conditioning
systems

Room airconditioners

Packaged airconditioners

Heat pump air
conditioners

Ceiling cassette
type

Multi-split air
conditioners

Absorption &centrifugal chillers

Absorption chillers

Air conditioning
managementsystem

Centrifugalchillers© Hitachi Appliances, Inc. 2010. All rights reserved.

31-3. Home Appliances Business Product Lineup
Energy-efficient home appliances to support customers’ lifestyles
Refrigerators

Washing machines

Vacuum cleaners

Microwave ovens

Pressurized IH jar
rice cookers

Air cleaners

IH cooking heaters

Eco Cute heat pumpwater heaters© Hitachi Appliances, Inc. 2010. All rights reserved.

4

Hitachi Appliances, Inc. Business Strategy

Contents
1. Business Overview
2. Management Policy
3. Home Appliances Business
4. Air Conditioning Business5. Conclusion

2-1. Consolidated Operating Results
0.4%

Operating income ratio(0.8%)(1.2%)

481.9

483.8289.0

280.0

234.0

Air conditioning

181.4

192.9

203.8

211.7

Home appliances

FY2006

FY2007

FY2008FY2009

Revenues(Billion yen)

0.9%

431.7

250.3

445.7

Returned to profitability in fiscal 2009
© Hitachi Appliances, Inc. 2010. All rights reserved.

6

2-2. Business Conditions and Key Strategies
FY2006-FY2009

FY2010-FY2012

Promote structural reforms
to restore profitability

Accelerate strategies
to create new growth■Return domestic electrical home
appliances to profitability■Speed up efforts targeting theenvironmental field

Moved back into the blackin fiscal 2009
■Launch an all-electric housingbusiness■Expand the air-conditioning
business globally by capturing
merger synergies(LED, photovoltaic solar powergeneration)■Develop second and third homeappliances markets overseas
after Japan■Further expand global
air conditioning business

Cooperate with the Hitachi Group to expand social
and lifestyle infrastructure businesses.
© Hitachi Appliances, Inc. 2010. All rights reserved.

7

Hitachi Appliances, Inc. Business Strategy

Contents
1. Business Overview
2. Management Policy
3. Home Appliances Business
4. Air Conditioning Business5. Conclusion

3-1. Home Appliances Business Management PlanAll-electric housing, solar power
generation, LED

40%

31%
Environment
New fields
Overseas
electricalhomeappliances

FY2009revenues¥230.0billion

Conventional
Lighting

Domestic
electrical home
appliances

Environment
New fields

Overseas
electricalhomeappliances

FY2012revenues¥250.0billionConventional
Lighting

Domestic
electrical home
appliances*Hitachi Appliances plans to absorb Hitachi Lighting, Ltd. (¥10.0 billion) in October 2010
*The figures include revenues of Hitachi Lighting, Ltd. and Solar power generation business and theother business of Hitachi Consumer Marketing, Inc.

Raise the share of total revenues from new environment fields
and overseas electrical home appliances to 40% in fiscal 2012.
© Hitachi Appliances, Inc. 2010. All rights reserved.

9

Initiatives for Emerging Business in Environment Fields
3-2. Key(1)Japanese Market

New environment fields are driving ongoing market expansion.
New environment fields (All-electric housing, solar power, LED)

FY2009 ¥510.0 billion.

FY2012 ¥800.0 billion.
Hitachi estimate(Trillion yen)

2.2

*Electrical home appliances (5 main products)(Refrigerators, washing machines, vacuum cleaners, microwave ovens, pressurized IH jar rice cookers)

2.2

2.4

2.2

Solar powergeneration
All-electrichousing

New
Environment fields¥800.0 billion

LightingLEDElectrical homeappliances(5 mainproducts*)

FY2006

FY2008FY2010FY2012© Hitachi Appliances, Inc. 2010. All rights reserved.

10

Initiatives for Emerging Business in Environment Fields
3-3. Key(2) Hitachi’s Strategy

Energy-conserving electricalhome appliances■Expand market share bypromoting energy-saving
performance and ease-of-use

Strengthen ability topropose systems for“Smart houses”

New environment fields■Expand LED lighting business

Plan to absorb Hitachi Lightingin October 2010
■Solar power generation
Expand business throughprocurement from Solar Frontier** The wholly owned subsidiary of Showa Shell
Sekiyu K.K.

■Expand all-electric housingbusiness

New Environment fields
revenues
FY2009FY2012¥30.0 billion¥50.0 billion*The above figures include revenues of Hitachi Consumer
Marketing, Inc (Solar power generation business etc.)© Hitachi Appliances, Inc. 2010. All rights reserved.

113-4. Overseas Home Appliance Market* in Asia
* 3 main electrical home appliances

The electrical home appliances market continues to grow steadily in Asia.
Asia electrical home appliances market(Trillion yen)

2009

2012

¥1.4 trillion¥1.7 trillion
Hitachi estimate*Electrical home appliances (3 main products) (Refrigerators, washing machines, vacuum cleaners)

1.7
1.5
1.3
China

1.1

Middle East
India
SoutheastAsia

2006

2008

2010

2012

(year)© Hitachi Appliances, Inc. 2010. All rights reserved.

123-5. Global Growth Strategy in Home Appliances Business
Market environment

Hitachi today■Major market expansion
in Asia due to future
economic development■Increasing demand forhigh-end products asincomes rise
■Rising need for energy-savingperformance■Large production basesin Thailand + sales bases
in major Asian countries■Strong brand image
in ASEAN and India■Sophisticated energy-savingtechnologies

Hitachi’s strategy■Promote a strategy of adding value with core energy-saving
and environmental technologies■Incorporate local needs to create
Overseas home appliances revenues
a business model where products
FY2012
FY2009produced locally are consumed locally¥40.0 billion¥50.0 billion■Expand overseas, centered on Asiaand the Middle East
© Hitachi Appliances, Inc. 2010. All rights reserved.

133-6. Key Initiatives of Global Growth in Home Appliances Business
Overseas home appliances revenues

FY2009FY2012¥40.0 billion¥50.0 billion

Middle East

China
(Washing machines,room air conditioners)
Thailand(Compressors)

Hong Kong

Thailand(Refrigerators, washingmachines, vacuum cleaners,pumps, rice cookers)

TaiwanIndia
Thailand
Vietnam
Malaysia
Singapore
Manufacturing company
Sales baseIndonesia

Expand business leveraging infrastructure in Asia and the Middle East.
© Hitachi Appliances, Inc. 2010. All rights reserved.

143-7. Key Initiatives for Japanese Home Appliances Market*Electrical home appliances (5 main products)
Source: JEMA (Hitachi forecasts from FY2010)

Hitachi’s share

23(%)

21171617

Demand900.0

900

25

18920.025

26*Electrical home appliances (5 main products)(Refrigerators, washing machines, vacuum
cleaners, microwave ovens, pressurized IH jarrice cookers)

920.0

910.0

900.0

870.0
840.0

860.0

850.0

2011

2012

800
(Billion yen)

2004

2005

20062007

2008

2009

2010

(FY)

The Japanese electrical home appliances market (5 main products)
is forecast to contract slightly,
but Hitachi aims to raise its share by proposing productsthat promote energy-savings and ease-of-use.
© Hitachi Appliances, Inc. 2010. All rights reserved.

15

Hitachi Appliances, Inc. Business Strategy

Contents
1. Business Overview
2. Management Policy
3. Home Appliances Business
4. Air Conditioning Business5. Conclusion

4-1. Air Conditioning Business Management Plan

FY2009Overseas revenues
Japan43%¥234.0 billion 57%¥ 100.0billion

FY2012
Overseas revenuesJapan¥300.0 billion 50%
50%¥ 150.0billion

Aim to increase the overseas revenues in fiscal 2012
・1.5 times compared with fiscal 2009・overseas revenue ratio : 50% in fiscal 2012
© Hitachi Appliances, Inc. 2010. All rights reserved.

174-2. Overseas Air Conditioning Market
Although prevailing market conditions are sluggish, expansion
is expected over the medium and long terms,
with growth especially striking in the emerging economies and Europe.

Global air conditioning market
2009
2012

¥3.2 trillion¥4.0 trillion(Trillion yen)

Hitachi estimate*Packaged air conditioning systems + room air conditioners*Excluding Japan and North America

4.0
3.4

3.43.0Others
EuropeChina

Brazil

2006

2008

2010

2012

India(year)© Hitachi Appliances, Inc. 2010. All rights reserved.

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4-3. Strategies for Overseas Air Conditioning Market
Market environment■Growing emerging
economy markets■Increasing environmental
regulations(High COP*, inverter expansion)■Emerging heat pump market
in Europe(Fuel-type → heat pumps)

Hitachi today［Strengths］■Environmentaltechnologies■Presence alreadyin India
and Brazil［Weaknesses］■Slow toenter Europe■Lackluster
Japanesebusiness
performance* COP…Coefficient Of Performance

Hitachi’s strategies■Expand environmentally friendly products based oncore heat pump technologies■Expand global business further
Global air conditioning revenues
・Maintain and build on competitive advantage
in India and Brazil
・Make up for lost time in Europe and China

FY2009FY2012¥100.0 billion¥150.0 billion© Hitachi Appliances, Inc. 2010. All rights reserved.

19

4-4. Deployment Strategy for Overseas Air Conditioning Market
Global Air Conditioning Revenues

China・Qingdao (Commercial use)
・Shanghai (Home use, compressors)
・Wuhu (Home use)
・GuangzhouFrance(Sales company)

FY2009¥100.0 billion

FY2012¥150.0 billion

U.S.
(Sales company)(Commercial use, large, compressors)

Taiwan(Home and commercial use)

Spain
(Commercial use)

Philippines(Large, etc.)

India(Home and commercial use)

Singapore(Sales company)

Manufacturingcompany

Thailand(Electronic components)

Sales base

MalaysiaBrazil(Home and commercial use)

(Home and commercial use)

Expand global business utilizing production and sales bases worldwide© Hitachi Appliances, Inc. 2010. All rights reserved.

20

4-5. Regional Business Strategies
Regional strategies

Europe■Expand environmentally friendly products(High-efficiency multi-split air conditioning systems,
data center air conditioning systems, heat pumps)■Strengthen sales capabilities■Launch heat pump business

China■Expand sales of energy-saving products(High-efficiency multi-split air conditioning systems,
inverter air conditioners, chillers)■Refine and strengthen sales framework

India■Begin chiller production at a new plant (July 2010)

Brazil■Began room air conditioner production
at a new plant (October 2009)

Others■Accelerate business developmentin the Middle East, Russia, Eastern Europe and North America© Hitachi Appliances, Inc. 2010. All rights reserved.

21

Strategies in the Emerging Countries
4-6. Key[Ex. Initiatives in India]

Expand business in India［Revenues］［High-end room air conditioners］

20.5(Billion yen)

14.7

13.4

Commercial use

9.3Home use(Room air conditioners)

No.1 share in fiscal 2009
FY2006

FY2008FY2010FY2012

Hitachi Home & Life Solutions (India) Ltd.
(Ahmedabad, Gujarat)■ 1999 Hitachi purchased an equity interest■ 2003 Hitachi acquired a majority stake(presently 68%)

in high-end products (22%)［New chiller plant opening ceremonyin August, 2009］

Hitachi’s India strategy■ Centered on room air conditioners→ Shift to comprehensive air conditioning strategy
after launch of commercial air conditioning■ Solidify the brand by maintaining No.1
share in high-end products■ Differentiate through powerful sales
and service network© Hitachi Appliances, Inc. 2010. All rights reserved.

22

Strategies in the Emerging Countries
4-7. Key[Ex. Initiatives in Brazil]

Expand business in Brazil［Revenues］(Billion yen)

9.6

［New room air conditioner plantin Manaus］

14.0
10.7

10.3
Commercial use
Home use(Room air conditioners)

FY2006

FY2008FY2010FY2012

Hitachi Air Conditioning Products Brazil, Ltd.
(Headquarters: Sao Paulo)
1972 Hitachi investment (Presently 100%)［Room air conditioner expansion plan］(Thousand units/year)84

Hitachi’s Brazil strategy■ Centered on commercial-use air conditioning42→ Shift to comprehensive air conditioning strategy
after launch of room air conditioners■ Leverage the only production base ofa Japanese air conditioner manufacturer in Brazil■ Differentiate through powerful sales and service network

12200920102011© Hitachi Appliances, Inc. 2010. All rights reserved.

23

Hitachi Appliances, Inc. Business Strategy

Contents
1. Business Overview
2. Management Policy
3. Home Appliances Business
4. Air Conditioning Business5. Conclusion

5-1. Hitachi Appliance’s Mission(1) Provide social and lifestyle infrastructure
Lifestyle infrastructure

Social and infrastructure

Shopping centers
Buildings

Transportationsystems

Data centers

Smart houses
Power plants(2) Actively expand overseas as the Hitachi brand spearhead
Contribute to Hitachi’s global business expansion© Hitachi Appliances, Inc. 2010. All rights reserved.

25

5-2. Medium-term Plan
Operating income ratio

0.9%
Revenues(Billion yen)

445.7

1.9%
1.0%

490.0

510.0

234.0

211.7
FY20092.7%

FY2010FY2011

540.0

300.0

Air conditioning

240.0Home appliances

FY2012

Aim for revenues exceeding ¥540.0 billion and an operating income ratio exceeding 2.7%.
© Hitachi Appliances, Inc. 2010. All rights reserved.

26

5-3. Conclusion (3) FY2012 Targets

Revenues

Overseas
sales ratio

Operatingincomeratio

FY2009¥445.7 billion

３３％

０.９％

FY2012FY2012¥540.0 billion

３７％

２.７％

© Hitachi Appliances, Inc. 2010. All rights reserved.

27

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-lookingstatements” 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.

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