Social Infrastructure & Industrial
Systems Business Strategy
Industrial & Social Infrastructure Systems Company
Hitachi Plant Technologies, Ltd.
Hitachi Industrial Equipment Systems Co., Ltd.

June 9, 2010

Gaku Suzuki
Vice President and Executive Officer
President & CEO,
Industrial & Social Infrastructure Systems Company
Hitachi, Ltd.

Social Infrastructure & Industrial Systems Business Strategy
Industrial & Social Infrastructure Systems Company
Hitachi Plant Technologies, Ltd.
Hitachi Industrial Equipment Systems Co., Ltd.

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

1-1. Business Overview(1) Revenues by sector
Hitachi Plant Technologies

Industrial & Social Infrastructure
Systems Company

３７％

Railway systems
２１％

Socialinfrastructure
１６％

Hitachi Industrial
Equipment Systems

１７％

４６％

FY2009consolidated
revenues¥727.5 billion

Industrial systems
６３％

Innovate by fusing IT and technologies supporting social infrastructure
and industrial systems[Integrated management with April 1, 2010 conversion of
Hitachi Plant Technologies into a wholly owned subsidiary]© Hitachi, Ltd. 2010. All rights reserved.

21-2. Business Overview(2) Major products
Industrial & Social Infrastructure Systems Company
SocialInfrastructure

Railway Systems

・ Rolling stock
systems・Transportmanagement &control systems

・ Transport management &control systems*(Business support systems)*Belongs to Information &Telecommunication Systems segment

・ Water and sewage
control system andelectrical component
control system
・ Road control system

・ Steel plant control
system・ Factory facility
control system

・ Production control systems
・ Industrial-use PCs

Web controllers

Programmable controllers
Power monitoring
systems

Industrial Systems

Permanent
magnet motors High efficiency
motorsVariable speed
controlled screw
compressors
・Water treatment
systems

・Compressors

・Chemicals andpharmaceutical plants

・LCD
manufacturing
equipment

・Construction
・Air-conditioning of various
plantssystems

Ink-jet printers
Amorphoustransformers Inverters

Inverter-driven
water supply
pumps

Inverter-driven
hoistsPower
distribution
systemProduction line
equipment

Utility equipment

Industrial Systems
Hitachi Industrial Equipment Systems Co., Ltd.

・PumpsSocialInfrastructure

Industrial Systems

Hitachi Plant Technologies,Ltd.
© Hitachi, Ltd. 2010. All rights reserved.

31-3. Noteworthy Business Features
Expansive, high-value-added key component groups

Fusion of highly reliable control systems and IT
Energy control and management systems

Water treatment equipment,
industrial machinery[FEMS*, HVAC control system for energy
saving][Pumps, compressors, ink-jet printers, etc.]

Monitoring and control systems

Industrial-use components[Inverters, motors, PLCs*, etc.][Plant, sewage, manufacturing process,steel, signaling/train control systems, etc.]

Substations
Railways

Simulation technologies[Forecasting, evaluation, analysis][Rolling stock, main circuit/main motor, etc.]
Components

Systems*Factory Energy Management System*Programmable Logic Controller

Provide total solutions fusing core products and systems as well as IT
Services

Water supply and sewage
operation businessComprehensive maintenance andmanagement
Measurement and diagnostics business

Full support through to operation,
maintenance and management

Water recycling and reuse systems
Air-conditioning systems and clean rooms

Remote monitoring and energy-saving services

Train maintenance (Overseas)

Engineeringandconstruction

Chemical plants (Process license)
Project management capabilities
Global construction capabilities
Proprietary techniques(Sophisticated modularization
construction techniques, etc.)

Proud EPC* track record*：Ｅｎｇｉｎｅｅｒｉｎｇ Ｐｒｏｃｕｒｅｍｅｎｔ Ｃｏｎｓｔｒｕｃｔｉｏｎ© Hitachi, Ltd. 2010. All rights reserved.

4Social Infrastructure & Industrial Systems Business Strategy
Industrial & Social Infrastructure Systems Company
Hitachi Plant Technologies, Ltd.
Hitachi Industrial Equipment Systems Co., Ltd.

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

Trends(1) Social Infrastructure Systems Business
2-1. Market—Water Business

Market Trends inJapan
Maturity of equipment market, decrease of investment on construction
Increase of update demand as facilities become superannuatedGlobal Market Trends
High growth rate in management and operation, as well as EPC
Asia and Middle East becoming largest markets in the world
Latin 欧州
America
Europe■ Market Size by Field and Region¥86.5 trillion¥36.2 trillion 38.0
Management& operation

19.3
48.5

EPC
& materials

3.8%

6.0%

Marketby Region¥86.5 trillion yen
2025
North
Asia &
America
Pacific
Middle East
& Africa

16.9
2007

2025

2007-2025 CAGR

*Source for by-market information: Global Water Market 2008, Ministry of Economy, Trade and Industry calculations; by-region information:
prepared based on the same materials© Hitachi, Ltd. 2010. All rights reserved.

6

2-2. Market Trends(2) Industrial Systems Business
Increasing energy demand centered on emerging economies → pressing need to improve energy efficiency

China and India account for most of the rise in global energy demandThis is spurring the oil and gas markets to find supply sources(un-developed and un-discovered markets)
Conversion from resource countries to product export countries (Iron ore→ steel products)■Projected Steel Field Capex
in Emerging Economies■Primary Energy Demand
20,000Mtoe

17,014Mtoe

CapitalExpenditures(Nominal)

Renewable energy

15,000China,
India

10,000Hydroelectric
NuclearGas（USM＄）

Non-OECD(Excl. China, India)

Oil

OECD

Coal

5,000

1980

2000

2006

2015

2030

CAGR
%/year(2009-2015)

2009

2015

China

48,164

119,975

16.4

India

5,841

14,231

16.0

Brazil

6,721

9,123

5.2

2030

*Mtoe: 1 million tons of oil equivalent, source: Energy Demand—IEA World Energy Outlook 2008
Steel capex—Prepared by Hitachi Research Institute based on Global Insight database© Hitachi, Ltd. 2010. All rights reserved.

7

2-3. Market Trends(3) Railway Systems Business2005-2007 ¥11.0 trillion ⇒ 2014-2016 ¥14.0 trillion (CAGR: 2.6%)
High growth in service and signaling/control
Huge market in Europe
Increased investments in railway infrastructure in emerging market■Market Size by Segment
Others16%¥14.0 trillion¥11.0 trillion
Signaling/control

1.25

Infrastructure

2.13

1.63

3.0%

2.75

2.9%

4.63

3.6%

Services(Maintenance,
etc.)

3.38

Rolling stock

3.88

4.75

2005-20072014-2016

2.3%

By Region

Asia &
Europe2014-2016
Pacific
38%
23% ¥14.0 trillion
North America
23%
CAGR for 2005-2007 and 2014-2016

Source: Market size prepared based on UNIFE 08 report; growth rate represents CAGR from 2007 to 2016
© Hitachi, Ltd. 2010. All rights reserved.

8

Social Infrastructure & Industrial Systems Business Strategy
Industrial & Social Infrastructure Systems Company
Hitachi Plant Technologies, Ltd.
Hitachi Industrial Equipment Systems Co., Ltd.

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

3-1. Business Policy
Innovate by fusing IT and technologies supporting social infrastructure and industrial systems

Full-scale entry into global markets

Socialby expanding the Hitachi Group’s
infrastructure
water business

Expand service businesses in JapanEnter overseas water businessin earnest

Industrial
systems

Expansion of solutions business toaddress global needs

Expand highly efficient, environmentallyfriendly components and systems
businesses

Railwaysystems

Accelerate globalization withtechnologies developed in Japan

Sustainable growth in Japan
Expand overseas businesses:
High-speed trains, emerging market

FY2009 Results

FY2015 Targets

Revenues: ¥727.5 billion
Overseas revenue ratio:22%

Revenues: ¥1,150.0 billion
Overseas revenue ratio:
Over 40%© Hitachi, Ltd. 2010. All rights reserved.

10Strategy and Growth Strategy(1)3-2. Business[1]Social Infrastructure Systems Business
Full-scale entry into global markets by expanding the Hitachi Group’s water business
Strategy unification: Established Water Environment Solutions Division (in Hitachi, Ltd. in June 2010)

Revenue Target

Business Expansion Measures

Revenues: ¥210.0 billion
Overseas revenue ratio: Over 30%
Operating income ratio: 6%

Develop services business in Japan

Roads, ¥210.0 billion
disaster prevention,etc.
Overseas
Water business¥120.6 billion
Japan■ Strengthen product competitivenessStrengthen equipment renewal■ Expand O&M* comprehensive contracts

Enter overseas water businessin earnest■ Provide solutions to improve the water
environment in emerging economies■ Expand business by entering waterbusiness operation andmanagement domain
Use experience in Maldives■ Provision of total solutions fusing water
treatment systems and IT“Intelligent water systems”

FY2009(Actual)

FY2015(Target)■ Greater cooperation with central andlocal governments
Utilize government finances and operation andmanagement know-how*：Operation & Maintenance© Hitachi, Ltd. 2010. All rights reserved.

11

Strategy and Growth Strategy(1)3-3. Business[2]Social Infrastructure Systems Business

Develop the water business globally as a “Japanese water major”
Total solutions provision■ Water supply and sewage field (EPC, business operation and management) [Volume zone]■ Reuse water, sea water desalination, industrial-use water and wastewater fields(EPC, operation and management) [Growth zone]■ Regional water infrastructure construction (Hitachi’s proposed concept: “Intelligent water systems”)■ Cultivate new area (Oil & Gas wastewater treatment and ballast water treatment, etc.)

Hitachi Group strengths■ Advanced water circulation systems(Membrane processing, microorganism treatment,
pumps, etc.)

Hitachi Group’s Vision
Services, maintenanceand management

operation
Water Major
Company A■ Advanced information systems(Monitoring, control, simulation, etc.)

Regions targeted for sales
expansion■ Middle East, Southeast Asia, China, India, SouthAmericaComprehensive
electricalequipment
manufacturer
Company B
Products andsystems

HitachiGroup

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

12Strategy and Growth Strategy(1)3-4. Business[3]Social Infrastructure Systems Business
Recent Highlights

Installed Pegasus* system
in sewage water treatment plants in Malaysia*Integrated immobilization nitrogen removal process. Pegasus isa registered trademark ofHitachi Plant Technologies, Ltd. And
Japan Sewage Works Agency in Japan.

Supplied wastewater recycling system
to the UAE.

Involvement in the operation of a water andsewage company in the Republic of Maldives.

Joined the Global Water Recycling andReuse System Association, Japan,
as a member of the board of directors.

Supplied a large water pumpfor irrigation to Egypt.

Micro hydroelectric power generation
using air-conditioning cooling water andpower grid control

Acquired a Singapore-based reverse
osmosis system manufacturer.

Developed and commercialized
a ballast water* purification system.
*Used as ballast for stabilizing hull balance,
ballast water usually contains plankton, bacteria, mud,and sand specific to the port from which it was drawn.

Ozone micro-bubble
wastewater reclamation system
Demonstration systemat Ikenokawa Sewage Treatment Plant© Hitachi, Ltd. 2010. All rights reserved.

13

Strategy and Growth Strategy(1)3-5. Business[4]Social Infrastructure Systems Business

Key Business: “Intelligent Water Systems”
Hitachi’s Proposed New Water Circulation System
Fusion of water circulation system and information system

Integrated
DB■Collate and integrate management of water environment information⇒Improve operating efficiency of water circulation as a whole■Actively utilize reused water and recycled wastewater⇒Help solve water resource problems■Provide water supply and sewage services based on sophisticatedtechnologies

City A

City B

City ECity D

・・・・

River

Water
purification

Sea water
Houses

Factories
Industrial-use
water

Industrial
wastewater
treatment

Treated water

Facility ownership
Operation andmanagement

PFI business, businessplanning(Private Finance Initiative)

DBO business, O&M
business(Design, Build, Operate)(Operation & Maintain)

EPC

Past business scope

Key Technologies
Sophisticated water treatment facilities■Sea water desalination facilities■Advanced wastewater treatment facilities (MBR*, etc.)

Pump facilities
Wastewater
Recycled
wastewater

Factories
Factory
wastewater

Water
distribution
information
management

Drinking water

City DB

Factory wastewater

Develop a solutions business to respond tosocial needs

Products
Systems

Intelligent Water System (City C)
River surface
water

From Equipment and EPC to Business Operations

Industrial-use
water
Treated water

Wastewater
treatment■Inverter-driven energy-saving control

IT for efficient system integration■Monitoring control system■Simulator technologies■Information management system(Asset management, automated meter reading, water fee
calculation, information disclosure)■Sensing technologies*Hitachi Membrane Bioreactor© Hitachi, Ltd. 2010. All rights reserved.

14

Strategy and Growth Strategy(2)3-6. Business[1]Industrial Systems Business

Expansion of solutions business to address global needs

Revenue Target

Business Expansion Measures

Revenues: ¥620.0 billion
Overseas revenue ratio: Over 35%
Operating income ratio: 5%

Expand highly efficient,environmentally friendly components
and systems businesses■ Eco factory solutions
Components
Systems, etc.

¥456.7 billion¥620.0 billion
Overseas

Japan

Drive systems
Energy-saving systems (FEMS)
Energy-saving data center air-conditioning
systems■Oil＆Gas
・ Accelerate entry into electric motor-driven LNG
plants market for small and medium-sized gas
fields* leveraging Papua New Guinea feasibility
study results
・ Expand sales of process compressors(Strengthen service system)■ Electric control systems forsteel plants
FY2009(Actual)

FY2015(Target)Expand orders in emerging economies bystrengthening local engineering capabilities: China,
India, etc.
*0.5 million to 2.0 million tons/year class© Hitachi, Ltd. 2010. All rights reserved.

15

Strategy and Growth Strategy(2)3-7. Business[2]Industrial Systems Business

Use the Group’s collective strengths to provide energy-saving solutions globally

Provide solutions that respond to global needs■ Eco factory solutions■ Oil & Gas: Display collective strengths
Information and control systems + Plant facilities + Process equipment+ Operation and maintenance■ Electric control systems for steel plants: Continuous
and greater cooperation with Mitsubishi-Hitachi Metals Machinery, Inc.

Hitachi Group strengths■ Highly efficient key components, High share in control systems
Amorphous transformers, inverters, motors, compressors, steel cold rolling facilities(Top global share*)■ Fusion With IT
Drive system control and analysis, energy-saving diagnosis,
operational status monitoring■ Large-scale plant EPC know-how*Hitachi estimate FY2009

Regions targeted for sales expansion■ China, Southeast Asia, India, Middle East, South America, Australia© Hitachi, Ltd. 2010. All rights reserved.

16

Strategy and Growth Strategy(2)3-8. Business[3]Industrial Systems Business
Recent Highlights

Data center
energy-saving
air-conditioning system

Supplied
air-conditioning
equipment for
the world’s tallest
building in the UAE.

Delivery of process compressors
for oil and gas plant in Saudi Arabia.

Developed dry air conditioning system
for lithium batteries.

Won bioplastic manufacturing process
license and equipment order in China

Conversion of compressor driveof existing steam turbine drive
to motor-drive in petrochemical plant

Hitachi Motor 100th Anniversary
Sold high efficiency motors
with carbon offsets

Developed anddelivered hot rolling mill control system
for Dongbu Steel Co., Ltd., South Korea

Model Project for Energy Saving andUtilization of Waste Heat/Pressure throughElectrical Systems in Yunnan Province, China© Hitachi, Ltd. 2010. All rights reserved.

17

Strategy and Growth Strategy(2)3-9. Business[4]Industrial Systems Business

Key business: Eco factory solution
Wide-ranging solutions from consulting to products, systems and services help reduce CO2
Management support with ■Energy-saving consulting■CO2 traceability solution
IT/consulting

Utility area
Optimal energy-saving and
CO2 reduction solutions

Plant & Factory

Substation■Gas insulated switchgear(SF6 gas free)■Vacuum insulated switchgear■Amorphous transformer
Private electric power generator

UPS (Uninterrupted Power Supply)

Air conditioning system
Factory process■Ice thermal storage air& equipment■From small to large scale depending
on application
Cooled and hot water and air
supply systems
Pumps, Chillers and Compressors■High-efficiency centrifugal chiller■Optimal control system■Inverter-type fan & pump■Energy-saving, oil-freecompressor

crane■CO2 reduction monitoring■Optimum total factory energy
consumption solution

Dust collection system
OfficeWastewater treatment
Solar power generation■Photovoltaic cell system■Power conditioner■Nitrogen and fluorine
treatment systems■Aeration control system

Energy-saving solution for offices■High-efficiency multipackage air-conditioning■Building and Energy Management System(BEMS)■Air conditioning energy optimization control
systems■Thermal storage systems in building mass

Cogeneration system

Soil & groundwater cleanupWind power generation facility■Wind power generator■Power conditioner

Unutilized hydro-energy■Micro-hydroelectric
generation equipment■Energy recovery system

conditioning■High-efficiency, small-space
multipackage air-conditioning■Energy-saving air-conditioning
systems■Energy-saving clean room
High-voltage direct inverter
Monitoring and control system■Factory total control system■Factory Energy Management System(FEMS)■Power monitoring system (H-NET)■Wireless sensor network (ZigNET)

Components for Factory
Automation■High-efficiency motors ■Permanent magnet■Low-voltage inverters(PM) motors■Inverter-driven hoist■Programmable controller■Ink-jet printerThunder prevention system© Hitachi, Ltd. 2010. All rights reserved.

18

Strategy and Growth Strategy(3)3-10. Business
Railway Systems BusinessAccelerate globalization of technologies developed in Japan
TargetBusiness Expansion Measures

Revenues*: ¥320.0 billion
Overseas revenue ratio: Over 60%
Operating income ratio: 8%
Transportation
Management& Control Systems¥320.0 billion

Rolling Stock
Systems
Overseas¥150.2 billion

Sustainable growth in Japan■ Focus on new Shinkansen lines■ Expand aluminum train
sales to municipal andprivate railway companies■ Expand hybrid traction system business■ Expand business support
systems business■ Create new businesses by collaboration
with customers

Expand overseas businesses
Japan

FY2009(Actual)

FY2015(Target)*Excluding business support systems which belongs to Information &Telecommunication Systems segment (FY2015 Sales target : ¥ 30 billion )■ Focus on high-speed train market■ Expand electrical components business■ Expand signaling/train control systems
business■ Expand monorail businessFor details, refer to March 29, 2009 presentation “Strategies for Railway Systems Business”
http://www.hitachi.co.jp/IR/© Hitachi, Ltd. 2010. All rights reserved.

19

Social Infrastructure & Industrial Systems Business Strategy
Industrial & Social Infrastructure Systems Company
Hitachi Plant Technologies, Ltd.
Hitachi Industrial Equipment Systems Co., Ltd.

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

4. Business Performance Trends and Targets
Over 40%
30%

Overseas revenue ratio (%)

19%

22%

22%

27%

1,150.0

Operating
Incomeratio (%)

Socialinfrastructure

1,000
Revenues(Billion yen)

801.2

10

833.5
800.0
Operating6%
income ratio (%)

727.5
673.0

5
3.5%

500

Industrial
systems

2.3%
0.5%

2.3%

0.8%
Railwaysystems

00FY2007

FY2008FY2009FY2010FY2012FY2015© Hitachi, Ltd. 2010. All rights reserved.

21

Social Infrastructure & Industrial Systems Business Strategy
Industrial & Social Infrastructure Systems Company
Hitachi Plant Technologies, Ltd.
Hitachi Industrial Equipment Systems Co., Ltd.

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

5. Conclusion

FY2015 Targets
Revenues: ¥1,150.0 billion
Overseas revenue ratio: Over 40%
Operating income ratio: 6%

Innovate by fusing IT and technologies supportingsocial infrastructure and industrial systems© Hitachi, Ltd. 2010. All rights reserved.

23

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.

24