Introduction

Sustainable Growth throughResolving Social Issues

Strengthening Our Technological Infrastructure

Our knowledge of the full potentialof machinery uniquely positions
us to contribute to solutions
for social issues

Eisaku Ito
Executive Vice President,
CTO Senior General Manager ofTechnology Strategy Office

Forecasting the Future and Achieving Innovation
MHI Group has contributed to the progress of society by providing various mechanical systems. At thesame time, as illustrated by SDGs, social issues andhuman values are diversifying and technologicalinnovation is accelerating, all of which requires a shift
in business.
Making this shift in business will require a newtrial and error “exploratory process” that takes abird’s-eye view of the future, and formulates hypotheses for innovation in business and technology. We
will undertake the challenge of innovating our business and technology from a medium- to long-term
perspective without being bound by the constraintsof current business. These activities constitute MHI
FUTURE STREAM (MFS) and are led by our Shared
Technology Framework*1.
We will share the business ideas we obtain withthe Growth Promotion Office and organically connectthem to our existing business foundation and organizational culture as a companywide growth strategy. Thisincludes business ideas that require new organizations.
MFS consists of three activities. The first of theseis “Mega Scan,” which explores business opportunities for MHI Group based on social mapping far intothe future. We are analyzing more than 100 mega-50

MHI REPORT 2020

trends in technology, politics, society and economics.
Next, with “Shift the Path,” we are considering measures for medium- to long-term conversion of businesses, and to accomplish this goal, we are using“Technology Scouting” to seek and co-create necessary technologies.
For example, we expect the values of our customers and investors to change and decarbonization toaccelerate. In response, we will work to achieve carbon recycling by engaging in conversion to low-carbon in our existing businesses, creating carbon-free
new businesses—as well as hydrogen power andstored energy—and achieve those goals from a variety of perspectives.
In addition, with the evolution of machinery systems, we are focusing on electrification and intelligent systems. MHI Group has many of the world’sleading hardware and control technologies. By incorporating more electrification and intelligent systems
into these technologies, we can create new value.
First, in electrification, we are developing products
in anticipation of future power semiconductors. Power semiconductors are devices that alter electricalfrequency, and the latest models have higher outputdensity. Furthermore, converting conventional motorized machinery to electric drive delivers a variety ofFurther Strengthening ofManagement Resources

Corporate GovernanceRisk Management

advantages, such as better efficiency, size and weight
reduction, as well as easier automated control.
In intelligent systems, for many years now, MHI
Group has been commercializing technologies thatmake use of deep learning and other forms of AI
and has been applying them to uses such as autonomous driving. By combining these efforts with recent
advances in digital, communication and control technologies, we can achieve optimal operation by linking
multiple machines as if they were one.
For example, in the growth fields of thermal andlogistics, we are working on intelligence, automation
and a significant improvement in performance. We
are also working to expand services by improving
inspection technology using AI.
With markets and technologies changing at an
unprecedented speed and scale, it is essential toincorporate external knowledge and create innovation. We are carrying out initiatives for the co-creationof innovation by collaborating with nearly 200 universities and companies and flexibly combining innovative technologies and business ideas.
*1 The Shared Technology Framework encompasses the Technology Strategy Office, Research & Innovation Center, ICT Solution Headquarters andValue Chain Headquarters.

Performance Data

New Initiatives to Achieve Innovation
Here we would like to present three examples of new
initiatives to achieve innovation through our MFS efforts.
The first of these is the MHI Innovation Accelerator, which we established in 2018. This organization
works to discover new knowledge from the mostadvanced technologies and research fields and carryout research and development of technologies thatrewrite conventional wisdom on products and business. The organization conducts R&D on ambitious
innovative technologies that, if achieved, will have agreat impact on society and industry. Many themes
start with essential verification of the basic principles,but we are steadily improving our technical readiness.
The number of themes is also increasing, and withyoung in-house researchers on board from the initialstage, we will accelerate future commercialization.
Furthermore, in 2020, we will establish “co-creation centers” to achieve the new ideas of venturebusinesses. These centers are equipped with laboratories and infrastructure for trial and error of prototypes and actual implementation and are operated
with a focus on hard technologies. Several venturecompanies have already commenced activities, andwe will accelerate commercialization by adding MHIGroup technologies, equipment and human resources.

 Deployment of Growth Strategy from MHI FUTURE STREAM(Blue: Led by the Shared Technology Framework, Red: Led by our Business Divisions)

Devise business shift and priority technology strategies<Exploring leadership>
Field of trial and error innovation
Megatrend ascertainmentand business opportunities

Commercialization<Exploiting management>
Field of business administration

Configuration andverification of businessconversion hypotheses

Production development,
business development

Mega Scan
Shift the PathGrowth strategies

Technology Scouting

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IntroductionSustainable Growth throughResolving Social Issues

Strengthening Our Technological Infrastructure

These centers also enable MHI Group employees tobecome creative, active innovators.
Another example is the acceleration of R&D andthe expansion of scope in the Shared Technology
Framework. We have introduced a new scheme,
focused on our Research & Innovation Center, forresearchers to freely come up with and verify hypotheses. This is conditioned on being able to write down
ideas and business scenarios that contribute to society in their own words and being able to subdivide
issues and break them down into elemental technologies. In the first few months, we received morethan 100 proposals. They made up a mixed bag ofideas ranging from those at the embryonic stage tothose that were quite well developed. Throughout thisprocess, we say, “It is alright to fail.” Even failed ideas
help accumulate excellent data on hypothesis testing.
We could see people take their own original ideas tothe aforementioned “co-creation centers” and comeinto their own as entrepreneurs.
Moreover, new business and product ideas that areclose to commercialization are also emerging fromMFS. Often, there is a need for Group-spanning projects facilitated through the collaboration of multiple
SBUs*2, and we therefore operate a scheme to have
SBU designers and Shared Technology Framework
researchers handle development jointly.
*2 SBU: Strategic Business Unit

Adding a New Form to MHI GroupOperating complex and high-performance machineswith high precision, while also providing reliability:
That is the strength of MHI Group. We will evolve byadding electrification and intelligent systems, andthat is the direction we will take in the months andyears ahead.
The name MHI tends to be associated with themanufacture of rockets and other large finished products, but going forward, we will increase opportunities
to “make strong components (parts) and put them into
more widespread use.” While focusing on machinerythat utilizes complex technologies, we will also provide new types of components incorporating electricand automated features. We will continue to create
innovative components that are useful to society.
For example, in automotive thermal systems, bycombining a motor into a conventional system forengine vehicles, we developed an electrical version
for EV vehicles in an extremely short period of time.
In addition, high-performance power components
are essential for the air taxis that are being developed around the world. Leveraging the top-classexpertise in rotors that we have accumulated inturbines and related technology, we will build components that integrate fans with motors, and sellthem to numerous air taxi manufacturers around theworld, where they will be in widespread use. This

Megatrends

Technologicalinnovation

Evolution of machinery systems

Electriﬁcation

Intelligence

Fusion of rotator body technology andpower electronics technology

Utilization of data to increase user value
and reduce risk

Conversion to electric drive

Service businesses utilizing data

Solid technologies and track record in manufacturing

52

MHI REPORT 2020

Communicationand securitySensors
AI anddigital technology
Materials manufacturing/machining

Further Strengthening ofManagement Resources

Corporate Governanceis a field where we can demonstrate our strengths
since it requires the combination of difficult technological developments.
Control technology that soundly and efficiently operates complex machinery and plants is ourimportant core competence. Above all, we lead theworld in mission-critical control technologies such associal infrastructure and power plants.
In the field of intelligent systems, by attaching
more sensors to equipment for monitoring, we carry out optimized operation of multiple systems. Our
in-house power plants have already demonstrated
technology that uses real-time data to determine
optimal operation via edge computing and wirelessnetworks. To analyze and utilize data, we are constantly improving various simulation technologies andAI technology platforms. By making full use of thesetechnologies and platforms, we identify the signs ofworn out parts that even seasoned experts may notnotice and recommend their replacement. We will
also increase remote control and autonomous driving.

Air taxis

Risk Management

Performance Data

We Will Continue to Provide Products andServices to Satisfy the Needs of our Customers
Some people wonder whether MHI Group has any
more room left to grow, but I am convinced that weare precisely the kind of company that has the potential for future growth.
For example, electrification leads to smallermachinery that operates at higher RPMs, which presents various concerns, such as how to cool the heatgenerated and whether the machines are structurallysound. It also increases the need to accurately predict the timing of repair and replacement. However,when it comes to identifying the location and causeof a problem and determining the timing of repair orreplacement, it is not enough to simply analyze operating data with AI. Only a company that has a deep
understanding of the machine itself, has advanced
design, development and manufacturing technologies, and is aware of boundaries such as operating
limits and machinery lifespan can respond appropriately. Ultimately, that is where success or failure will
be determined.
When it comes to advancing intelligent systems,
one of the strengths of MHI Group, which is engaged
in a wide range of applications for everything fromdefense to factories to air conditioners, is the ability
to set appropriate security levels for the applicationin question. Diversity of technologies and breadthof practical experience are the pride of our Shared
Technology Framework. This is unique to MHI Group,with our range of more than 500 products.
In the field of production, we are also working onwork navigation systems and production schedulingtechnologies using AI technology. Basic technologies
such as these can be used to transform business.
The credo of our Shared Technology Framework
is to not be afraid to fail and to be faster than venturecompanies. By executing our MHI FUTURE STREAM,
we will continue to evolve as a manufacturer ofmechanical systems offering innovation to society.

Intelligent plants

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