business strategy of urban planning and development systems

January 18, 2005

Business Strategy of Urban Planning and Development Systems

All Rights Reserved, Copyright 2005 Hitachi, Ltd.

Yoshito Tsunoda, President and Chief Executive Officer,

Urban Planning and Development Systems,Hitachi, Ltd.


1. Positioning and Strategy of Urban Planning and Development Systems

2. Reinforcing the Elevator and Escalator Business

3. Deployment of the Solutions Business

4. Summary

Contents




4. Summary

Contents


All Rights Reserved, Copyright 2005 Hitachi, Ltd. 4

Demand

Entrepreneur

Investing activities

Environment

Growth in scale

Government/public organization

Investment growth

Sustain damage

Pursuit of quality

Private company/local government

Use of asset

Sustainable society

1. Socio-economic Structural Changes

The demand of society todayImproving the ability of cities and communities to function as

the foundation for a society centered on knowledge-based industries

Industrial society Knowledge-industrial society


Our mission is reinforcing the elevator and escalator business anddeploying the solutions business that support new lifelines for

cities in a society centered on knowledge-industries

1. Targeted Businesses in “i.e. HITACHI Plan II”

Urban Planning and Development Systems (established in April 2003)

Global Products IncorporatingAdvanced Technology

Convergence of technology and knowledge

HDD business HDD business

Automotive productsbusiness

Automotive productsbusiness

Semiconductor productionequipment business

Semiconductor productionequipment business

etc. など

Battery business Battery business

New Era Lifeline Support Solutions

Urban redevelopment business

Urban redevelopment business

SAN/NAS Storage solutions business

SAN/NAS Storage solutions business

Strategic outsourcingbusiness

Strategic outsourcingbusiness

etc.

Biomedical businessBiomedical business


Urban service infrastructure

Informationinfrastructure

a half century of experience

Social infrastructure

a century of experience

Improve safety, comfort and convenience

Mainframe Gigabit router Storage system

5HP motor 50MW generator Nuclear plant Computer control Railwaysystems

1. Hitachi’s Contributions to Economic Growth in Japan

Enhance urban functions and facilitate truly enriching lifestyles through the “urban service infrastructure”


1. The Urban Service Infrastructure Provides a TQOL

Safety

Comfort

Convenience

Total Quality of Life… Improving safety, comfort and convenience

Provide hospitality while maintaining sustainability

Address a variety of needs by ubiquitous IT and our service networks

Provide exclusive security and safety to our users with less burdensome


1. Business of Urban Planning and Development Systems

Manufacturing of elevators and escalators

Installation, maintenance and renovation

Elevator and Escalator Business

Solutions Business

Building management solutions

Urban development solutions

Asset management solutions


1. Major Group Companies

Subsidiaries

Affiliated companies

Hitachi Building Systems Co., Ltd.

Seishin Service Co., Ltd.

Hitachi Brain Co., Ltd.

Hitachi-Mito Engineering Co., Ltd.

Guangzhou Hitachi Elevator Co., Ltd.

Hitachi Elevator Engineering Co., (Hong Kong) Ltd.

Hitachi Elevator Engineering (Singapore) Pte. Ltd.

Mitsubishi Hitachi Home Elevator Corporation Manufacture, sales and installation

Siam-Hitachi Elevator Co., Ltd. Manufacture, sales, installation and maintenance

Equipment sales, installation, maintenance and renovations; comprehensive building management

Building maintenance

Marketing

Engineering and manufacturing

Manufacture, sales, installation and maintenance

Sales, installation and maintenance

Manufacture, sales, installation and maintenance


1. Key Points of Our Strategies

Goal: Sales of ¥500 billion and achieve a 10% operating profit marginby fiscal 2010 *

Focusing on the two businesses;elevators and escalators business and solutions business(Building management, Urban development and asset management), and securing high profitability

Reinforce the elevator and escalator business by focusing on ASIAN REGIONS

Deploy the solutions business

Establish superiority through up-front investments; use this as a new operating base to generate higher earnings

Enlarge business scale (Building management solutions,Urban development solutions and asset management solutions).

Aim for the No.1 market share in ASIAN REGIONS(Japan, China and Southeast Asia) by concentrating on our resources in this regions

Enlarge our business and enhance the profit margins

* Including the sales and operating profit of the “property sector” of Chuo Shoji Ltd. and Hitachi Life Ltd.Therefore, the definition is different to that in the segment information of Hitachi’s consolidated accounting.


1. Our Advantages

Advantages of Hitachi Group

Leading-edge core technologies for movement detection and sophisticated sensingComprehensive support for customers’ business operation for real estatedevelopment, financing and many other categories of services

Powerful brand based on technology and trust

365-day/24-hour Hitachi’s Customer Center and 350 service center in Japan

Elevator and Escalator Business

Utilization of elevator and escalator service network

Development of leading edge products and systems

Solutions Business


1. Goals

４００

３００

Sales (billion yen)

１００

２００

５００

(FY) ２００３２０１０(goal)

Asset managementsolutions

Urban developmentSolutions

Building management solutions

Elevator and escalator

６５

２００

４７５７０

２３０

４８１００

２７０

６０

７０

１５

２７０

３１７ * ３１５

３６３ *

４４０

５００ *

Fiscal 2010 sales of ¥500 billion, operating profit margin of 10%*

２００５(plan)

* Including the sales and operating profit of the “property sector” of Chuo Shoji Ltd. and Hitachi Life Ltd. Therefore, the definition isdifferent that to in the segment information of Hitachi’s consolidatedaccounting.




4. Summary

Contents

2. Reinforcing the Elevator and Escalator Business2-1. The Elevator and Escalator Market2-2. Market Analysis and Basic Strategies2-3. Goal for Elevator/Escalator Business2-4. Key Initiatives


2-1. The Elevator and Escalator Market

Market Forecast(new equipment, Hitachi estimates)

Market Share in Unit Volume(2003, new equipment, Hitachi estimates)

Demand (10,000 units)

(FY)２００３２００５２０１０

China

Southeast Asia/India/

Middle East

Japan

Europe,North America,

others

３．２

１４．５

２．８

７．８

３．３

２．８

８．９

１４．５

３．７

２．８

１４．５

２８．３２９．５３２．０

１１．０

Strong growth in China leading up tothe Beijing Olympics and Shanghai Expo

Japan① Company A 28% ② Hitachi 25%③ Company B 17%

China① Company C 　22%② Company A 　20%③ Hitachi 13%

Worldwide

① Company C 20%② Company D 16%③ Company A 11%

⑥ Hitachi 7%

Southeast Asia/India/Middle East

① Company C 30%② Company A 15%③ Company D 11%

⑥ Hitachi 4%




4. Summary

Contents



2-2. Market Analysis and Business Strategies

Strong growth in China leading up to the 2008 Beijing Olympics and 2010 Shanghai ExpoSteady growth in Southeast Asia, India and Middle East

Flat Demand in Japan, Europe and North America

Intense price competition in market for new installations and maintenanceIn maintenance market, fierce competition between manufacturer-affiliated firms and independent firms

Market analysis

Concentrate on our resources in ASIAN REGIONS

Enhance business framework focused on China, the world’s largest market

Upgrade profitability by product cost reduction and maintenance serviceefficiency

Business strategies




4. Summary

Contents



2-3. Goal for Elevator/Escalator Business

Sales (billion yen)３００

１００

２００

(FY)２００３２０１０(goal)

China

Japan

Southeast Asia

２００２３０

２７０

Share of newequipment

in ASIAN REGIONS １３％２５％

Fiscal 2010 aim for No.1 market share in ASIAN REGIONS

２００５(plan)




4. Summary

Ｃｏｎｔｅｎｔｓ



2-4. Key Initiatives

Deepen ties among development bases in the ASIAN REGIONS Develop globally competitive products Development

Build a manufacturing network in the ASIAN REGIONS withGuangzhou, China, as the hub

Cut manufacturing costsManufacturing

Strengthen sales activities through sales force automation (SFA), e-sales* and other means * estimation and specification decision

system using the webExpand the Chinese sales network to cover major cities

Sales

Upgrade quality and efficiency of maintenance services Build maintenance network covering ASIAN REGIONS Maintenance


2-4. Key Initiatives: Development (1)

Southeast Asia Engineering Centre

(established Sep. 2004, Singapore)

Hitachi ElevatorDevelopment Centre of ASIA

(established Oct. 2004, Guangzhou)

Hitachi, Ltd.Research & Development

Group (Japan)

Hitachi (China), Ltd. Research &

Development Center (Beijing)

Japan

China

Southeast Asia

・ Develop advanced technology and products

・ Develop global products

・ Develop advanced technology and premium products

・ Develop mainstream products for the ASIAN REGIONS

・ Modify products for Southeast Asian markets

・ Develop products to meet Chinese needs

・ Develop products for Southeast Asia

Development base Current missions Future missions

Deepen ties among development bases in the three ASIAN REGIONS

Urban Development Systems,Elevator Development Center

(Japan)


Upgrade product performance and enhance functions

Improve user-friendliness

Enhance energy saving and space minimization

Develop the global products which lead ASIAN REGIONS

2-4. Key Initiatives: Development (2)

〔１〕

〔２〕

〔３〕


(1) Upgrade product performance and enhance functions

Prioritize needs in high-demand zone(high speed and large capacity)

LargerSmaller

Slower

Faster

Elevator with the world’s largest capacityHitachi development target Hitachi secured Hitachi developed

Hitachi sellingOther company secured Other company developed

High speed 　and 　

large capacity

High capacity

Higher speed

Focus on developing elevator with the world’s largest capacity

Substantial demand


Handrail of traction drive

system

(2) Enhance energy saving and space minimization

Relaytype

Traction elevator with machine room

Helical gearPermanent magnet motorgearless

Hydraulic elevator with machine room

Machineroomlesselevator

Microcomputer

controlled inverterHigh efficient drivesystem

Shaft space saving

Handrail of liner drive system

Worm gear Helical gear

Slim type of balustrade

Truss frame

Helical gear/handrail of liner drive systemThe limitof slim type and thin type

１９８０１９９０２０００２０１０Less energy Less space

Less energy Less space

Power converter

Thin type drive system

Slim type drive system

Flexibility to adapt to building layouts, environmental sensitivity, cost savings

Elevators

Escalators

High efficient drivesystem


(3) Improve user-friendliness

High-contrast, raised buttons

Feedback from a panel of typical users

Extend the use of

universal designs

From elevator to the entire spatial movement domain

“Urban Ace” elevator received universal designprize of Good Design Special Award in fiscal 2002

Recognized for outstanding ease of operation and clean, sinceredesign

　First universal design prize 　　in the elevator industry

Pursuit universal design

* “Urban Ace” is the trademarks of Hitachi, Ltd. in Japan.


Japan

Tianjin

Guangzhou Guangzhou

Bangkok

Singapore 　　Existing factories (January 2005)

　　New factory (October 2005)

2-4. Key Initiatives: Manufacturing

Expand operations in Southeast Asia

Enhance production capacity

Expand operations in the rapidly growing Chinese market

Open new factory in Tianjin for northern, 　　　　eastern and northeastern China

2005


Japan

Tianjin

　　Existing factories (January 2005)

　　New factory (October 2005)

　　New factories

Build a a more efficient and lower cost manufacturing network in the ASIAN REGIONS with Guangzhou, China, as the hub

Product cost reduction

2008

Eastern China

Western China

(Details are undecided) (2005 through 2008)

Expand operations in Southeast Asia

Enhance production capacity

Expand operations in the rapidly growing Chinese market

Open new factory in Tianjin for northern, 　　　　eastern and northeastern China

2005

2-4. Key Initiatives: Manufacturing

Bangkok

Guangzhou Guangzhou

Singapore


2-4. Key Initiatives: Sales

Use IT to raise efficiency of sales activities (already started in Japan)

Strengthen sales activities through sales force automation (SFA)Apply SFA: Hitachi sales force since 2000

Sales agents since 2005

Use e-sales system to enhance the approach to our customers (since 2004)

Expand sales network to cover major Chinese cities

Increase number of sales base (branch offices, sales companies, and sales agents) by 40% (2003 through 2005)

Expanding sales network to cover local cities


Upgrade quality and efficiency of maintenance services

Improve service quality through use of remote maintenance technology (HERIOS)

Upgrade service efficiency through development and use of advanced maintenance tools

Customize maintenance menu to meet customer demands- Utilization of the maintenance plans improve the transparency of maintenance

service- Become a more trusted partner for customers

Enhance the customers service- Visit customers more often to respond effectively to our customers' needs

2-4. Key Initiatives: Maintenance (1)

* HERIOS is the trademarks of Hitachi Building Systems Co., Ltd. in Japan.


HERIOS : elevator remote maintenance system


Future evolution of remote maintenance technology

HERIOS : Hitachi Equipment Remote and Intelligent Observation System365-day/24-hour remote monitoring provide the Security & Safety・・・ 1994 Developed and introduced the industry’s first system of this type・・・ 1999 Received Ishikawa Award from Union of Japanese Scientists

and Engineers

Minimize maintenance time by remote automatic diagnostic system

Quick recovery by remote diagnostic and analysis

Reduce break downs with preventing maintenance

* HERIOS is the trademarks of Hitachi Building Systems Co., Ltd. in Japan.



アジア３極保全ネットワークの構築Build maintenance network covering ASIAN REGIONS

2005

Offer high quality, efficiency maintenance services in China and Southeast Asia Reinforce the maintenance business in China 　　・Expand the maintenance service order

　　・Build a maintenance service network

Reinforce the maintenance business in Southeast Asia 　・Optimizing the maintenance menu for each region


2008

Build a maintenance network in Asia ・Standardized service level throughout Asia

・Strengthen support collaboration in ASIAN REGIONS

2-4. Key Initiatives: Strengthen the Maintenance Business (4)

2005

アジア３極保全ネットワークの構築Build maintenance network covering ASIAN REGIONS

Offer high quality, efficiency maintenance services in China and Southeast Asia Reinforce the maintenance business in China 　　・Expand the maintenance service order

　　・Build a maintenance service network

Reinforce the maintenance business in Southeast Asia 　・Optimizing the maintenance menu for each region





4. Summary


3-1. Outline of Solutions Business 3-2. Building Management Solutions3-3. Urban Development Solutions3-4. Asset Management Solutions3-5. Key Advanced Technology to Support Solution Business:

Sensor Networks


Propose the future needs of Urban Development Solutions Market, ahead of the trend

3-1. Outline of Solutions Business: Basic Stance

Apply the advanced technologies in IT, energy facility and security fields to enhance safety, comfort and convenience

Create and promote new business value by collaboration with business partners

Market pull

Technology push

“Collaborative Value Creation”


3-1. Outline of Solutions Business: Strategies and Key Initiatives

Building Management Solutions: enhance one-stop service menu and quantifythe service value

Urban Development Solutions: take-off ahead of competitors with advanced Technologies

Asset Management Solutions: accelerate business by establishing the asset Management Solutions task force

Key initiatives

Stimulate the Building Management Solutions market

Establish superior position ahead of competitors in the Urban Development Solutionsmarket, where rapid growth is foreseen Enhance Solutions menu by using Hitachi Group’s advanced technologies and asset

Conduct highly profitable B-to-B service businesses

Strategies


Real estate owners/Developers/Construction contractors/Government and public organizations/Universities, etc.

Hitachi Group

3-1. Outline of Solutions Business: Business Model

IT Power and IndustrialSystems Financial services Services

Living SpacesCondominiums, houses

Work Spaces Buildings, offices

Public Spaces Towns, public facilities

Urban Services Infrastructure

Sensor networks, micro-grid energy management,total security management, etc.

＜Hardware ＞Advanced technology/Specific technology

Hitachi’s Customer Centers/Service center established in elevator/escalator business

＜Services＞Highly effective network

Services/Solutions

Conduct highly profitable B-to-B service business

Value-added services Service fees


3-1. Outline of Solutions Business: Goals

Building Management Solutions

Asset Management Solutions

Urban Development Solutions

Sales (billion yen)

１００

２００

(FY)２００３２０１０(goal)

６５

４７

５

７０

４８

１５

１００

６０

７０

８５

〔１３３〕*

１７０

〔２３０〕*

７０

〔１１７〕*

* Including the sales of the “property sector” of Chuo Shoji Ltd. and Hitachi Life Ltd.Therefore, the definition is different to that in the segment information of Hitachi’s Consolidated accounting.

２００５(plan)



2. Reinforcing the Elevator and Escalator Business3. Deployment of the Solutions Business

4. Summary


3-1. Outline of Solutions Business3-2. Building Management Solutions3-3. Urban Development Solutions3-4. Asset Management Solutions3-5. Key Advanced Technology to Support Solution Business:

Sensor Networks


3-2. Building Management Solutions: Market Analysis

４,０００

１２０３,０００

１００

８０２,０００

６０

Sales (billion yen)

Overall market(billion yen)

００

２０

４０１,０００

５,０００

（FY）２００３２００５２０１０

１００

４,０００

７０

４,２００

４,６４０

Hitachisales goal

market size

市場の特徴

６５

Market Forecast (Hitachi estimates)

Falling prices are reducing the marketscale of conventional building maintenance services, such as management equipment and cleaning

Annual growth of about 2% in totalmarket due to inclusion of peripheral activities, such as security services

Top 50 companies have only about 30%market share; the market is currently divided by a large number of small andmedium-size service providers

Market Analysis


3-2. Building Management Solutions: Key Initiatives

Consulting based on comprehensive

engineering skills

Report on problems

365-day/24-hour remote monitoring

Daily maintenance

365-day/24-hour emergency response

Directive to visit site

HitachiBuilding SystemsCo., Ltd.

Building equipment (elevators,escalators

/HVAC)

Security

Buildings/Offices

Cleaning/Hygiene management

Building and equipment maintenance

Others

Strengthen one-stop service capability

Provide safe and secure environments ・Machinery security system・Remote monitoring control system, etc

Maintain high-level reliability

Consulting to improve thevalue of customer asset

(Energy saving proposals, etc.)

Hitachi’sCustomer Centers

350 nationwide service centers

Quantification of service value

Ensure transparency of services

Improve service quality

HVAC: heating, ventilation, and air-conditioning




4. Summary



Sensor Networks


3-3. Urban Development Solutions: Market Analysis

40200

600

500

80400

00

20100

60300

700

３００market size

４６０

７００

５

１５

７０

Hitachisales goal

Market Forecast(Hitachi estimates)

（FY）２００３２００５２０１０

A market where rapid growth is expected. Full-scale expansion has started due to entry of companies from many fields (electric machinery, electronics, security, etc.)

More than 60% is dominated by services segment

Alliances spanning industries are being formed because no single company can cover all needs

Market AnalysisOverall market

(billion yen)Sales

(billion yen)


Work Spaces Buildings, offices

Public SpacesTowns, public facilities

Living SpacesCondominiums, houses

Security Ubiquitous IT

Energy/Environment

3-3. Urban Development Solutions: Business Map

　　　Home security

Video on demand(VOD)

Home healthcare

Home energymanagement

Room access Control

Building information System integration

ESCO *1

BEMS *2

Town security Digital Media

Communication Interpretation service

Private finance initiative (PFI)

ESCOMicro-grid

Energy Networks

Business Map of Hardware and Services

*1 ESCO : Energy Service Company*2 BEMS : Building and Energy Management Service


3-3. Urban Development Solutions: Pioneering New Businesses

Market trends Key initiatives

Establish superiority by pioneering the IT condominium marketsExpand the services menu

Security service demand is growingahead of others

Rapid growth is expected in home healthcare, VOD, etc. from 2005

LivingSpaces

Condominiums,

Houses

Enhance one-stop service capability extending from equipment supplyto maintenance management services

Enhance service quality and efficiency,utilizing Hitachi’s customer centers

Keep the balance between energy saving and comfort

More sophisticated security systemwith reduced burden of operations

WorkSpacesBuildings,

Offices

Launch new services such as townsecurity services ahead of othersEstablish superiority in regionalenergy systems using Hitachi’scontrol technology Concentrate on PFI for governmentoffices and schools

Improve convenience through “intelligent functions” at commercial facilities, railway stations, hospitals and other facilities

Optimal energy control for districts and facilities

Full-scale launch of PFI projects by national and local governments

PublicSpacesTowns,

Public facilities


3-3. Urban Development Solutions: Condominiums and Houses (1)

Living Spaces: Hospitality spaces creating a subtle atmosphere of peace

Home security system

Home video on demand service

Home health care service

Community information service

IT condominium system


3-3. Urban Development Solutions: Condominiums and Houses (2)

Providing security, comfort and convenience in common areas, living areas and when away from home

・Triple security: main entrance, elevators, home door ・Remote lock system using cell phone ・Visual confirmation of visitors when away from home ・e-mail notification using cell phone when family memberreturns or when an emergency occurs

Cell phone

Internet

Emergencyresponse

Security team call out

Hitachi service network,Partner security company

Datacenter

Contact center

Control center

Hitachi’s Customer Centers

IT condominium system

Home server, Condominium controller

Door/Intercom

PC

Main entrance/Intercom

Elevators

Home appliance

Condominium

Living Spaces: Hospitality spaces creating a subtle atmosphere of peace

Mobile solutions


3-3. Urban Development Solutions: Buildings and Offices (1)

Building management services

Physical/cyber security management system

“Unconscious security” management system

Office communication support system

Optimized control system for HVAC and lighting

Emergency response system

Work Spaces: adjustable business spaces offering greater comfort and flexibility

Intelligent elevator system



Building management services

Optimal integrated management for HVAC, lighting and security in many buildings

●Building energy saving service ・Easy attainment of energy saving targets without sacrificing comfort ofbuilding occupants ・Maximize operating efficiency of HVAC equipment both centralized heatsources and package-type units


Use of energy consumption forecast upon an energy saving plan

Turn off HVAC for unseated office room

Use of centralized heatsource to achieveoverall optimization

BEMS BEMS

Area-specific HVAC adjustments to match personal preferences

Optimal PAC* operation to raise efficiency

Optimal output control based on changes in ventilation needs


* PAC : Packaged air conditioners



Physical/cyber security systemsOffers security and convenience to match specific client needs through the integration of biological verification, smartcards and internet technology

● Building management system using smartcards・A single smartcard unifies building entry/exit managementand data security management ・PC log-in management linked to building entry/exit records ・Replicate personal desktop environment on shared company PCs

Recognition

Building entry gate

ＤＢ

PC

Entry/exit Log in for server

Management server


Common recognition method

Room entry/exit information access


3-3. Urban Development Solutions: Towns and Public Facilities (1)

Area navigation services

Community support services

Town security services

Service support system for retail stores

Service support system for hotels

Private Finance Initiative

Public Spaces: Cross-field for people and communities that create pleasant and 　　 memorable experiences



Community support services

Supports easy and convenient interaction with community people

●TV Telephone Interpretation Service・Support the multi-language communication・Interpreters appear on screen by IP telephone ・Offer low-cost services covering multiple languages

Service spots Hitachi Interpreting Service Management Center

Interpreter

Interpreter

Interpreter




Town security services

A new type of town security that preserves a community’s safety and security in agreement with the surroundings

● Low-profile Street and Security Lighting System・Bright illumination for walkways prevents crime・Built-in security camera and emergencyreporting device ・Images are recorded over the network

Low-profile street and security lighting system

Images of sites withsecurity services




Hitachi Group can offer best solutions for the public sector

●Key points of Hitachi’s Private Finance Initiative Business・Adequate equipment plans and maintenance management aiming for optimal life cycle cost ・Centralized management based on Hitachi Group-wide strengths ・The optimal operations based on the research laboratories’ management methods

Private Finance Initiative

Customer Institute of Basic Medical Science & Laboratory installation : Animal Resource Center, University of Tsukuba

Hitachi’s proposal received high marks for energy saving, through the use of natural energy and other means, and for its reduced level of maintenance management due to a long-term support system.

Business contract signed in March 2004





4. Summary



Sensor Networks


Hitachi GroupCompanies

3-4. Asset Management Solutions

Create and promote development business valuethrough collaboration with business partners

Real estate developmentRenovations/conversions

Related equipment (including elevators

and escalators)

Services (cleaning and hygiene management,

security, food services,etc.)

Equipment maintenance management Property management

Partners

Developers

ConstructionContractors

・・・

■Nikkyo Create 　 ■Seishin Service ■Hitachi Security Services ■Hitachi Building Systems, etc.

■Chuo Shoji ■Hitachi Architects & Engineers ■Hitachi Building Systems

■Chuo Shoji ■Hitachi Life ■Hitachi Building Systems

■Chuo Shoji ■Hitachi Life■Hitachi Architects & Engineers ■Hitachi Building Systems

■Hitachi Plant Engineering ■Hitachi Air Conditioning Systems■Hitachi Industrial Equipment Systems■Hitachi Building Systems,etc.

Maximizing the customer’s asset value


3-4. Asset Management Solutions

Aim to generate more earnings from Hitachi Group’s and customers’asset

Create and promote value through collaboration with developers

Conduct highly profitable maintenance business

Accelerate business by establishing the Asset Management Solutions task force

Concentrate staff from Hitachi Group companies




4. Summary



Sensor Networks


3-5. Key Advanced Technology: Sensor Networks (1)

Sensor board

Communication + CPU board

Power supply board

Temperature/Humidity sensor

Infrared sensor

Acceleration sensor

Light intensity sensor

Connector for external sensors (distortion, pulse wave, switch, etc.)

25mm

Sensor network management server

Sensor database

Application system

LAN

Stationary node

Name-tag-type node

Relay node Gateway

Wristband-type node

1) Compact

2) Wireless

3) Low powerconsumption

4) Locationmonitoring

Key technology for the ubiquitous information society: Sensor nodes automatically collect information and transmit it wirelessly to application systems

Sensor node The sensor node in its case

System configurationFeatures


Carry out the new business launch quickly with a focuson urban development solutions, such as IT condominiums, building internal environment control and social infrastructure monitoring

Make substantial investments for the rapid launch of these businesses

Establish Hitachi Group-wide promotion task force, combing Hitachi Group’s human resources

Develop new business

Prioritized investments

Establishbusiness promotion

task force


Key initiatives to commercialize sensor networks


Health information database

Healthmanagement

Security device

Wristband-type node

Cell phone


Network TV

Home facilities

Health monitor Blood

pressure gauge scale

server

Responds to emergencies

Service provider

Health statusand emergency

information

　 24-hour monitoring of seniors’ daily activities via wristband-type node

　 Allows family members to constantly confirm a senior’s health status from a distance

　Provides daily data records to allow monitoring trends in an individual’s health


Home Healthcare system

Family members

Home


LAN

Security camera

Sensor networkBase station

Energy saving control (HVAC*, lighting)

Internet

Buildings

Temperature sensor node

Environmental monitoring (comfort, energy saving)

24-hour centralized management

HVAC*

Centralized management of building equipment, IT devices and other items to monitor operating status

Provision of diverse systems and services covering comfort, security, disaster prevention, etc.

Offices/IT Environment

Name-tag-type node

Computer rack

Smoke sensor node

IT devices access control

Detection of accidents/emergency notification

Sensor networks base station

Security (crime/disaster prevention)

PCCrime preventionsensor node


IP network-based building management

* HVAC: heating, ventilation, and air-conditioning

Lighting

Hitachi’s Customer Centers

Notification


Sensor network (wireless)

Structural monitoring (deterioration, bolt loosing)

Control center Construction site (stress, warping)

Sensor node

Wireless sensing using an ultra-compact, low-cost distortion sensor

Regular monitoring of structures for lowering life cycle costs


Social infrastructure (structural) monitoring





4. Summary

Contents


4. Summary

Sales of ¥500 billion and achieve a 10%operating profit margin by fiscal 2010 *Goal

Elevator and Escalator Business・ Aim for the No.1 market share in ASIAN REGIONS(Japan, China and

Southeast Asia) by concentrating on our resources in this regions

Solutions Business (Building management,Urban development and asset management)

・ Establish superiority through up-front investments; use this as a newoperating base to generate higher earnings

・ Enlarge business scale

* Including the sales and operating profit of the “property sector” of Chuo Shoji Ltd. and Hitachi Life Ltd.Therefore, the definition is different to that in the segment information of Hitachi’s consolidated accounting.


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:

-rapid technological change, particularly in the Information & Telecommunication Systems segment and Electronic Devices segment;

-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;

-fluctuations in product demand and industry capacity, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment;

-increasing commoditization of information technology products, and intensifying price competition in the market for such products;

-fluctuations in rates of exchange for the yen and other currencies in which Hitachi makes significant sales or in which Hitachi's assets and liabilities are denominated, particularly between the yen and the U.S. dollar;

-uncertainty as to Hitachi's ability to access, or access on favorable terms, liquidity or long-term financing;-uncertainty as to Hitachi's ability to implement measures to reduce the potential negative impact of fluctuations in product demand and/or exchange rates;

-general economic conditions and the regulatory and trade environment of Hitachi's major markets, particularly, the United States, Japan and elsewhere in Asia, including, without limitation, a return to stagnation or deterioration of the Japanese economy, or direct or indirect restriction by other nations on imports;

-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 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; and

-uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write-down equity securities it holds.

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 other materials published by Hitachi.

business strategy of urban planning and development systems

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