Building Systems Business Unit Business Strategy

1 Hitachi, Ltd. 2018. All rights IR Day 2018 Building Systems Business UnitBusiness StrategyHideaki SekiSenior Vice President and Executive OfficerCEO of Building Systems Business UnitHitachi, 8, 2018 Hitachi, Ltd. 2018. All rights Systems Business UnitBusiness Overview and Analysis of current Hitachi, Ltd. 2018. All rights controlsystemMovingsidewalksEscalatorsMo dernizationNew installationSmart- Building servicesBuilding equipment fromother BUs andother companies(HVAC, lighting, security etc.)E&E maintenance services(Inspection, adjustment, replacing parts,remote monitoring) Building equipment management services(Remote monitoring)FY2017 yenBuildingServicesSalesand Manufacturing ofE&E(Elevatorsand Escalators)31%69%X : Ratio of FY2017 revenuesE&E: Elevators and EscalatorsHVAC:Heating, Ventilation, and Air ConditioningProviding high-value-added products and services globallyby utilizingdata from E&E and other buildingequipment1-1.

2 Business Overview Hitachi, Ltd. 2018. All rights Progress of the 2018 Mid-termManagement Plan (1): FY2017 Results4 Profitability decreased in FY2017 and FY2018 forecast updateddue to competition in the Chinese E&E market pushing prices downEBIT:Earnings Before Interest and TaxesO/R: Orders Received*1 As of 8thJune, 2017*2As of 1stJune, 2016*3 Against original targets excluding foreign exchange fluctuation and Business transfer impactFY2015(Results)FY2016(Results)FY20 17(Results)FY2018(Forecast)YoYAgainst previous forecast *1 Againstoriginal target *2 Revenues(Billion yen) ( )( )( )[( )*3]Adjusted operating income + ( )( )[( )*3]EBIT + ( )( )[( )*3] China:Despite slowing E&E newinstallation demand, expanded O/R unitshare;profitabilitydecreased by intense pricing competition, rising material costs ( steel) Japan: Revenues decreased with withdrawal from low-profit Business ( buildingmanagement businesses).

3 E&E Business remains steady Asia / Middle East:Expanded sales bases, improved E&E O/R, improved profitabilityFY2017 Conditions Hitachi, Ltd. 2018. All rights Operating Income [Ratio] in selling prices in China( )Cost reduction+ ofunit installation in China+ (Results)Foreign exchange( )[JPY / RMB ] [ ]FY2018(Forecast)Foreign exchange( )[JPY / ]Drop in selling prices in China( )Improve profitability year over year in FY2018promoting cost reduction in the China businessImproving profitability by promoting drastic cost reduction measures and expanding O/R for increasing NI units, in order to recover from drop in selling prices in China and foreign exchange impactsComparison with FY2017 [ ]FY2017(Results)FY2018(Forecast)NI: New Installation1-3. Progress of the 2018 Mid-termManagement Plan (2): FY2018 OutlookBillion yenBillion yenIncrease of unit installation in China+ in Asia/ Middle East+ Hitachi, Ltd.

4 2018. All rights 21 20 20 490 505 500 500 187 199 211 252 120 122 124 133 51 52 54 59 880 910 920 975 FY2016(Results)FY2017(Results)FY2018(For ecast)FY2021(Forecast)AmericasJapanChina Asia/Middle EastEurope6 CAGR: Compound Annual Growth Rate*ResearchedbyHitachi(Thousand units) Hitachi Analysis on E&EMarkets by Target Region E&ENIM arket Trends*ChinaAsia / Middle EastJapan Stillover50% of world s NI market, but slow down in growth Expect shifts of growth driver to maintenance NI demandgrowthin multiple countries (CAGR: ) NI demand to gradually decrease(modernization demand to increase)1-4. Towards FY2021(1): Market Trends Hitachi, Ltd. 2018. All rights strongrevenues growthwith expansion of E&E NI Business in China7*Hitachi sestimate of each company s revenues (size of circle corresponds to revenues size);revenues growth based on average between FY2013 and FY2017 Rate of revenues growth(Average over 5 years)Operating income ratio (Latest)Company BCompanyCCompanyEHitachiCompanyA10%0%5%1 5%5%CompanyD Our Positionin the E&E Industry*1-5.

5 Towards FY2021(2): Competition Strategy1. EvaluatingAchievements and Direction for Future Growth Past Achievements-Improve profitability mainly with Building service businessutilizing data-Continue consideration of M&A to supplement growth Strategy in target regions and Business areas Directionfor Future Growth2. Key Strategies by Target RegionChinaAsia / Middle EastJapanImprove profitability by expanding Building service Business , mainly with E&E maintenanceGrowth responding to strong E&E NI demand, improve profitability(shift in phase from investing in bases to reaping returns)As global mother function , promote development of Building service utilizing data Hitachi, Ltd. 2018. All rights (Results)FY2018(Forecast)FY2021(Target)8 Promote growth Strategy , aim towards industry leaderExpand Business and improve profitabilityby accelerating overseas promotion ofhigh-value-adding Building service Business utilizing data1-6.

6 Towards FY2021(3): Business Targets*1 Average yearly growthprediction of E&E NI market(in units), FY2018-FY2021: + *2 Average yearly growth of revenues, FY2018-FY2021*3 Compared to FY2018 forecastAdjusted operatingincome ratioRevenues(Billion yen)Over10 Overseas revenue ratio56%55%over59% -China:Expand E&E maintenance Business which has large growth potential (+ billion yen)-Asia / MiddleEast: Correspond to E&E NI demand growth (+ billion yen)Overseasbusinessexpansionrevenues:ov er+ yen*3-Expand Building service businesses, such as the creation of data-utilizing maintenance Business overseas-Accumulate cost reduction efforts through strict execution ImproveprofitabilityAdjustedoperating income:over+ yen*3 Realize strong growth, including considerationof non-continuous growthby M&A etc.,in addition to organic growthRealize growth exceeding market trends*1at over 5% / year*2M&Aetc. Hitachi, Ltd.

7 2018. All rights Systems Business UnitBusiness Overview and Analysis of current Hitachi, Ltd. 2018. All rights servicesElevators and Trends and Social / Environmental Values Social andEnvironmentalValuesContribution to sustainable urban development by providing products and services that realizesafety, security, comfort, and reduceenvironmental loadCorresponding SDGsSDGs: Sustainable Development GoalsGlobalizationCreatinginnovativeserv icesStrengtheningurbaninfrastructureMain taining,improvingfacility valueWork styleinnovationSocialinfrastructuredevel opmentSolution fortaller buildingsGlobalexpansionof governments,corporationsResolvinglaborsh ortagesReducingenvironmentalloadBusiness opportunities in socialchanges and challenges Hitachi, Ltd. 2018. All rights reserved. Expand globally, utilizing 20 years of experiencein Japan withIoT servicesforE&Eand Building equipment Provide new services combining OT IT Productsutilizing the IoT platformLumada11 Provide competitive E&E products 2-2.

8 Basic StrategyUtilizing data, provide fine-tuned Building services globallyProductPlatformE&E Supplement laborshortages withservice robotsAnalyze visitorinformation to increasefacility valueRealize comfortableand efficient mobileenvironmentsOptimizeelectricitycon sumptionHVAC /lightingSecurityMobility / human flowIoT(remote monitoring)AI /analyticsRoboticsProvide solutions as services to customerCustomersIoT platformLumadaOT: OperationalTechnologyAI:Artificial Intelligence Hitachi, Ltd. 2018. All rights GDPE&E NI market(Fiscal Year)1. Market EnvironmentYear over yeargrowthSlow down in growthand rising competition since FY2015-New-Urbanization Plan-China Manufacturing 2025-Belt and Road Initiative-Stable investment with urbanization- Business shifts with IoT evolution-Customers expansion outside ChinaBusiness opportunities Hitachi s China Business StrategyE&Esales &manufacturingBuildingservices-Over 50% of world s NI market,but slow down in growth-Demand for E&E modernizationto rise in coming years -Low E&E maintenance contractratio (potential for expansionin the maintenance Business )Market condition-Improve profitability by acceleration ofcost structure reforms-Expand exports utilizing high production capacity-Expand E&E maintenance Business , improveprofitability by data-utilizing maintenance(remote monitoring service)-Establish new Building service businessStrategy2-3.

9 China: Market Environment and StrategyConstructionInvestments Hitachi, Ltd. 2018. All rights China: Key Measures (1) Visualize production procedures for further efficiency in production utilizingLumada Introduced toChengdu factory(China), other factories to followOffset impacts from price competition and increases in material costby cost structure reforms throughout the value chainVisualize, analyze variability of working time by worker / modelWork analysis systemVideo linkage systemConnect workrecords and video data to analyze work efficiencyAutomaticvideo analysis systemAutomatically analyze video data,detect unnecessary procedures within worker flow and work down time2. Smart Production Reform1. Reducing Material CostsData visualization,analysisWorking video linkageAutomatic videoanalysisGlobalexpansion(FY2019~)Col laborationamong fourfactoriesinChina(FY2018)Introducedto Chengdufactory(FY2017)Strengthening joint / centralizedpurchase within Hitachi groupJoint / centralized purchase ratio (FY2017:55% FY2018:69%) Improvecost competitiveness: locate new suppliers through Hitachi group collaboration, revise specs, standardize, multiple purchases, review internal / external productionAccelerating cost structure reformsE&Esales & manufacturing Hitachi, Ltd.

10 2018. All rights China: Key Measures (2)Phnom Penh(Cambodia)Johor Bahru(Malaysia)Vientiane(Laos)Orders received projects from strategic partners (FY2016-FY2017)Sihanoukville(Cambodia)Ma laysiaPrincess BayXi-hu International HotelThe BridgeLandmark Expand exports aligned with strategic partners expanding overseas, such as to Asia Improve product competitiveness by introducing global unified model, standardized components (modular design)Expand exports from ChinaE&Esales & manufacturingImprove profitability in China and grow Business in Asiaby fully utilizing production capacity in China Hitachi, Ltd. 2018. All rights China: Key Measures (3)Expand E&E maintenance Business andintroduce new Building service businessBuilding services050201220152018(Fiscal Year)(Thousand units)500 Hitachi E&E Units in unitsCharge-freemaintenance contractand non-contract units Shifting Our Business Model Efficient, differentiated maintenance by introducing E&E remote monitoring service-Establish service structure ready for full-scaledeployment following legal framework enforcement Introduce remote monitoring system for Building equipment and Building security service-Plan to start offering a service to Japanese corporationsin China-Increase E&E maintenance units by respondingto NI and modernization demand growth-Improve maintenance contract ratio andprofitability byintroducing efficient remotemaintenance service businesses-Start introducing remote monitoring service forbuilding equipmentAfter-Respond to growing E&E NI demand-Low maintenance contract ratio-Maintenance service relying onhuman resource capabilityBeforeImprove maintenance contract ratio and profitabilityby introducing remote monitoring service Business Hitachi, Ltd.