R&D strategy - Hitachi Global

1 R&D str-Strategies to acce12thApril 2 Shigeru AZVice PresidGeneral MHitachi, Ltrategygyelerate new growth -2010 ZUHATA, and Executive Officer,Manager, Research & Development Group, 2010 Hitachi , Ltd. All rights Corporate R&D or2. R&D to pioneer fubusiness3. Positioning for strategy5. Summaryrganizationusion & environment e future 2010 Hitachi , Ltd. All rights Corporate R&D or2. R&D to pioneer fubusiness3. Positioning for strategy5. Summaryrganizationusion & environment e future 2010 Hitachi , Ltd. All rights R&D organizationPresidentResearch & DevelopmenItll t lPt GHitachi Gr. CTOP ower Systems CompanyPower Systems CompanyCTO: Chief Technology OfficerIntellectual property CTOP ower Systems CompanyIndustrial & Social InfrastructuSystems Planning & Devt. SystemInformation Control Systems CInfo & Telecommunication SysPower Systems CompanyIndustrial & Social InfrastructuSystems Planning & Devt.

2 SystemInformation Control Systems CInfo & Telecommunication SysInfo. & Telecommunication SysDefense Systems CompanyBattery Systems Company (20 Info. & Telecommunication SysDefense Systems CompanyBattery Systems Company (20 Development lab/divisionDevelopmBusiness DivisionEnergy & Environmental Sy(Power SystemsBusiness DivisionGroup company CTODevt. & DeCentral Research LaboratoryAdvanced Research Laboratoryt Research LaboratorySystemsDevelopmentLaboratoryTe TeacracrTeTeacracrure ms Coure ms CoSystemsDevelopmentLaboratoryMechanical Eng. Research tiERhLbechnology echnology ross the Hiross the Hiechnology echnology ross the Hiross the Histems - )stems - ) Division(integrated 2010/4 -)PlatformsPlatformsitachi Grouitachi GrouPlatformsPlatformsitachi Grouitachi Grouent CenterOverseas R&D facilitiesystems Lab s Company)ssupupssupup 2010 Hitachi , Ltd. All rights Section31-2. R&D schemeFocus on social inManagementBusiness target Focus on social inEManagementstrategyCompanyBusiness strateResearchSponsored reseLong-t&DevelopmentpAdv.

3 Sponsored re(Company funCurrent businenextgeneration businesnext-generation busines<Generate No. 1 bunnovation business nnovation businessEnvironmental Vision 2025gy roadmaparchFrontier term technology devt. planesearchds)ote& Platform research(Corporate HQ funds)Generate innovative & disruptive technologiesess /s expansion 2010 Hitachi , Ltd. All rights disruptive technologies<Shifts in paradigm>s expansionsiness>41-3. R&D investment R&D expenditure52%52% JPY)200250300350 Hitachi Groupenditure (bil050100150200020012002200320042005200 62007R&D expe R&D personnelCorporate labs +Devtlabs2000200120022003200420052006200 7 HitachiCorporate labs + Devt. labsHitachi, Hitachi Tota4%6%8%10%R&D expenditure as % of RevenueCorporate labs2%4%0% Hitachi GrCorporate labs15 pcompany 20 Hitachi Gr. company65 Fiscal Year2008 Breakdown of expenditureFiscal Year2008 LtdFY20083 700FY20093 600FY20103 500 2010 Hitachi , Ltd.

4 All rights reserved., Ltd. Gr. ,7002,2005,9003,6002,2005,8003,5002,2005 ,70051-4. Improving return on in R&D efficiency based on Hitachi Gr. co6R&D expenditu45pOperating incoROI 23012 Fiscal 02000 2001 2002 2003 2004 2005 Focus on social innFocus on social innnvestmentonsolidated financial ure/Revenue (%)Operating /()me/Revenue (%)incomeR&D 2006 2007 2008 2009 2010 Hitachi , Ltd. All rights businessnovation business6 SiliSili1-5. Focusing on social innoSocialSocial IndustrialIndustrial UrbanUrbanSocial innoSocial innoTUrban systemsSgCloudSoftwareNetworkFusFusbusib usigEco-friendlydata centersInfo. & Telecom. systemsInfo. & Telecom. systemsStorageKey deytib itib iovationn development systemsn development systemsovation businessovation businessTransport systemsmartridsionsioninessinessridRenew able energyGreen mobilityNuclear powergenerationPower systemsPower systemsThermal power generationevices 2010 Hitachi , Ltd.

5 All rights cPrioritizing R&D inveCorporate funds 1 Increased appropriation of corporate30%70%420%40%FY200 Company funds Silh jt(Tkk)Accelerate key projects: approx. 202 Priority investment in social innovati Special research project (Tokken) Coverage: Backbone technology for future business & productsproducts Term: 1-2 years Leader: Research Dept. funding portfolioe funding to social innovation areas40%55%20%25%09FY2010 Social innovation Platform Other St t i b ij t (SPJ)ion researchAccelerate business commercialization Strategic business project (S-PJ) Coverage: Important businesses to be set-up in minimum time 2010 Hitachi , Ltd. All rights reserved. Leader: Business Clid tITh f ilitii t t1-7. dConvergence of IT rCentral Research Laboratory ConsolidateIT research facilities into tdevelopment efficiency LaboratoryYokohama(660 researYokohama(660 researCentraKokubunji160 of 940 researchersSystems DevelopmentLaboratoryCentraLabora160 peSystemLaboraLaboratory500 peIT R&D <Assignment> Build-up IT <Assignment> Build-up IT Yokohama Laboratory 200 researchersp Contribute tp Contribute tKawasaki Laboratory300 researchersth Y k ht iesearch facilitiesIT business divisionsthe Yokohama area to increase Net o k /Soft a ea arearchers)a arearchers)al ResearchServerFinancialNetwork /Softwareal Researchatoryeoplem DevelopmentatoryIndustrialPubliceopleSto ragehub>platform for social infrastructure>platform for social infrastructure 2010 Hitachi , Ltd.

6 All rights cloud computing businesspto cloud computing business91-8. eStrengthenglobal R&zStrengthen green mobility researzPromotion of smart grid researchNorth America Regional R&D synchronized with expan PCS Storage batteries Amorphous transformersParticipation in NEDO pilot project in NewPCmeAmorphous transformersPower Systems Company,Info. Control Systems Company, Hitachi Research LaboratoryPCS: Power ConditimepoAgreement with the Chinese National DevelopmeCommission (NDRC) to collaborate in the Low caChinazParticipate in the Chinese NationazLead info. & telecommunications3/19 Sub-com[Hi hlffi i3/19 Sub-com[Hi hlffi iNDRC- Hitachi Green Economy Technology ExchanTech exchangeTech exchangeNDRCC ommission (NDRC) to collaborate in the Low caconstruction and Resource recycling project (200[Highly-efficiegeneration & [Water treatm[Home applia[Urban transp[Highly-efficiegeneration & [Water treatm[Home applia[Urban transpTe c h.)]]]]]]]]]]

7 ExchangeModel projectsJoint researchPersonnel managementTe c h. exchangeModel projectsJoint researchPersonnel managementHitachiHitachiNDRC&DFusion businessch (NEDO pilot project in NM, )nsion of social innovation business overseasHitachi America, Mexico, USACS for ega solararch hubioningSystemega solarower systemsGreen mobility, Storage systems<40 employees> <40 employees>Reseaent and Reform arbon societyHitachi China R&D Corporationbal Development and Reform Commission projects and software business development in Chinammittee themetl tiitmmittee themetl tiitnge (2010/3/19)arbon society 09/11/8)R&D Corporationesearch hubll 2010 Hitachi , Ltd. All rights electricity smart grid]ment]ance recycling]port (subway)]ent electricity smart grid]ment]ance recycling]port (subway)]ReSmart grid, Offshore devt., Adv. software<80 employees> <80 employees>101-9. Integration of the Des Contribute to business innovation1.

8 Visualization of social innovation businessinnovative technology and market (people/2. Introduction of human-centric design to Infgand Power & Industrial systems fusion areaInnovativeInnovativeHuHuffInnovative InnovativetechnologytechnologyLifeLifefo cfocdede ExperienExperienBusiness R&DBusiness R&DUltrasound scaHI VISION Pr[2009 Good Design GUK IEP (Intercity Express Programme) high-speed trainssign Divisions through /lifestyle) focusfo. & Telecomm. Visualization of social Visualization of social innovation businessinnovation businessas umanuman Active introduction of Active introduction of estyle estyle cusedcusedesignesignhumanhuman--centric designcentric design nce Designnce DesignPreparing requirement dfiiti dt 2010 Hitachi , Ltd. All rights reirus Gold Award]Application of Experience Design in information business (financial/public): Visualization of customer requirementsdefinition document11 ContentsContents1.

9 Corporate R&D or2. R&D to pioneer fubusiness3. Positioning for strategy5. Summaryrganizationusion & environment e future 2010 Hitachi , Ltd. All rights Hitachi Group growth Focus on social in1. Expansion of Global bu2F ififti &pg2. Fusion of information &systems and power & i3. Expansion of environmstrategynovation businessusiness&t li ti (IT)& telecommunication (IT) ndustrial (PIS) systemsmental business 2010 Hitachi , Ltd. All rights FY2010 R&D initiativesBuildupinformation platform To generate globally cBuild-up information platformFacilitate business cooperation and coconsolidate IT research facilities in th .Dl ltf thliDevelop platform technologiEco-friendly data centers, Railway Sys .New directions in electronicsfor ..Strengthening Green Mobilitsmsfor social infrastructurecompetitive businessms for social infrastructureontribution to fusion business by e Yokohama area ittITPIS f iies to support IT-PIS fusion/environmental businessstems, Inverter, Li-ion batteriess research r social innovation businessty R&D for environmentalbusiness expansion 2010 Hitachi , Ltd.

10 All rights expansion142-3. Social infrastructure in Collect massive volume of data from svalue-added information and controlSocial infrUrban planningUrban planningUrban planningUrban planningManufacturingManufacturingSmagri dSmartcitiesTran s p o r tTran s p o r tTran s p o r tTran s p o r tPlantPlantPlantPlantollect20062025 Data volumeNext-generat Social infrastruKaaS (Knowledge as a servicCo fStorageServer (virtualiCloudCloudcomputingcomputingEco -friendly Knowledge creation sy Information proSocial infrastructure icoedydata centerInformation platformsnfo. platformsocial infrastructure, transform into rastructurePower infrastructurePower infrastructurertGreenMobilityRail infrastructureRail infrastructurentroltion networkcture network layerce) Massive data managementConCollect ControlfEncryptionization)MiddlewareAdd valueHighly reliableystem coordinated platform 2010 Hitachi , Ltd. All rights platforminformation platformHighly reliableinformation processing152-4.