Railway Systems Business Strategy - Hitachi

1 Railway Systems Business Strategy Hitachi IR Day 2011. June 16, 2011. Hiroshi Nakayama President & CEO, Rail Systems Company Hitachi , Ltd. Hitachi , Ltd. 2011. All rights reserved. Railway Systems Business Strategy Contents . Overview . Market Environment . Policy and Strategy . Performance and Targets . Conclusion Hitachi , Ltd. 2011. All rights reserved. 1-1 Revenues by Systems and Products & Services Transport management & control Systems Rolling stock Systems Signaling/traffic management Systems Rolling stock/Overseas maintenance Signaling/train control Systems High-speed trains Limited express trains 32% FY2010. consolidated revenues billion 68%. Traffic management Systems / Commuter trains Monorails power management Systems Electrical components Main circuit/ Air-conditioning/.

2 Overseas maintenance Power supply Systems Platform gates main motor air-moving Systems Hitachi , Ltd. 2011. All rights reserved. 3. 1-2 Organization Rail Systems Company Rail Systems Division Sales & Marketing Division Kasado Rail Systems Product Div. Rail Systems Sales Div. (Domestic market). (Rolling stock). Global Sales & Marketing Div. (Overseas market). Mito Rail Systems Product Div. (Electrical components, signaling/. train control Systems , traffic management Systems / Global Rail Business power management Systems ). Development Division Hitachi Works (Main motors, IGBT modules). Kokubu Engineering & Product Div. (Power supply Systems ). Omika Works (Traffic management Systems /. Power management Systems , Business support Systems ).

3 Hitachi , Ltd. 2011. All rights reserved. 4. Railway Systems Business Strategy Contents . Overview . Market Environment . Policy and Strategy . Performance and Targets . Conclusion Hitachi , Ltd. 2011. All rights reserved. 2-1 Market Trends Japan Increase investment in services and environment-related areas, but major growth in capital expenditures cannot be expected Drop off construction of new Shinkansen lines, and increase demand on replacement/upgrading aging lines, etc. Overseas 11 trillion yen per 3 years average (2007-2009) 13 trillion yen per 2 years average(2015-2016)( ). High growth in service and Signaling/control segments Increase investments in Railway networks in emerging countries Market Size by Segment Others.

4 13 trillion 15%. 11 trillion Signaling/control By region Europe Asia & . Infrastructure Pacific 2015-2016 36%. Services 27% 13 trillion (Maintenance, etc.) . North Rolling stock America . 21%. 2007-2009 2015-2016. 3years average 2 years average) show CAGR from 2009 to 2016. Source: UNIFE World Rail Market Study 2010. Hitachi , Ltd. 2011. All rights reserved. 6. 2-2 Competitive Environment and Hitachi 's Position Position as a Total Systems Integrator Rolling stock Transport management &. Systems control Systems Position Rolling Electrical Signaling/. stock components traffic management Chinese Hitachi 800. Company A. Big3. Company C. Big3. Company B. Big 3 . Revenues (Billion yen). Big3. Company A.

5 China (Company A) . 400 Hitachi billion (FY2015 target). Rolling stock (Company A) . manufacturers Japanese Rolling stock Japanese Hitachi Company A. Electrical Components billion (FY2010). (Company B). 0. 5 10. Signaling (Company C) Operating income (%). * Figures are for FY2010. Hitachi , Ltd. 2011. All rights reserved. 7. 2-3 Strength and Key Target Rolling stock Systems Transport management & control Systems Higher efficiency, lower environmental impact High reliability Aluminum train technology Signaling/train control Systems (High-speed trains, Commuter trains) technologies Highly economical rolling stock in the next Developing signaling Systems compliant generation (A-train) with European standards (ETCS*).

6 Inverter technology *ETCS: European Train Control system Developed small, lightweight, low noise Traffic management system (World-class) products technologies Hybrid technology Provide high-performance, high function World's first to enter service Systems to support high-density (Ki-Ha E200 series for East Japan Railway transportation with advanced control Company ) technologies (Top share in Japan). Total project integration Develop globally with own core Systems technologies on traffic management, signaling, power supply and rolling stock Hitachi , Ltd. 2011. All rights reserved. 8. Railway Systems Business Strategy Contents . Overview . Market Environment . Policy and Strategy . Performance and Targets.

7 Conclusion Hitachi , Ltd. 2011. All rights reserved. 3-1 Policy and Strategy Accelerate Globalization with Technologies Developed in Japan Target Strategies Revenues*: 320 billion Sustainable Growth in Japan Overseas revenue : 60% Expand sales of rolling stock Systems Operating income : 8% Secure market share in signaling/train control Systems Expand hybrid traction Systems Business 320 billion Create new businesses by collaboration Transport management & with customers control Systems Rolling stock Systems Overseas Expand overseas Business Focus on the High-speed trains market billion Expand Electrical components Business Expand Signaling/train control Systems Japan Business Accelerate to develop emerging countries FY2010 FY2015.

8 (Actual) (Target). * Excluding Business support Systems which belongs to Information & Telecommunication Systems segment (FY2015 sales target : 30 billion ). Hitachi , Ltd. 2011. All rights reserved. 10. 3-2 Sustainable Growth in Japan Expand Sales of Rolling Stock Systems Expand aluminum trains (A-train) sales to municipal and private railways Hankyu Corporation Series 9000 train, Tobu Railway Co., Ltd. Series 50000 train . Secure market share of Shinkansen East Japan Railway Company E5/E6 series . Expand sales of electrical components Central Japan Railway Company E233 series . : resent order receipt Secure Share in Signaling/Train Control Systems Complete Shinkansen signaling system projects (Hokuriku/Hokkaido).

9 Hokuriku Shinkansen (Takasaki to Kanazawa), Hokkaido Shinkansen (Shin-Aomori to Shin-Hakodate) . Maintain and ensure high share in Traffic management Systems (81% for JR) : resent order receipt Expand Sales of Hybrid Traction Systems Develop by leveraging track record (World's first to enter service). East Japan Railway Company Ki-Ha 200 series/ HB-E300 series . : resent order receipt Create New Businesses in Collaboration with Customers Create new Business by fuse information and control technologies (IC card, Digital signage, etc). Hitachi , Ltd. 2011. All rights reserved. 11. 3-3 Expand Overseas Business (1). Further Expansion of and Chinese Business Challenge to Emerging Markets (Urban Transport Including Monorail).

10 Rolling stock + maintenance, Electrical components, Signaling/train control Systems China Electrical components, Signaling/train control Systems Emerging markets(Southeast Asia, Brazil, India). Total project integration Business Hitachi , Ltd. 2011. All rights reserved. 12. 3-3 Expand Overseas Business (2). (1). Rolling stock + maintenance Expand maintenance Business by Rolling stock sales Establish high profitable Business model by maintenance Business - Starting-up a full maintenance service for Class 395 train Challenge to the future project, (Rolling stocks and maintenances) Ashford Depot (Class 395). - Intercity Express Programme (IEP). - Commuter trains and replacement of aging trains Electrical components Signaling/train control Systems Actively target retrofit projects Expand sales through the trial project with Network Rail Complying with European standard Leverage Class 465 track record (ETCS).