Hitachi Appliances

Business Strategy
Hitachi IR Day 2012

June 14, 2012

Haruki Yamamoto
President and Director
Hitachi Appliances, Inc.

© Hitachi, Ltd. 2012. All rights reserved.

Hitachi Appliances Business Strategy

Contents
1. Outline of Digital Media & Consumer Products Segment
2. Hitachi Appliances Business Overview
3. FY2011 Business Performance
4. Growth Strategy
5. Business Performance Plan

© Hitachi, Ltd. 2012. All rights reserved.

 Position of the Digital Media &
1-1 Consumer Products Segment in the Hitachi Group

FY2011 consolidated revenues

Main Companies in the
¥9,665.8 billion* Digital Media & Consumer
[ ]: Composition ratio (%)
Products Segment
Financial
Others [9] Information & Hitachi Consumer
Services[3] Hitachi

manufacturing
Development and
Telecommunication Electronics Co., Ltd.
Digital Media & Systems [16] Appliances, Inc.
Consumer
Products [8]
Flat- Video related
¥858.8 billion Home Air
panel products and
appliances conditioning
Power TVs components
Systems [8]
Components &
Devices [7]
Social Infrastructure &
Industrial Systems [11] Hitachi Consumer Marketing, Inc.
Automotive Sales and services
Systems [8]

High Electronic Home Air

Flat-
Functional Systems & conditioning
panel
appliances
Materials & Equipment [10] TVs
Components
[13] Construction
*Mainly consumer route
Machinery [7]

*Total consolidated revenues of ¥9,665.8 billion includes eliminations and corporate items
© Hitachi, Ltd. 2012. All rights reserved. 3
1-2 Segment Revenue Composition

Segment Revenue Composition (FY2011)

Breakdown Revenues Composition ratio
Hitachi Appliances Consolidated
•Air conditioning business (Home use and commercial use)
¥546.1 billion 64%
•Home appliances business
(Electrical home appliances and new environment fields)
Digital Media Business Consolidated
•Video related products and components ¥262.4 billion 31%
•Flat-panel TVs

Trend in Revenue Composition ○: Composition

ratio (%)
Others Others Others
Digital Media Business
Consolidated
¥386.0 billion ¥262.4 billion ¥210.0 billion FY2012
FY2010 FY2011
Consolidated
Consolidated Consolidated
revenues
41 revenues
53 31 revenues
64 25 ¥830.0 billion 67
¥951.5 billion ¥858.8 billion
Forecast

¥502.6 billion ¥546.1 billion ¥560.0 billion

Hitachi Appliances Consolidated
*Flat-panel TVs will be reclassified from Digital Media Business Consolidated to Other from October 2012
© Hitachi, Ltd. 2012. All rights reserved. 4
Hitachi Appliances Business Strategy

Contents
1. Outline of Digital Media & Consumer Products Segment
2. Hitachi Appliances Business Overview
3. FY2011 Business Performance
4. Growth Strategy
5. Business Performance Plan

© Hitachi, Ltd. 2012. All rights reserved.

2-1 Hitachi Appliances Business Overview

New environment fields Hitachi Appliances is the

corporations of Home
Appliances and Air Conditioning
Responsible for social and living
Home use
infrastructure in the Hitachi Group
FY2011
Electrical
home
Consolidated
appliances revenues
¥546.1 billion Growing
market of
Emerging
Commercial economics
use
A corporation that contributes to
the global environment
Increased
Home appliances Air conditioning interest in
business business energy
（47%） （53%） conservation

© Hitachi, Ltd. 2012. All rights reserved. 6

2-2 Position of Hitachi Appliances within Hitachi Group

Infrastructure Information & Power Systems Construction High Functional

Telecommunication
Systems Group Systems Group Group Machinery Group Materials Group

Hitachi Hitachi Consumer Hitachi Consumer

Appliances, Inc. Electronics Co., Ltd. Marketing, Inc.

The Digital Media & Consumer Products segments

Accelerate business expansion in support for social and living infrastructure

© Hitachi, Ltd. 2012. All rights reserved. 7
2-3 Product Lineup(Air Conditioning)

Answer energy-saving needs and create comfortable air-conditioned environments

in fields ranging from home use to industrial use

Industrial use

Commercial use (Shops, buildings, etc.)

Home use
Absorption &
Room air conditioners Packaged air conditioners
centrifugal chillers

Room air conditioners Packaged air conditioners

Absorption chillers

Air conditioners with Ceiling cassette Multi-split air Air conditioning

powerful heating type conditioners management system Centrifugal chillers

© Hitachi, Ltd. 2012. All rights reserved. 8

2-4 Product Lineup(Home Appliances)

support people's lives, guided by the slogan “eco + α = Hitachi”

Electrical home appliances New environment fields
Refrigerators Washing machines Vacuum cleaners LED lamps LED lighting

LED ceiling light

Merged in October 2010

EcoCute
Microwave ovens Rice cookers Air cleaners IH cooking heaters heat pump water heaters

Solar power generation systems

Plan to sell under the Hitachi brand in
summer 2012

© Hitachi, Ltd. 2012. All rights reserved. 9

Hitachi Appliances Business Strategy

Contents
1. Outline of Digital Media & Consumer Products Segment
2. Hitachi Appliances Business Overview
3. FY2011 Business Performance
4. Growth Strategy
5. Business Performance Plan

© Hitachi, Ltd. 2012. All rights reserved.

3-1 Changes in FY2011

FY2011 was a year of events that had a major social impact

⇒Affected the markets and Hitachi Appliances' results
Impact on
Events Impact Hitachi Appliances' Results

Impact on
Impact on markets
production
•Holiday rotation to • Increased demand
Higher sales
Japan

Great East Japan replacing existing in Japan

cope with power
Earthquake shortage products with (air conditioning and
•Disruptions with energy-saving products home appliances)
procuring parts • Reconstruction
demand

Hitachi’s refrigerator compressor factory Underachieved in terms of

revenues and earnings
Thailand Floods was flooded, causing the temporary in the refrigerator business
suspension of operations in Japan and overseas
Overseas

European ・Lackluster European markets Overseas revenues

Sovereign ・Growth slowdown centered underperformed,
debt crisis on emerging nations profitability declined

© Hitachi, Ltd. 2012. All rights reserved. 11

3-2 FY2011 Business Performance

FY 2011 Business Performance (Billion yen)

FY2010 FY2011 FY2011
Compared to
(Actual) (Previous forecast) (Actual) YoY previous forecast

Revenues 502.6 540.0 546.1 109% 101%

Air conditioning business 266.6 290.0 291.5 109% 101%
Home appliances business 236.0 250.0 254.6 108% 102%
Overseas revenue ratio 32% 35% 32% ±0% -3%
Operating income ratio 2.2% 1.9% 1.0% -1.2% -0.9%

(Billion yen) Revenues Operating income ratio

○ : Compared to previous forecast
(%)
101 1.9
100 546.1 Thailand
540.0 Floods Impact
▲1.3
Overseas
business
1.0
profitability
+0.4 Higher Japan
Overseas decline
sales
revenue
100 91

Previous Actual Previous Actual

forecast forecast © Hitachi, Ltd. 2012. All rights reserved. 12
3-3 Thailand Floods Damage and Restoration
Flood Damage
Hitachi Compressor (Thailand), Ltd.
Compressors for refrigerators factory
(Rojana Industrial Park, Ayutthaya)
 Inundated with flood waters for 49 days
from October 10 to November 27, 2011
 Highest water level: approx. 2 m
 Damage: approx. ¥6.7 billion
(Buildings and facilities)
Highest water level
Photo taken on November 22
Restoration
Started full-scale restoration efforts
on November 28
after all water had been drained
Local Support from all Hitachi Group
staff + Engineers from all Hitachi Appliances factories
Engineers from facility manufacturers, etc.
[At the peak] 750 + 360 = 1,110
Mass production resumed on January 25, 2012
All production lines restored by end of March 2012
Photo taken on January 25
© Hitachi, Ltd. 2012. All rights reserved. 13
Hitachi Appliances Business Strategy

Contents
1. Outline of Digital Media & Consumer Products Segment
2. Hitachi Appliances Business Overview
3. FY2011 Business Performance
4. Growth Strategy
5. Business Performance Plan

© Hitachi, Ltd. 2012. All rights reserved.

4-1 Market Trends (1)

FY2011 impacts

Previous forecast Current view

(as of FY2011) 2011-2012 trends Medium- to long-term trends

Higher As before

Great East Japan Earthquake

Air Growth in energy-saving
conditioning Lower demand
Products
following end to Increase in reconstruction
Lower demand in Japan
Home
appliances eco-points program demand
Japan

Increasing Increasing

Accelerated diffusion of LED lighting, solar power generation and EMS*

New Expansion of
Lower
Environment new environment demand
As before
fields Stagnant demand for Recovery over
fields
all-electric housing the medium and long terms
sovereign debt crisis
European

Slowdown As before
Overseas

Air
conditioning Expanding demand Continued expansion
Slowing pace of expansion
centered on emerging in demand over
Home (Differs depending on region) the medium and long terms
appliances
economies

*Energy Management System Monitoring conditions

© Hitachi, Ltd. 2012. All rights reserved. 15
4-2 Market Trends (2)

Air (Global Market)

conditioning Data for: Japan, Asia, Middle East, Europe, Russia, Market Growth by Area
Africa, North America, Central and South America, Hitachi estimate
(Trillion yen) Oceania
2013-2015
*Packaged air conditioning systems + room air conditioners Area

Medium- to long-term outlook hasn’t changed

4.9% CAGR
*Circled numbers are 2013-2015 CAGR
Previous
6.8 forecast
7.3 Japan 0.0%
6.3
6.0 6.1 Europe 4.2%
5.9 5.9
Previous forecast

China 7.6%
Previous forecast

Emerging Emerging Southeast Asia 8.2%

economies economies
8.5% India 14.7%
Hitachi Brazil 14.8%
～
estimate
2011 2012 2013 2015
Home (Global Market) Market Growth by Area
appliances Data for: Japan, Asia, Middle East, North Africa Hitachi estimate
(Trillion yen)
2013-2015
Refrigerators + washing machines + vacuum cleaners Area
*Circled numbers are 2013-2015 CAGR Previous
CAGR
4.0 forecast
4.0 Japan -0.9%
3.7 3.7
3.6
3.7 China 4.9%
3.6
Previous
forecast

Emerging Emerging Southeast Asia 7.0%

Previous
forecast

economies economies
5.3%
Middle East and
Hitachi 4.4%
～

North Africa
estimate
2011 2012 2013 2015
© Hitachi, Ltd. 2012. All rights reserved. 16
4-3 Company Growth Strategy

Revamped Strategy Based on FY2011 Changes

(3) Accelerated expansion of LED lighting,
solar power generation Basic policies
and EMS businesses
Promote local production
Accelerate for local consumption
Business Past Strategy (2011)
expansion Execute premium strategy
Develop new
environment fields
New fields

LED lighting
Solar power generation
All-electric housing

(1) Continue to expand

business globally
Existing fields

Present situation Continue (However, must monitor conditions)

Air conditioning
Global business
business
Electrical home
expansion
China, India, Brazil, Europe,
+
appliances business Southeast Asia, Middle East Strengthen (2) Accelerate efforts to
strengthen global business
base with an aggressive
Geographical cost strategy
Japan Overseas expansion

© Hitachi, Ltd. 2012. All rights reserved. 17

4-4 Global Business Expansion (1) [Locations]

China * The Qingdao manufacturing company is an equity-method affiliate

Qingdao, Shanghai, Wuhu,
Guangzhou, Hong Kong China
(Manufacturing, sales) (Manufacturing, sales)

India
France Taiwan area
(Manufacturing,
(Sales) (Manufacturing, sales)
sales)

India Taiwan area

UAE (Sales) (Sales)
(Sales)

Philippines
Spain (Manufacturing) U.S.A.
(Manufacturing)
Thailand (Sales)
(Manufacturing, sales) Malaysia
(Manufacturing, sales)
Thailand
(Manufacturing, sales) Singapore
(Sales)

Singapore, Malaysia, Brazil

Air conditioning Indonesia (Manufacturing,
(Sales) sales)
Home appliance

29 bases worldwide
<Air conditioning: 20; home appliances: 9>
© Hitachi, Ltd. 2012. All rights reserved. 18
 Global Business Expansion (2)
4-5 [Air Conditioning Business Basic Policy]

Enter emerging nations from an early stage, develop

business through local production for local consumption
20 bases
47 years 40 years 13 years
worldwide Taiwan area Brazil India
(1965 Established) (1972 Acquired equity interest) (1999 Acquired equity interest)

＋
Make comprehensive Integrated manufacturing,
Make comprehensive air conditioning systems available
air conditioning systems sales and services
available
+ Commercial Industrial
Integrated manufacturing, Home use
use use Manufacturing Sales Services
sales and services
Capture synergies in home,
at all bases Flexibly respond to local needs
commercial and industrial use

Utilize existing bases to expand business, particularly in emerging nations

© Hitachi, Ltd. 2012. All rights reserved. 19
 Global Business Expansion (3)
4-6 [Air Conditioning Business Strategy]

Past Strategy Future Initiatives

Continue basic strategy (Must monitor conditions)

(1) Expand business leveraging Continue (Must monitor)
existing base infrastructure
India : Maintain competitiveness of home-use air
conditioners
Commercial Speed up launch of commercial-use air conditioners
India : Home use + use (Begin producing packaged air-conditioning systems in June
2012)
Brazil : Commercial use + Home use Brazil : Strengthen profitability of commercial-use air
China : Home use + conditioners
commercial use + Expand home-use business, carefully select timing for
absorption and centrifugal chillers investment
China : Monitor inventory adjustment phase

(2) Expand business leveraging Continue

home appliances sales
infrastructure
Southeast Asia:
Electrical home appliances +
Southeast Asia: Focus on promoting sales of inverter
driven room air conditioners
Bolster sales ability by working with home
Home-use air
conditioners appliance sales companies

(3) Enhancing in core markets Continue (Must monitor)

Increase of products that comply Europe: Established new company (April 2012)
with environmental regulations Promote measures for raising market share,
in Europe strengthen operations
Accelerate localization of production

Plan to invest ¥24.0 billion by 2015 Same as on left

© Hitachi, Ltd. 2012. All rights reserved. 20

 Global Business Expansion (4)
4-7 [Home Appliance Business Basic Policy]

Across-the-board backup from Hitachi, Ltd. laboratories

日本でシェア
Product
development
No.１を
targeting
狙った
for No.1 Share Cutting-edge
technology
in 商品開発
Japan  Front loading washing
Machine development
 Inverter technologies
 Highly efficient refrigerating cycle
 Inverter technology

＋
Local production for
local consumption
Product  Big Drum 510 series・ Premium strategy  Inverter Side-by-Side
strategy Front-loading WM
 Eco Thermo-Sensor
 Power Boost Inverter
matched to
local needs Thailand China
42 years 19 years 18 years
Kabinburi Ayutthaya Shanghai
(1970 Established) (1993 Established) (1994 Established)

Expand sales centered on Southeast Asia and the Middle East, where Hitachi’s brand is strong

© Hitachi, Ltd. 2012. All rights reserved. 21

 Global Business Expansion (5)
4-8 [Home Appliance Business in Japan Initiatives]

* Electrical home appliances (5 main products)

Hitachi share (Refrigerators, washing machines, vacuum cleaners, 29 Continue using the
microwave ovens, and rice cookers) 28 pop idol group Arashi
(%) Source: JEMA (Terms of monetary shipping amounts)
26
24 Run commercials
23 using the catchphrase
21 “eco + α = Hitachi”
18 +9 points
17 over 5 years
Eco-points
Demand system
Expand energy
saving products

Company 980 980

established
in 2006 920 920 910
900
900 900 890

800

～
(Billion yen)

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Company Company
forecast forecast

Expand share in Japan by providing energy savings

and feeling of reality value
Develop globally
© Hitachi, Ltd. 2012. All rights reserved. 22
 Global Business Expansion (6)
4-9 [Home Appliance Business Strategy]

Past Strategy Future Initiatives

Continue basic strategy (Quickly recover from Thailand floods)

(1)Expand business mainly Continue
using manufacturing bases Southeast Asia: Strengthen sales in Indonesia
in Thailand and Vietnam
Aggressively expand business
in Southeast Asia, Middle East,
Middle East and North Africa:
Expand sales of large-capacity
and North Africa refrigerators

(2)Increase premium home Continue

appliances made in Japan
Expand sales routes for premium products
Expand sales in major cities of
China and Asia in major cities of China and Asia

(3)Expand key Restoration

components business
Increase production of ・Completely recover from the floods
compressors to support ・Expand production of High value added
refrigerator business expansion compressors

Plan to invest ¥17.0 billion by 2015 Same as on left

© Hitachi, Ltd. 2012. All rights reserved. 23

4-10 Aggressive Cost Strategy (Hitachi Smart Transformation Project)

Global business Intensifying

expansion competition
Basic
Stance
Create a competitive cost structure
for establishing a global position.

Stronger
Reduce the total cost to Hitachi Group collaboration
Target revenues by 4 percentage Hitachi Appliances
points by FY2015 Promote Hitachi Smart Transformation Project
Total cost to revenues(FY2011) Reduce production • Reform global TSCM
99.0 cost (Europe, Brazil, etc.)

Reduce direct • Promote global VEC

97.4
materials cost • Promote global procurement
• Centralize administrative operations
94.7 95.0 Reduce indirect cost
94.2 • Use shared services

Appoint executives
Hitachi Company Company Company
in charge to promote on a project basis
Appliances A B C
© Hitachi, Ltd. 2012. All rights reserved. 24
4-11 Business Expansion in New Environment Fields

Save energy throughout an entire city through systemization

FY2015
Systemization

Smart cities Accelerate ¥75.0 billion

• Strengthen cooperation within
Infrastructure Systems Group
• Establish an Environmental
Smart buildings Smart houses Business Equipment
Division to speed up efforts to
create a commercially viable EMS
business
FY2012
Launch new product businesses in new environment fields ¥50.0 billion

Accelerate Accelerate
Components business

Expand LED Market solar power

generation systems
lighting lineup under the Hitachi brand
Scheduled to go
on sale from FY2011
this summer
¥38.6 billion

Make individual products more energy efficient (smarter)

New
environment
fields
Air conditioning and
electrical home appliances
Revenues*
Bases businesses
Revenues include revenues of Hitachi Consumer Marketing (solar power generation systems, etc.)
© Hitachi, Ltd. 2012. All rights reserved. 25
Hitachi Appliances Business Strategy

Contents
1. Outline of Digital Media & Consumer Products Segment
2. Hitachi Appliances Business Overview
3. FY2011 Business Performance
4. Growth Strategy
5. Business Performance Plan

© Hitachi, Ltd. 2012. All rights reserved.

5-1 Business Performance Trends
*[ ]：Previous forecasts or targets announced on June 16, 2011

Overseas revenue ratio

［35］ ［35］
45
［45］
33 32
(%)
32 31 5.0
Operating income ratio ［2.7］ ［5.0］
2.2 ［1.9］
(%) 0.9 2.5
1.0
655.0
［655.0］
546.1 560.0
Revenues
［540.0］ ［560.0］
502.6
(Billion yen) 445.7 Air
conditioning

Home
appliances

～
～
FY2009 FY2010 FY2011 FY2012 Forecast FY2015 Target

Aiming to achieve plan targets in FY2015

© Hitachi, Ltd. 2012. All rights reserved. 27
5-2 FY2012 Business Performance forecast

FY2012 Business Performance forecast (Billion yen)

FY2011 (Actual) FY2012(Forecast) YoY
Revenues 546.1 560.0 103%
Air conditioning business 291.5 290.0 99%
Home appliances business 254.6 270.0 106%
Overseas revenue ratio 32% 31% -1%
Operating income ratio 1.0% 2.5% +1.5%

Implement timely measures Strengthen cost

to respond to changing competitiveness
Steadily capture conditions overseas Through the Hitachi
demand in Japan Smart Transformation
Strengthen
the earnings base Open up Project
in Europe and
emerging nations
+ new markets

Generate revenues of ¥560 billion and achieve an operating income ratio of 2.5%
© Hitachi, Ltd. 2012. All rights reserved. 28
5-3 Conclusion

FY2012 Forecasts FY2015 Targets

Revenues: ¥ 560 billion Revenues: ¥ 655 billion

Overseas revenue ratio: 31% Overseas revenue ratio: 45%

Operating income ratio: 2.5% Operating income ratio: 5.0%

Growing market of
emerging economies A corporation that
contributes to the
global environment Increased interest
in energy conservation

© Hitachi, Ltd. 2012. All rights reserved. 29

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:

economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe,
as well as levels of demand in the major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;
exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly
against the U.S. dollar and the euro;
uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;
uncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds;
the potential for significant losses on Hitachi’s investments in equity method affiliates;
increased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Digital Media &
Consumer Products segments;
uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance
for such products;
rapid technological innovation;
the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales;
fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals,
or shortages of materials, parts and components;
fluctuations in product demand and industry capacity;
uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or
shortages of materials, parts and components;
uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;
uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness
and other cost reduction measures;
general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and
Europe, including, without limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract
terms and conditions and labor relations;
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;
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 outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or
may become parties;
the possibility of incurring expenses resulting from any defects in products or services of Hitachi;
the possibility of disruption of Hitachi’s operations by earthquakes, tsunamis or other natural disasters;
uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers;
uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit-related costs; and
uncertainty as to Hitachi’s ability to attract and retain skilled personnel.

The factors listed above are not all-inclusive and are in addition to other factors contained in other materials published by Hitachi.

© Hitachi, Ltd. 2012. All rights reserved. 30