23 GLOBAL EXPANSION OF THE BUSINESS

Fiscal 2011 ResultsAccounting for 42% of total net sales, overseas sales for the fiscal year under review amounted to ¥200.7 billion, a decrease of 7% compared with the previous fiscal year. Despite efforts to further bolster global business development focusing mainly on newly emerging countries, this year-on-year downturn in both overseas sales and the share of overseas sales to total net sales is largely attributable to the drop in automotive component sales including friction materials as a result of the floods in Thailand and the impact of fluctuations in foreign currency exchange rates and most notably appreciation in the value of the yen. Turning to the Company’s capital investment activities, Hitachi Chemical adopted an aggressive approach overseas. The amount of capital investment undertaken outside of Japan to-taled ¥14.4 billion, up ¥6.8 billion compared with the previous fiscal year. This represented around 40% of the Group’s total capital investment in fiscal 2011. A significant portion of this in-vestment was directed toward the construction of new produc-tion facilities overseas as well as extension work aimed at increas-ing existing capacity. Considerable weight was placed on businesses that are expected to enjoy growth in the future with a particular emphasis on newly emerging countries including

China and Thailand where the Company is working diligently to capture a robust share of overseas demand. In addition, Hitachi Chemical took steps to strengthen its global product supply structure to ensure stable of supply. This was particularly relevant in the wake of the Great East Japan Earthquake. In order to expand the Group’s business and enhance com-petitiveness, Hitachi Chemical includes M&As in its growth strategy to complement capital investment. In fiscal 2011, Hitachi Chemical acquired two of its suppliers that manufacture copper-clad laminates for printed wiring boards in Hong Kong and Guangzhou, China, purchasing additional stock to turn them into subsidiaries and renaming them Hitachi Chemical Electronic Materials (Hong Kong) Ltd. and Hitachi Chemical Electronic Materials (Guangzhou) Ltd. This purchase has bol-stered the Group’s supply structure in the printed wiring board market in China, where strong growth is expected.

Chinal Newly established a production base for carbon anode materials for lithium ion batteries [online]

Hitachi Chemical (Yantai) Co., Ltd.l Increase production capacity of friction materials for automotive use

[operations scheduled to commence in July 2012]Foshan J.B. Automotive Products Co., Ltd

l Increased production capacity of powder metal product [online]Hitachi Powdered Metals (Dongguan) Co., Ltd.

l Increased production capacity of epoxy molding compounds andphotosensitive dry films [online]

Hitachi Chemical (Suzhou) Co., Ltd.l Newly establish a production base for advanced performance resins and chemical materials

[operations scheduled to commence in January 2013]Hitachi Chemical (Nantong) Co., Ltd.

l Newly establish a production bases for anisotropic conductive films for displays and conductive films for solar cells [operations scheduled to commence in April 2013]

Hitachi Chemical (Nantong) Co., Ltd.l Newly establish a production base for automotive plastic molded products

[operations scheduled to commence in January 2014]Hitachi Chemical Automotive Products (Zhengzhou) Co., Ltd.

AsiaTaiwan

l Newly establish a production base for CMP slurry [operations scheduled to commence in April 2013]

Hitachi Chemical Electronic Materials (Taiwan) Co., Ltd.

Indial Newly establish a joint-venture company to manufacture friction materials

for automotive use [operations scheduled to commence in December 2012]Allied JB Friction Private. Ltd.

l Increase production capacity of powder metal products [operations scheduled to commence in April 2013]

Hitachi Chemical India Private. Ltd.

Thailandl Newly established a production base for carbon brushes for automotive use [online]

Hitachi Powdered Metals (Thailand) Co., Ltd.l Increase production capacity of powder metal product

[operations scheduled to commence in July 2013]Hitachi Powdered Metals (Thailand) Co., Ltd.

l Newly established a production base for automotive lead batteries [online]Hitachi Storage Battery (Thailand) Co., Ltd.

Indonesial Newly established a production base for powder

metal products [online]PT. Hitachi Powdered Metals Indonesia

Malaysial Increased production capacity of epoxy molding

compounds [online]Hitachi Chemical (Malaysia) Sdn. Bhd.

Hong Kongl Upgrade and expand copper-clad laminate

production line [operations scheduled to commence in July 2012]Hitachi Chemical Electronic Materials (Hong Kong) Limited

ANNUAL REPORT 2012 24

44.5

162.9

421.4

46.0

387.6

193.3 36.1

159.4

293.1

42.9 43.4

32.1

163.3

259.9

34.6

181.5

281.4

06 07 08 09 10 11 (FY)

10

0

20

30

40

50

200

0

400

600

800

1,000

(%)(Billionsof yen) Japan Asia

FY2011

42%FY2006

33%

42.4

29.1

171.6

272.4

33.0

40.040.0

Others Overseas sales amount ratio

FY2010 FY2011 FY2012 (Plan)

Japan 22.8 22.9 26.5

Overseas 7.6 14.4 22.5

(Billions of yen)

Regional Headquarter system

ChinaHitachi Chemical (China) Co., Ltd. manages twelve manufacturing companies and four sales companies.

ThailandHitachi Chemical (Thailand) Co., Ltd. manages four manufacturing companies and one sales company.

IndiaHitachi Chemical India Private Limited manages two manufacturing companies.

■ The overseas sales amount ratio

■ Sales amount according to the area

■ Capital expenditures

■ Regional Headquarter system

Hitachi Chemical adopts a global perspective toward its business development

endeavors. The Group maintains a keen eye on growth markets in which it is

likely to succeed and actively engages in overseas capital investment. Driven by

these efforts, steady growth in its overseas sales ratio is witness. Moreover, as the

Company moves toward local production for local consumption, Hitachi Chemical

is working to establish a Regional Headquarter system.

Outlook and Plans for Fiscal 2012Hitachi Chemical will continue with efforts to expand and bol-ster overseas production bases in fiscal 2012. To this end, the Company will ramp up its overseas capital investment. On a year-on-year basis, plans are in place to undertake capital in-vestment totaling ¥22.5 billion overseas. This is an increase of ¥8.1 billion compared with fiscal 2011 and represents around 46% of Hitachi Chemical’s total capital investment plans. Rec-ognizing that economic growth in China remains entrenched an upward trajectory, and that the automobile sector in such emerging countries as Thailand and India are forecast to grow, The Group is establishing new production facilities while boost-ing production capacity at existing facilities in order to boost its automobile component business, which includes friction mate-rials and powder metal products. In the semiconductor indus-try, which is currently underpinned by the increase in demand for tablet PCs and smartphones, growth is expected in such countries and regions as China, Taiwan and Southeast Asia. Un-der these circumstances, the Group is driving up its production capacity of semiconductor epoxy molding compounds in order to capture a healthy share of this demand. The Company is also constructing overseas production bases for slurry for chemical

mechanical planarization (CMP slurry), which to date has been manufactured solely in Japan. In this manner, Hitachi Chemical is building a multi-production structure that is designed to en-sure stable supply while fueling business growth. In the envi-ronment and energy field, a priority business domain for the Hitachi Chemical Group, plans are in place to construct a facility and commence production of conductive films for solar cells. This takes into account projections of an increase in photovol-taic power generation as a renewable energy and efforts to secure a portion of the growing demand in China, which is fast becoming the world’s largest supply base. By promoting each of these measures as a part of collective endeavors to pursue global business development, overseas sales are forecasted to surpass the levels recorded in fiscal 2011. In the future, Hitachi Chemical will focus on capturing demand in emerging countries including China, which are projected to drive the world economy forward. To this end, the Company will undertake aggressive investment with a view to promoting local production for local consumption and to surge steadfastly forward toward sustainable Group growth.

Japanl Increasing production capacity of lithium ion battery

carbon anode materials for in-car use [operations scheduled to commence in September 2012]Yamazaki Works, Hitachi Chemical Co., Ltd.

Japan

Others

Mexicol Increase production capacity of friction materials for

automotive use [operations scheduled to commence in August 2012]Hitachi Chemical Mexico, S.A. de C.V.

U.S.l Increased production capacity of powder metal

products [online]Hitachi Powdered Metals (USA). Inc.