Review of Operations - Hitachi · power amplifier modules for mobile terminals and gallium arsenide compound semiconductors. In addition, Hitachi has commercialized and started volume

I n f o r m a t i o n & T e l e c o m m u n i c a t i o n S y s t e m s G r o u p

“We are building up services, SI and prod-

ucts as our core business areas and aim for

additional growth by creating synergies

among these three business areas.”

8

8

Hitachi AR 99Paper Size=A4 letter (215mmX280mm)

R e v i e w o f O p e r a t i o n s

The new Hitachi Skyline Triniummainframe

I n f o r m a t i o n S y s t e m s & E l e c t r o n i c s

The rapid diffusion of the Internet has combined with a rise

in electronic commerce to considerably boost investment in

information technology (IT), and steady growth worldwide is

anticipated. In Japan, deregulation in the financial sector and

other industrial sectors has led to firm demand for information

systems.

In this environment, the Information & Telecommunication

Systems Group was able to expand its business from the previ-

ous fiscal year. Our systems integration (SI) business benefited

from strong IT investment in Japan. Regarding the products

business, a model changeover in mainframes coincided with an

intensification of price competition to reduce sales, principally

due to a drop in exports. However, disk array systems using the

world’s fastest disk drive continued to attract strong demand

for open systems and mainframes. Disk array systems designed

expressly for open systems are expected to achieve strong mar-

ket penetration. Higher sales were registered by 2.5-inch disk

drives equipped with giant magneto-resistive (GMR) heads. In

software, our Job Management Partner 1 program for enterprise

systems management has a leading position in the Japanese

market, and significant growth was registered in sales of

OpenTP1 on-line transaction processing software. Sales by

telecommunications businesses showed a year-on-year

decrease, reflecting the negative impact of lower investment by

a major telecommunications carrier in Japan. Also during the

year, Hitachi PC Corporation (USA), a PC sales firm, was liq-

uidated, and its operations were consolidated within Hitachi

Data Systems Corp. (HDS), which initiated sales of high-end

PC servers in North America. HDS will be a focal point for the

comprehensive array of information solutions products and ser-

vices for corporate customers in North America.

In fiscal 1999, our group will further increase the reliability

of each of its products and leverage that reliability to expand SI

operations in Japan. We are strengthening our distributed-

object-software business for various individual industries. We

are also proactively promoting supply chain management and

enterprise resource planning (ERP) software to permit

enterprise customers to respond to deregulation. Hitachi has

been working for several years on support issues related to the

Year 2000 problem. To further strengthen our capabilities for

helping customers deal with this issue, in November 1999, we

will establish a specialized organization that will be responsible

for comprehensive supervision of problem-response operations

at the end of 1999 and the start of 2000.

With the world becoming increasingly connected, the result

is increasing demand for computing power, as measured by

million instructions per second (MIPS). Hitachi will expand its

business by launching the Hitachi Skyline Trinium mainframe

in the third quarter of 1999. This new machine offers nearly

two times the power of comparable systems currently on the

market. In the telecommunications area, we are expanding

optic fiber related operations, with a principal emphasis on 10

gigabit transmission equipment and optical components.

Over the medium term, we intend to build up service busi-

nesses—such as electronic commerce, content delivery and

outsourcing—as our core business areas as well as concentrate

on SI and products. We aim for additional growth by creating

synergies among these three business areas. In April 1999, the

group responded to surging growth in demand for outsourcing

services by establishing its third outsourcing center in Japan.

We plan to concentrate our resources on SI and services,

including cooperative tie-ups with domestic and overseas part-

ners. Hitachi is upgrading such core technologies as those

for servers, storage systems and network systems so that

our group can deliver optimal solutions that respond to cus-

tomer needs.

Toshihiko Odaka, President & CEO

H i t a c h i I n f o r m a t i o n S y s t e m s , L t d .

“As a leader in the market for information

services in the 21st century, we are focus-

ing on high-margin businesses by responding

to customer needs with an extensive menu of

high-quality information services.”

H i t a c h i S o f t w a r e E n g i n e e r i n g C o . , L t d .

“As a pioneer in digital information tech-

nologies, we are expanding our customer base

through alliances in the increasingly net-

worked global market.”

9

9


FM-BIO fluorescent gene analysissystem


In fiscal 1998, Hitachi Software Engineering provided cus-

tomer-driven solutions in the core aspects of information ser-

vices, such as systems software development and the

integration of enterprise-scale systems in mainframes, client-

server systems and networks. In addition, we provided a com-

prehensive array of specialized support services to assist

customers in implementing their Year 2000 compliance pro-

grams. We posted strong results once again, with net sales ris-

ing 24%, to ¥149,285 million ($1,234 million), and net income

advancing 31%, to ¥3,301 million ($27 million), all on an

unconsolidated basis. In fact, we have posted gains in revenues

and earnings every year since fiscal 1995.

In fiscal 1999, our goal is to increase sales by at least 10%

from fiscal 1998. To accomplish this, we are further expanding

our lineup of package software solutions both developed

in-house and licensed from leading companies worldwide. We

will strengthen our partnership with Microsoft Corporation to

provide NT/BackOffice® Systems Integration. Moreover, we

established a joint venture with Hewlett-Packard Company and

Marubeni Corporation to develop and deliver service solutions

to the Japanese market from April 1999.

In addition, we are pursuing promising new businesses and

took an equity position in EarthWatch Incorporated, of the

United States, to enter the market for providing image content via

satellite. We are also making a strong push in the area of gene

analysis systems, a sector that is expected to register rapid global

growth. Amid the digitalization of industry, we will strive to

continue developing in-house products and leading-edge tech-

nologies to carve out new markets. We thus aim to firmly es-

tablish our position in the global market for information services.

Centralized network monitoring sys-tems in the company’s OutsourcingCenter

Celebrating its 40th anniversary in fiscal 1999, Hitachi

Information Systems will use this milestone as a springboard to

attaining its goal to be a leader in the information services mar-

ket of the 21st century with a business structure capable of gen-

erating good profits.

In fiscal 1998, the Japanese market for information services

remained at the same level as in the previous year. We continued

to win the approval of clients for our experience in systems con-

struction and operation, state-of-the-art networks, open systems

and information security technologies. As a result, the company

posted a 4% gain in net sales, to ¥98,151 million ($811 million),

and a 25% rise in net income, to ¥844 million ($7 million), all on

an unconsolidated basis.

In fiscal 1999, our goals are to further improve customer sat-

isfaction, enhance managerial efficiency and raise the level of

our systems technologies. To accomplish this, we will fortify

our position as an outsourcing specialist and broaden our menu

of high-quality information services. We will also address cus-

tomer requirements for work from information processing to

systems design, network security and backup services as well

as the rapid-growth areas of operation and administration of

intranet/Internet servers.

In particular, we are strengthening our service lineup to

include the outsourcing of data entry of family registry infor-

mation and services related to the introduction of a new social

insurance system for the elderly in April 2000 in Japan.

Akisuke Takasu, President and Representative Director

Hiroyuki Kanekiyo, President and Representative Director

S e m i c o n d u c t o r & I n t e g r a t e d C i r c u i t s G r o u p

“To achieve a rapid business recovery, we

are focusing our development resources on

leading-edge products and actively pursuing

strategic alliances with other companies.”

10

10


The world’s smallest 64-megabitsynchronous DRAM


The semiconductor market during fiscal 1998 experienced a

very difficult time, due to anemic economic conditions in Japan

and the price erosion of DRAMs. However, it was also a year

of major renewal for the Semiconductor & Integrated Circuits

Group, as we started to see promising results for such applica-

tions as IT, telecommunications, digital consumer electronics

and multimedia.

The Semiconductor & Integrated Circuits Group recorded a

substantial loss during fiscal 1998 as a result of deteriorating

market conditions. Excess supply in the DRAM market and a

slow start in the system LSI market in Japan due to the weak

business climate were key factors behind lackluster perfor-

mance. Looking to the future, the group invested in state-of-

the-art processes for making chips smaller and in the

development of high-frequency devices, such as high-frequency

power amplifier modules for mobile terminals and gallium

arsenide compound semiconductors. In addition, Hitachi has

commercialized and started volume production of the world’s

smallest 64-megabit synchronous DRAMs using 0.18-micrometer

process technology, system LSIs and SH-4 microprocessors.

Fiscal 1998 was truly a rebuilding year for our group. To for-

tify our fundamental strengths, we reorganized both domestic

and overseas subsidiaries, refurbished key equipment of each

facility and worked to shorten turnaround time. In July 1998,

we reorganized the group into four divisions based on product

type: system LSIs, system memories, DRAMs and multipur-

pose semiconductors. In September 1998, we stopped produc-

tion at Hitachi Semiconductor (America) Inc., in the United

States. We also transferred the back-end production line of

Hitachi Semiconductor (Europe) GmbH to Hitachi Semi-

conductor (Malaysia) Sdn. Bhd. Furthermore, effective April 1,

1999, we sold our silicon wafer business to Shin-Etsu Chemical

Co., Ltd. to focus more on the semiconductor business.

From fiscal 1999, we will shift to a management paradigm

that more than ever emphasizes profitability over market share.

In the past, the scale of production was a critical success factor,

but for the future we need a balanced business structure that is

cost-competitive. Not every product can capture the top share

of its market. What is more important is that we are able to

express our core competencies and combined strengths in such

growth areas as system LSIs and multipurpose semiconductors.

Also, as of April 1, 1999, we obtained a majority voting right in

Hitachi Nippon Steel Semiconductor Singapore Pte. Ltd.

(HNS), Hitachi’s joint venture with Nippon Steel Corporation

and the Economic Development Board of Singapore, giving

us management leadership. With greater autonomy over deci-

sion making, HNS can respond more agilely to changes in

the market.

The Semiconductor & Integrated Circuits Group will also be

more selective in capital investments and will concentrate its

R&D resources, while aggressively cutting fixed costs and thus

bolstering its cost-competitiveness. In October 1999, we will

sell our semiconductor mask operations to Dai Nippon Printing

Co., Ltd. and thus will be able to focus our management

resources on our device business and raise asset efficiency.

To compete against manufacturers who focus exclusively on

specific market segments, we will form strategic alliances and

foundry partnerships with companies both in Japan and other

countries. Our management style is now driven by speed. In

April 1999, we reached an agreement with Infineon Tech-

nologies AG, a subsidiary of Siemens AG, to promote the

MultiMediaCard™, a small flash memory card, as an industry

standard. We will be stepping up our system LSI development

activities and building close cooperative relationships with cus-

tomers for various applications.

We will concentrate our resources on such core businesses

and seek out strategic alliances for the future. Through such ini-

tiatives, we are confident that Hitachi’s semiconductor business

will once again achieve high profits and growth.

Tadashi Ishibashi, President & CEO

D i s p l a y s G r o u p

“We are raising productivity by further

streamlining our processes and by continuing

to invest in automation in our manufacturing

lines. We aim to be the market leader

through effective management and technologi-

cal advantages.”

11

11


18-inch Super TFT display fordesktop PCs


In recent years, the increasing adoption of just-in-time sys-

tems by PC manufacturers has meant that fluctuations in mar-

ket demand have a direct impact on our business, and this has

significantly changed our business environment.

In fiscal 1997, we were the first to launch 19-inch color dis-

play tubes (CDTs), which made a strong contribution to sales.

However, sales came under pressure in the second half of fiscal

1998, due to fierce competition from new market entrants. With

price erosion being especially pronounced in small CDTs, we

implemented a scaling-down of small CDT lines at Hitachi

Electronic Devices (Singapore) Pte. Ltd. during fiscal 1998. In

addition, a plunge in market prices for LCDs in the first half

of fiscal 1998 led to a loss for this product group on a full-

year basis.

During fiscal 1998, we began full-scale operations at a new

facility for manufacturing thin-film transistor (TFT) LCDs,

using the largest glass substrate in the industry, which enhances

productivity for large devices. We introduced 15- and 18-inch

Super TFT displays for desktop PCs, which feature

a wide viewing angle and provide picture clarity on a par with

that of a CDT.

Our group’s core strength lies in its technological excellence,

based on its proprietary chip-on-glass mounting technology,

which meets the compact form factor requirements of notebook

PCs, as well as its in-house manufacturing capabilities for color

filters, LCD drivers, backlights and other key components that

ensure customers a stable supply of high-performance products.

Our future product strategies involve increasing the ratio of

Super TFT LCDs in our lineup in response to further growth

projected for the market for desktop PCs with LCDs. In CDTs,

we will seek to differentiate ourselves by raising the percentage

of sales of slim 19- and 21-inch CDT models and by continuing

to anticipate market needs for higher-value-added products. In

color picture tubes (CPTs) for TVs, we broadened our portfolio

of large devices by introducing a 37-inch model in May 1999 to

respond to increasing demand for large models in the United

States. Furthermore, we aim to accelerate the launch of medium-

sized reflective super-twisted nematic (STN) displays and

low-temperature polysilicon TFT LCDs.

Among newer business areas, Hitachi established Fujitsu

Hitachi Plasma Display Limited, a joint venture with Fujitsu

Limited, to develop, manufacture and market next-generation

plasma display panels (PDPs). The PDP market is expected

to grow rapidly, in response to the digitalization and higher

image quality of TV broadcasts, where we anticipate a major

increase in demand for wall-hanging, wide-screen televisions

for home use.

The Displays Group is globalizing its manufacturing opera-

tions by consolidating production facilities and product lines to

enhance efficiency. Projection tubes are being manufactured in

the United States and CPTs in the United States and China.

Recently, also, STN LCD manufacturing has been transferred

from Japan to Taiwan.

We expect the display market to continue to grow and

will strive for increases in both sales and profits during fiscal

1999 based on effective management and our technological

advantages.

Koichi Maruyama, President & CEO

D i g i t a l M e d i a G r o u p

“We are channeling our investment, R&D and

other management resources into DVD and LCD

application businesses and will leverage the

technologies we develop across a wide range

of business sectors.”

12

12


GD-2500 DVD-ROM drive forPC multimedia applications


Although the PC market was firm during fiscal 1998, price

erosion became more pronounced in the consumer electronics

market and created slack business conditions. In addition

to this, we were adversely affected by foreign exchange rate

fluctuations.

Our optical storage device business grew during fiscal 1998,

driven by replacement demand for CD-ROM drives. Moreover,

the DVD-ROM market began to take off and helped sustain our

leading share of the optical storage device business. Sales of

CDT monitors declined slightly, reflecting lower PC prices and

intense competition. In televisions, sales in Japan were down,

but projection TV sales were robust in the United States, and

sales of LCD projectors and printers were higher.

Hitachi launched digital projection TVs codeveloped with

Thomson Consumer Electronics, Inc., of the United States, in

time for the debut of terrestrial digital broadcasting in the

United States. In addition, we were the first to launch TVs that

support terrestrial digital broadcasting in the European market.

In another exciting development during fiscal 1998, we began

shipments of cellular phones supporting cdmaOne™ standards.

These phones have a built-in browser that enables users to

access the Internet to receive the latest information. In our dis-

play monitor business, we released a multimedia monitor that is

ideal for electronic billboards and information signs, which

incorporates four Hitachi Super TFT panels.

During the fiscal year, we formed a strategic alliance with

Microsoft Corporation to develop mobile equipment and home

multimedia stations using the Windows®CE operating system.

Together with International Business Machines Corporation

and three other companies, Hitachi has proposed a standard for

digital watermarking technology, a method of protection

against unauthorized copying of digital content. We thus laid

the foundation for expanding the markets for digital video

recorders and TVs with high image quality. Our group formed

a sales agreement with Baron International Ltd., of India, to

expand sales of VCRs and DVD players in the Indian market.

We are channeling our investment, R&D and other manage-

ment resources toward DVD and LCD applications, such as the

LCD projector business, and will leverage technologies we

develop across a wide range of business sectors. We will accel-

erate the adoption of digital technologies in the consumer prod-

ucts arena and seek out higher-value-added businesses. We will

also move beyond providing only products and offer to cus-

tomers solutions that include service packages for large-screen

display systems.

In fiscal 1998, we transferred our manufacturing facilities

into manufacturing subsidiaries, such as TOKAI TEC Co.,

Ltd., for VCR production, and Hitachi Joei Tech Co., Ltd., for

TV production, which gave us an even more flexible manufac-

turing network. In the future, we will focus on product develop-

ment in Japan and shift manufacturing overseas to build a

manufacturing system with greater competitive strength.

Yoshinori Fujimori, President & CEO

H i t a c h i M e d i c a l C o r p o r a t i o n

“Our mission is to become a market leader by

developing distinctive products in our core

business, such as AIRIS™ , our open-type MRI

system.”

I n s t r u m e n t s G r o u p

“In addition to providing high-performance

hardware, we will offer customers the opti-

mal system solutions for their needs

by integrating our software and technology.”

13

13


Ultra-thin film evaluation system foradvanced semiconductor devices


During fiscal 1998, growing concern for environmental pro-

tection boosted demand for environment-related products,

including measurement and control systems for dioxin reduction

equipment and analyzers to test city water quality. However,

sales of semiconductor manufacturing and evaluation equipment

dropped, due to constrained capital investment in the semicon-

ductor industry in Japan and elsewhere in Asia. Sales of indus-

trial systems were sluggish, due to slack conditions at food

processers, pharmaceutical companies and chemical plants.

Sales of medical systems were also down, adversely affected by

the impact of medical cost-containment measures and increasing

price competition.

Our strength is that we have the number one worldwide

share of such products as scanning electron microscopes and

clinical chemistry analyzers. With our distinctive technologies,

we will continue to be the market leader. Considering the

importance of overseas markets for our business, we have been

very active in forming alliances with leading companies world-

wide. For example, we have entered agreements with

F. Hoffmann-La Roche Ltd., of Switzerland, for clinical labora-

tory systems; with Merck KGaA, of Germany, for analytical

instruments; and with Perkin-Elmer Corporation, of the United

States, for genetic analysis systems. Also, we expect the envi-

ronment-related market to continue to grow, and we will strive

for increases in both sales and profits during fiscal 1999.

Open-type AIRIS™ MRI system

The globalization of the medical equipment industry created

extremely competitive conditions during fiscal 1998.

Hitachi Medical’s performance was influenced by the very

competitive market situation during the term. Market condi-

tions in Japan were also sluggish due to the effect of medical

cost-containment measures. To cope with these market condi-

tions, we made every effort to remain competitive, such as by

developing superior products that differentiate us from other

companies and by comprehensively improving our business.

However, net sales decreased 1%, to ¥105,653 million ($873

million), and net income decreased 45%, to ¥1,521 million

($13 million).

During fiscal 1998, we bolstered our lineup in our core busi-

ness of open-type magnetic resonance imaging (MRI) systems

by launching compact models. We also launched a near-

infrared-spectroscopic device for brain function analysis.

Expanding overseas business is our future key strategy.

Hitachi Medical aims to increase overseas sales by expanding

its global sales channels through subsidiaries in the United

States and Europe as well as through OEM channels.

Japan’s healthcare system is expected to change dramatical-

ly, shaped by the aging of the population and the introduction

of a new social insurance system for the elderly in April 2000.

We are committed to becoming a supplier of healthcare-related

systems that will be needed for the future.

Hiroshi Inomata, President & CEO

Yutaka Takuma, President

P o w e r & I n d u s t r i a l S y s t e m s G r o u p

“Our aim is to be highly cost-competitive

and to be a world leader in the engineer-

ing field through the development of new

services-related and other businesses.”

14

14


700-series Shinkansen bullet trainfor Central Japan Railway Company

P o w e r & I n d u s t r i a l S y s t e m s

The Power & Industrial Systems Group is now confronted

with an extremely difficult operating environment. Japan is

experiencing the severest economic conditions it has seen in the

postwar era. Private-sector capital investment has plummeted

in Japan and other Asian countries while price competition is

growing increasingly fierce.

The group’s distinctive competencies lie in the construction

of such social and industrial infrastructure systems as railways,

water supply and sewerage systems, and steel and chemical

plants as well as electric power generation and power distribu-

tion control systems. A new corporate structure will enable the

group to leverage the strengths it has gained through its experi-

ence in building large-scale systems that have earned a strong

reputation for reliability in Japan and overseas.

We intend to withdraw from business areas that hold little

promise for future growth. At the same time, we will invest

aggressively in business areas that we believe will develop or

that are essential to our operations. It is also necessary to close-

ly examine development operations within the group and in

competitor companies and maximize our investment in product

development, and this includes actively pursuing alliances with

other companies. Speed and efficiency are essential for survival

under such rigorous conditions and to be a serious contender in

global markets. As the president and CEO of the Power &

Industrial Systems Group, I intend to take strong leadership to

achieve these operational objectives and strategies.

Looking at business topics for fiscal 1998, Dalian Hitachi

Baoyuan Machinery & Equipment Co., Ltd., a joint venture

company set up in China in May 1997, began full-scale opera-

tions during the period. This marked the beginning of a base

that will become the core for the overseas activities of Hitachi’s

power business. Meanwhile, in Japan, we merged seven of the

ten affiliated companies of the Hitachi Works to form three

companies in April 1999. The aim of this reorganization is to

increase the efficiency and speed of business operations by run-

ning these affiliated companies on a consolidated basis. We

aim for further improvements in efficiency through the swift

implementation of information systems infrastructures in a

number of divisions.

In fiscal 1999, the group intends to pursue thorough rational-

ization programs, including further reductions in fixed and

material costs. While making the changes that will ensure the

Power & Industrial Systems Group becomes among the most

cost-competitive in the world, we will aggressively pursue

alliances with other companies that will facilitate the develop-

ment of our product lineup and its entrance into new markets.

Examples of new business areas for the group include sig-

nalling-related equipment for the railway industry and the

expansion of such service businesses as energy service perfor-

mance contracts. In addition, the group aims to establish, in

1999, a joint venture with General Electric and Toshiba to

develop, design, manufacture and market fuel for use in nuclear

power generation.

We aim to increase sales from service businesses to approxi-

mately 30% of total sales, from the current 15%. Expanding the

service businesses will contribute to raising sales and will also

improve the group’s profitability. Hitachi is one of only a few

companies worldwide that can provide total systems for a host

of social issues. The Power & Industrial Systems Group will

leverage its strengths in information systems and will strive to

become a world leader in the engineering field.

Katsukuni Hisano, President & CEO

E l e v a t o r s & E s c a l a t o r s G r o u p

“We will expand our maintenance and service

business based on building management sys-

tems and will lead the market for elevators

and escalators in China and Southeast Asia.”

I n d u s t r i a l C o m p o n e n t s & E q u i p m e n t G r o u p

“We are aiming for steady growth in our

existing business while aggressively provid-

ing products with greater energy-saving

capabilities and lower environmental impact

and expanding our service- related business.”

15

15


High-efficiency motor for industrialapplications


The Industrial Components & Equipment Group is empha-

sizing a core business related to such control equipment as

programmable controllers and inverters, while also endeavoring

to expand operations, including in motors, electric switches and

distribution equipment, ventilators, water pumps, air compres-

sors, hoists, and inkjet printers for industrial marking

applications.

During fiscal 1998, sharp declines in private-sector capital

equipment investment and sales prices in Japan as well as slug-

gish market conditions in Southeast Asia created an extremely

difficult business environment for the group. These difficult

conditions adversely affected the group’s business, leading

to lower results. We enjoyed relatively strong growth in

products with greater energy-saving capabilities and lower

environmental impact as well as in our service-related business.

We expect that the market will bottom out in the first half of

fiscal 1999 and begin to recover gradually in the second half.

We are initiating various measures to strengthen our business

structure to remain successful in a rigorous business climate.

While securing steady growth in existing businesses, we will

introduce products that offer enhanced energy conservation and

lower environmental impact, including highly efficient motors,

amorphous transformers, and inverter-controlled equipment.

In addition, we will fortify the foundations of our service-

related businesses, adding and expanding services to our base

in maintenance.

Escalators and an observationelevator installed in an atrium

Japan and other Asian countries account for approximately

50% of the world market for elevators and escalators. The

group’s business is on solid footing in China and Southeast

Asia, and we intend to expand into other high-growth market

areas.

In fiscal 1998, the number of new housing starts in Japan,

which is a barometer of demand for newly installed elevators,

declined approximately 12% year on year. Stiff competition

also had an adverse effect. In Asian markets, although medium-

to long-term growth prospects are positive, the Southeast Asian

markets remained weak in contrast to buoyant conditions

in China. In overall terms, the operating environment was

very harsh.

A step ahead of the competition, we have launched two-

person home elevators for the Japanese market. In markets out-

side Japan, the group has moved to strengthen its business in

the growing Chinese market by expanding its sales channels

through tie-ups with local sales companies.

In fiscal 1999, we will strengthen our product lineup by

introducing new escalators to join elevators introduced in

March 1999 that do not require separate rooms to house motors

and other related machinery. These initiatives and the strength-

ening of our service-related business, centering on building

management systems, are designed to achieve increased sales

and profits for the Elevators & Escalators Group.

Takeji Hiramoto, President & CEO

Katsuya Yanai, President & CEO

H i t a c h i A i r C o n d i t i o n i n g S y s t e m s C o . , L t d .

“We are applying our technological advan-

tages in scroll technology and noise reduc-

tion technology to deliver products

dovetailed to market needs.”

A u t o m o t i v e P r o d u c t s G r o u p

“We are a supplier of trusted systems with

coordination skills that provide automobile

manufacturers with systems configured using

leading-edge technologies.”

16

16


Airflow sensor for fuel injectionsystems


The automotive market in fiscal 1998 was healthy in the

United States. However, stagnant Japanese and Southeast

Asian markets had an adverse effect on the Automotive

Products Group’s business, leading to weak results. In markets

outside Japan, Hitachi Automotive Products Europe, Ltd., in

the United Kingdom, began production in July 1998.

The automotive industry is experiencing a period of drastic

change. As automobile manufacturers contend with enormous

development costs to attain compliance with tightening regula-

tions for environmental protection and safety, mergers and

acquisitions and alliances among not only automobile manufac-

turers but among suppliers as well are taking place on a global

scale. The advent of intelligent transport systems (ITSs) is

expected to expand the automotive products market significantly.

With our advanced technologies, we are taking a leading role in

the development of electronic toll collection systems, which

will be put into operation in 2000 in Japan.

We are building a business structure that capitalizes on the

wide-ranging technologies and expertise of the entire Hitachi

Group. Furthermore, we are proactively seeking alliances with

other companies in technology development. Working with

Eaton VORAD Technologies, L.L.C., for example, we have

jointly developed the world’s first vehicle-use millimeter wave

radar, which we expect will become a key device in ITSs. In

another important development, we have reached an agreement

with Unisia JECS Corporation and Nissan Motor Co., Ltd. to

jointly develop cutting-edge vehicle control technologies rang-

ing from engines to brake and steering systems.

Outdoor (left) and indoor unitsof packaged-type air conditioners

In April 1999, Hitachi Air Conditioning Systems started an

operation as an independent company. In July 1999, the com-

pany will merge with Hitachi Air Conditioning & Refrigeration

Co., Ltd., a sales company, thus integrating manufacturing and

sales functions and maximizing the efficiency of operations.

Although markets in European countries were firm, other

markets for commercial air conditioners during fiscal 1998

were exceptionally sluggish, particularly in Japan, Southeast

Asia, China and the Middle East. Despite our efforts to expand

sales of our market-leading products, such as through the

launch of ice thermal storage packaged air conditioners in

Japan, sales and earnings were severely impacted.

We have established a significant technological lead over our

competitors in many areas, including the scroll technology used

in compressors, control technology and noise reduction tech-

nology. Furthermore, we have laid the basic foundation for the

optimal deployment of corporate resources worldwide with a

considerable portion of our operations based outside Japan.

One example is Hitachi Air-conditioning & Refrigerating

Products (Guangzhou) Co., Ltd., in China, which began pro-

ducing chiller units in March 1999.

We will complement our product portfolio through stronger

alliances with other companies in parallel with activities to

expand sales of components with leading-edge technologies.

These initiatives are designed to create a structure capable of

generating a steady profit stream.

Seiji Suda, President & CEO

Toyooki Soejima, President and Director

H i t a c h i P l a n t E n g i n e e r i n g & C o n s t r u c t i o n C o . , L t d .

“We are enhancing construction efficiency,

streamlining installation processes, and ex-

panding in new product areas and technologies,

such as advanced water treatment systems.”

H i t a c h i C o n s t r u c t i o n M a c h i n e r y C o . , L t d .

“We are promoting corporate renewal under

our JUMP-UP 30 for 21 plan as we transform

the HCM Group into a major global player in

the 21st century.”

17

17


This hydraulic excavator is amongthe world’s largest.


The Japanese market for construction machinery has faced

exceptionally difficult conditions, due to downturns in both

private- and public-sector works projects.

In these inhospitable business conditions, although sales

declined 6%, to ¥291,863 million ($2,412 million), at ¥1,889

million ($16 million), net income increased by 22% year

on year.

During the term, we were able to expand our market share in

all major machinery sectors by developing new products that

reflect market needs. Manufacturing by joint venture compa-

nies in North America, Europe and China is proceeding well,

and Hitachi Construction Machinery (HCM) continued to have

the world’s largest share of the hydraulic excavator market.

Moreover, we successfully reduced production cycle time for

custom-built machines from two weeks to four days. In this

way, we significantly improved customer satisfaction and

trimmed inventories.

In fiscal 1998, HCM started its medium-term JUMP-UP 30

for 21 plan that, by the early years of the 21st century, aims to

achieve a 30% share of the world market in hydraulic excava-

tors and its other major lines. The plan also seeks to achieve

four primary goals and thereby lay a solid foundation for the

company’s vigorous development in the 21st century. The four

primary goals are to explore new sources of demand, enhance

overseas operations, raise productivity and reinforce the com-

pany’s financial structure.

The accelerated deployment of our JUMP-UP plan, coupled

with rising demand resulting from increases in public works

investment in Japan, is expected to result in higher sales and

profits in fiscal 1999.

Advanced sewage treatment sys-tem utilizing biotechnology

The operating environment for Hitachi Plant Engineering &

Construction was exceptionally challenging during fiscal 1998,

as the Japanese economy sank deeper into recession due to

weak personal spending, cutbacks in capital investment ham-

pering domestic demand and the Asian economic crisis com-

pounding problems outside Japan.

Under such conditions, we focused on creating new market

opportunities for environment-related and other products while

cutting costs and improving efficiency. However, the power

plant construction and clean room installation related businesses

were negatively affected by sluggish investment by power com-

panies and semiconductor manufacturers, respectively. As a

result, net sales declined 1%, to ¥251,209 million ($2,076 mil-

lion), and net income fell 45%, to ¥2,091 million ($17 million).

In fiscal 1999, our focus is to develop new technologies that

meet ever diversifying customer needs and to enter new mar-

kets to expand revenues. At the same time, we will further

reduce costs, improve our financial position and develop into a

leaner, more profitable enterprise. We will accomplish this by

applying our expertise in new materials handling technologies

for the power plant business and by improving efficiency by

streamlining various installation processes.

We will also expand our business in new products and tech-

nologies, including advanced water treatment plants, compost

production systems, clean room renovation and the full turnkey

engineering of food processing facilities.

Kunio Hamada, President and Representative Director

Ryuichi Seguchi, President

C o n s u m e r P r o d u c t s G r o u p

“Making our manufacturing divisions indepen-

dent companies has reduced fixed costs and

strengthened our management structure. We

will carefully segment our markets and cre-

ate strategic products for clear customer

targets.”

18

18


Washing machine with improvedcleansing functions capable ofremoving metal ions

C o n s u m e r P r o d u c t s

Sales of Hitachi’s Consumer Products Group fell year on

year, reflecting a reduction in personal spending as Japan’s

consumers remained uncertain about the Japanese economic

recovery. Even amid the very tough market conditions, ship-

ments in Japan of refrigerators, washing machines and

microwave ovens rose from October 1998, compared with

those of the previous year, and were a harbinger of recovery in

replacement demand for consumer products.

Our refrigerators incorporating pulse amplitude modulation

(PAM) control technology have been well received in the

Japanese market. In 1994, we became the first in the industry to

employ PAM technology in home air conditioners, and we

have been applying this technology to refrigerators and air puri-

fiers to differentiate our products. With the domestic economic

slump, consumers have been attracted to products that help

lower their electricity bills, and this has bolstered sales growth

of our refrigerators and air conditioners. Our new line of wash-

ing machines, with a 50% improvement in cleaning power, also

enjoyed a warm reception in the market.

We have been working to raise operational efficiency by

reducing fixed costs in our sales divisions since fiscal 1997 and

working to create a cost structure appropriate for our sales vol-

ume. In fiscal 1998, we transferred all manufacturing divisions

to our manufacturing subsidiaries. In July 1998, we established

Hitachi Tochigi Technology Co., Ltd. and transferred design

and manufacturing operations for refrigerators and air condi-

tioners to the new company. Furthermore, effective April 1,

1999, we transferred design and manufacturing operations for

washing machines and other appliances to the newly estab-

lished Hitachi Taga Electronics Co., Ltd. and for lighting tubes

to Hitachi Lighting Equipment Co., Ltd. This transfer of manu-

facturing operations will improve our cost-competitiveness and

result in a more-flexible manufacturing system capable of a

speedier response to changes in market requirements.

Alliance activity was brisk in our group during the term. In

February 1999, we took an equity position in Amtrex

Appliances Ltd., the third-largest air-conditioner manufacturer

in India, as part of our strategic expansion into the growing

Indian market for air conditioners. In the same month, the com-

pany’s name was changed to Amtrex Hitachi Appliances

Limited, and in March, it launched India’s first Hitachi-brand

air conditioners. In addition, Hitachi has achieved a 20% share

of the Thai market for washing machines and refrigerators.

In the midterm, the Japanese market will be buoyed by

replacement demand for appliances purchased during Japan’s

economic bubble—sales peaked from 1988 to 1991—but we

believe that consumption will remain subdued during fiscal

1999. Noteworthy trends affecting our business include the

need to develop new energy-saving technologies by 2004 to

remain compliant with benchmarks for energy conservation

stipulated under the revised regulations for energy conservation

in Japan. In addition, as of 2001, in Japan the recycling of con-

sumer electronics products will become the responsibility of

manufacturers, and thus a major theme for us will be creating

products from the design stage that are easy to recycle and dis-

assemble as well as creating a system for collecting and recy-

cling products disposed of by consumers.

We are confident that improving our managerial efficiency

and responding even more swiftly to changes in business condi-

tions will contribute to enhancing our profitability.

Yoshihisa Uneyama, President & CEO

H i t a c h i M a x e l l , L t d .

“We fulfill a vital role as a leading manu-

facturer of storage media and batteries for

the IT field.”

19

19


DVD-RAM disk with a two-sidedstorage capacity of 5.2GB

C o n s u m e r P r o d u c t s

In fiscal 1998, Hitachi Maxell had a strong performance in

the United States, which accounts for 35% of the company’s

overall turnover, but this was not enough to offset the impact of

economic recessions in Japan and elsewhere in Asia. It was

also a difficult year in terms of earnings as fierce price competi-

tion and the impact of a stronger yen from the second half of

the fiscal year led to a fall in net income compared to the previ-

ous term. As a result, net sales amounted to ¥208,291 million

($1,721 million), an increase of 9%, while net income declined

56%, to ¥2,524 million ($21 million).

Looking at performance by segment, in storage media,

demand for large-capacity storage tapes surged due to Year

2000 compliance initiatives and other factors and boosted sales

of computer tapes. Professional-use videotapes for broadcasting

displayed competitiveness during the term, particularly at tele-

vision stations in markets outside Japan. In optical storage

media, we boosted our output of CD-Rs, which are write-once

media, by 40%, to seven million units per month in response to

favorable market reception. We increased our shipments of

magneto-optical disks to address rising demand, but lower unit

prices caused a decline in sales revenues. Although we sus-

tained our more than 50% share of the Japanese floppy disk

market, low unit prices caused profits to weaken.

In our battery business, Hitachi Maxell enjoyed double-digit

growth in shipments of alkaline batteries, which sold well in

tandem with an expansion of the computer game market in

Japan. Button batteries suffered from inventory adjustments in

the watch market, but we expect a recovery in fiscal 1999.

Despite strong demand for rechargeable batteries for use in

notebook computers and cellular phones, Hitachi Maxell had

difficulty timing the release of new products and thus faced

tough conditions in fiscal 1998. We expect an upturn in fiscal

1999, however. Among newer business lines, in summer 1998,

we launched a glossy photographic paper developed by apply-

ing magnetic tape technologies. We anticipate that this product

will elicit rising demand and achieve a high level of market dif-

fusion due to the increasing use of digital cameras and inkjet

printers. In markets outside Japan, we strengthened our product

planning and R&D structure in the United States, one of the

key markets for our storage media business. We are confident

that we have enhanced our ability to reflect customer require-

ments more swiftly in our new products.

Our development activities during fiscal 1999 will focus on

working as a partner with other electronics manufacturers to

create products that respond to the needs of the rapidly chang-

ing multimedia age. In such endeavors, we will concentrate on

DVD-RAMs, SuperDisk™, CD-Rs, noncontact IC cards,

rechargeable button batteries, rechargeable polymer lithium-ion

batteries and other multimedia-oriented products.

In parallel with these activities, we are revitalizing our cost-

competitiveness by reviewing our manufacturing systems from a

global perspective. As one aspect of this, we will seek to boost

profitability by shifting production of 8mm videotapes to Mexico

and production of floppy disks to Malaysia, both products being

the focus of intensifying price competition.

Hitachi Maxell is striving to develop a third core business to

join storage media and batteries. Leading candidates for growth

include electronic devices, precision components and multi-

media content. In fiscal 1998, we made forward-looking invest-

ments in these businesses and expect to see growth in fiscal

1999. Our electronic devices business will start with noncontact

IC tags, and multimedia content will initially focus on enter-

tainment. In addition, our venture into precision components

will begin with engineering plastics and electrofine forming

technologies that apply technologies used to manufacture razor

blades.

We position ourselves as a manufacturer of “memory and

mobility” products in the IT field and develop market-leading

products that provide total customer satisfaction.

Norio Akai, President

H i t a c h i C h e m i c a l C o . , L t d .

“Hitachi Chemical intends to achieve higher

profitability by leveraging its core

strengths in resin technology to create new

high-value-added businesses and revitalize

its existing businesses.”

H i t a c h i M e t a l s , L t d .

“While sharpening our competitive edge, we

are expanding in such high-value-added areas

as next-generation magnetic heads and other

electronic products.”

20

20


Compact household dual-use septictank for treating sewage

M a t e r i a l s

During fiscal 1998, net sales registered a year-on-year

decrease of 7%, to ¥524,219 million ($4,332 million), due to

weaker demand from such key customer industries in Japan as

mining, semiconductors and housing construction. However,

we were able to post a 201% gain in net income, to ¥8,096 mil-

lion ($67 million), by shifting to a product mix that includes

higher-value-added offerings and by making improvements in

managerial efficiency.

Products that posted strong sales and contributed to profits

included anisotropic conductive films for use in fine circuit con-

nections for LCDs, which have been in strong demand for lap-

top PCs and cellular phones, and copper-clad laminates for

multilayer printed circuit boards developed for smaller, lighter

electronic products. In household facilities and equipment,

strong sales were recorded by new products, such as sewage dis-

posal tanks for household waste treatment that are compact and

easy to install and the industry’s first barrier-free bathroom units

without drains in the washing area.

To accelerate management decision making and en-

hance operational efficiency, in each business division, R&D,

manufacturing and sales have been integrated, and each

division has been made more responsible for its business per-

formance. We also took some measures to reorganize and con-

solidate subsidiaries and to reduce the amount of

interest-bearing debt.

In the rapidly changing and fiercely competitive market

environment, we will continue to direct management resources

toward the development of new products in the fast-growing

areas of IT, telecommunications, the environment and energy.

In tandem with such activities, we will continue to move for-

ward with management reforms. We are strengthening our

R&D system, which plays a key role in creating new business-

es, and are restructuring our head office organization for

increased focus on strategic corporate planning. At the same

time, we are improving our cost-competitiveness by streamlin-

ing production processes and are also focusing on the opera-

tional efficiency of our consolidated businesses. We are

confident that such initiatives will transform Hitachi Chemical

into a high-profit company with improved ROE.

Magnetic heads for computerdisk drives

Market conditions during fiscal 1998 were weak, due to

downturns in the steel, automotive and other key industrial sec-

tors as well as slack demand from construction companies and

public works projects in Japan.

During the term, sales of information-related components

were boosted by the strength of the mobile communications

market. However, sales of specialty steels, automotive compo-

nents, magnets and metallic materials for electronic products

were lackluster. Our magnetic head business was also

Tetsuya Eda, President and Representative Director

Isao Uchigasaki, President and Representative Director

H i t a c h i C a b l e , L t d .

“To succeed in an era of global competition,

we aim to continue to develop such pioneer-

ing products as TAB tape for semiconductor

packages, compound semiconductors and opti-

cal products for WDM telecommunications

devices.”

21

21


M a t e r i a l sdepressed by the delay in shifting to the volume production of

magneto-resistive (MR) heads. As a result, Hitachi Metals post-

ed an 8% decrease in net sales, to ¥431,433 million ($3,566

million), while the net loss was ¥10,982 million ($91 million).

We reduced the number of directors to accelerate decision

making from June 1999. In terms of future strategy, we will be

reorganizing our affiliates and subsidiaries in North America

and in Japan and other Asian countries to manage the consoli-

dated Hitachi Metals Group more effectively. In addition, we

are significantly raising the autonomy of each business group

and giving group executives the authority to make decisions

regarding personnel and capital investment. In line with the

new clear demarcation of managerial responsibility, we will

evaluate the profitability of each business group in terms of

ROE, ROA and cash flow.

We expect an increase in both sales and profits in fiscal

1999, resulting from the positive impact of the launch of the

volume production of GMR heads in spring 1999, a rebound in

sales from growth in new products, cost-cutting measures and

more-focused investment. In addition, we will differentiate our-

selves by offering products with unique value proposi-

tions, such as heat-resistant cast-iron products, including the

HERCUNITE™ series, which is capable of withstanding high

automotive exhaust temperatures. At the same time, we will

maintain our world-leading share of the market for shadow

mask materials for high-resolution PC monitors.

The two chips at right are RambusDRAMs in an ultrasmall TABpackage.

During fiscal 1998, the business environment was very

severe and was affected by reductions in capital investment by

electric power and telecommunications companies.

Consequently, Hitachi Cable recorded a 12% decline in net

sales, to ¥382,264 million ($3,159 million), and a 76% reduc-

tion in net income, to ¥2,001 million ($17 million).

During the term, sales of wires and cables, our mainstay

products decreased, mainly due to slackening demand for insu-

lated wire and bare wire. In copper products, sales of copper

tubes for room air conditioners were lackluster. In electronic

components, while sales of compound semiconductors were

brisk, sales of IC leadframes fell.

During fiscal 1999, we will start volume production of

eBGA® semiconductor packages and tape automated bonding

(TAB) tape for Rambus DRAM packages. Furthermore, antici-

pating increasing demand for gallium arsenide compound semi-

conductors, in which we have one-third of the world market

share, we plan to invest in additional capacity for this globally

strategic product.

Finding ways to increase market share in the well-estab-

lished wires and cables business and developing other business-

es are priority management issues. Accordingly, we will

continue to develop such optical-related products as submarine

cables and multiplex devices, wavelength division multiplexing

(WDM) telecommunications devices and fiber optic trans-

ceivers for fiber channels. These products target a market that is

set to expand and will contribute to the company’s plan of

boosting the share of sales derived from businesses other than

wires and cables. Furthermore, as part of our commitment to

respond to strong social and environmental needs, we are

developing power cables with environment-friendly features.

To dramatically increase the global competitiveness of

Hitachi Cable, we will seek to improve customer satisfaction

and operational efficiency. To achieve these goals, we will

strive to enhance labor and manufacturing efficiency as well as

R&D productivity to enable us to introduce products into the

market ahead of our competitors.

Seiji Hara, President and Representative Director

H i t a c h i C r e d i t C o r p o r a t i o n

“Hitachi Credit is entering the securitiza-

tion business as it moves to become a new

financial services company.”

N i s s e i S a n g y o C o . , L t d .

“Our goal is to be a global business creator

in the 21st century by leveraging our mar-

keting skills and ability to provide techno-

logical solutions.”

22

22


Mori no Sato Techno Plaza,a demonstration center formicroscopes

S e r v i c e s & O t h e r

During fiscal 1998, Nissei Sangyo was severely affected by

the downturn in private-sector capital investment in Japan and

recorded a 16% decline in net sales, to ¥733,204 million

($6,060 million). However, owing to cost-cutting measures by

management, net income for the term rose 16%, to ¥5,540 mil-

lion ($46 million).

By product, sales of semiconductor manufacturing equip-

ment and industrial materials decreased, but sales of recharge-

able batteries, microcontrollers and disk array subsystems were

brisk in markets outside Japan. In fiscal 1999, we expect a

recovery in sales of scientific systems and optoelectronic prod-

ucts. We also expect to sell in Japan steppers manufactured by

ASM Lithography, B.V., of the Netherlands.

Nissei Sangyo’s distinctive competencies are the company’s

marketing skills to provide technological solutions and reliable

internal management systems. We will continue to build on our

strengths by investing in sales support. Rare for a trading com-

pany, we have our own R&D facilities, such as the Mori no

Sato Techno Plaza, a demonstration center for microscopes in

Kanagawa Prefecture, Japan. In addition, we have opened

demonstration centers in Europe, the United States and else-

where in Asia to support sales of our scientific and industrial

systems. In 1998, we established Nissei Sanyo Hitech Service

Pte. Ltd. in Singapore to serve as our Southeast Asian support

center for chip mounters.

Following our goal to be a global business creator in the 21st

century, we are focusing on seven primary domains in which

we expect strong growth and can leverage our key strengths:

information and imaging, semiconductors, optics and telecom-

munications, the biotechnology and medical fields, environ-

mental technologies, public-sector operations and import

operations.

We will expand our business along four main dimensions.

First, we will fully apply our strengths as a trading company for

the Hitachi Group by working in even closer cooperation with

Group companies. Second, we will import leading-edge technolo-

gies from other countries and add value with our engineering,

software and maintenance capabilities to create competitive prod-

ucts and expand our global business. Third, we will invest inten-

sively in promising new technologies and business areas, and by

taking full advantage of our network in Japan and overseas, we

will uncover new opportunities for strategic alliances. And, final-

ly, we will develop world-caliber specialists in all of our fields.

Hitachi Credit’s NOVA credit cards

Japan’s consumer credit market in fiscal 1998 was character-

ized by favorable growth in the card sector but showed a year-

on-year decline in the shopping credit arena. Furthermore,

cutbacks in capital investment led to negative growth in the

leasing business field.

Despite such trends, Hitachi Credit achieved solid business

growth and recorded its 13th consecutive year of increased

earnings on a consolidated basis. Such new core businesses as

financial services showed substantial growth. Our traditional

core business in installment credit arranged through consumer

Noriaki Higuchi, President

Masayoshi Hanabusa, President and Representative Director

23

23


S e r v i c e s & O t h e rproduct vendors suffered from weak economic conditions, but

we were able to apply the strength of our sales capabilities and

extensive marketing network to post a healthy increase in auto-

mobile credit sales. As a result, Hitachi Credit posted a 15%

increase in the volume of business, to ¥1,515,605 million

($12,526 million), and a 2% rise in net sales, to ¥457,040 mil-

lion ($3,777 million). Net income for the term rose 6%, to

¥10,352 million ($86 million).

Among the new initiatives undertaken during fiscal 1998 to

expand our financial services business was the establishment of

Hitachi Credit Securities Co., Ltd. Making full use of the expe-

rience of the Hitachi Group in asset securitization, we can now

offer a full range of services from securitization arrangements

to sales. Hitachi Credit Securities has expanded into the unique

and increasingly specialized business of securitized asset sales.

Going forward, Hitachi Credit aims to achieve steady growth

through the handling of investment trusts and money manage-

ment funds.

In fiscal 1999, we will seek heightened cooperation with all

of our partners in the automotive and IT sectors to make even

greater strides in our business development. Moreover, we will

intensify our activities in the financial services sector and focus

on such businesses as insurance, investment trusts and out-

sourcing. Fiscal 1999 promises to be a period of great change

for Hitachi Credit, as it moves toward becoming a new finan-

cial services company.

Our motto is “A Company Highly Regarded by Customers

and Investors.” We believe that remaining successful under

intense global competition requires an unwavering commit-

ment to creating value for both customers and shareholders.

H i t a c h i T r a n s p o r t S y s t e m , L t d .

“As experts in corporate logistics, we are

raising profit levels by focusing on the

three Gs: Growth, Group and Global.”

Tokyo Monorail is owned by HitachiTransport System.

Depressed consumer spending and private-sector capital

investment caused a sharp decrease in the volume of domestic

freight in fiscal 1998. Furthermore, because of stiff competition

caused by deregulation in Japan, freight customers demanded

larger cuts in distribution costs, thereby creating an extremely

severe business environment. Amid these unfavorable condi-

tions, Hitachi Transport System made efforts to win new orders

in its third-party logistics business. We also worked to increase

profitability by streamlining service departments and divisions

and implementing other cost-cutting measures. Despite such

measures, however, the company posted a 6% decline in net

sales, to ¥274,492 million ($2,269 million), and a 22% drop in

net income, to ¥2,762 million ($23 million). The systems distri-

bution business turned in a strong performance, led by the

logistics outsourcing group. One notable example was an out-

sourcing contract received for the distribution of adidas Japan

K.K. products.

In fiscal 1999, we expect our outsourced distribution busi-

ness to continue to grow rapidly by leveraging supply chain

management technologies developed using the Hitachi Group’s

technology resources. We aim to achieve increased profits

through a strategy focusing on the three Gs: Growth, Group and

Global. In terms of Growth, the company is working to win

new customers in the growth areas of convenience stores and

healthcare networks. We set long-term targets in our “55-100

strategy.” This refers to more than 55% of sales being generat-

ed from outside the Hitachi Group, with the target being sales

of ¥10 billion a month on an unconsolidated basis. In terms of

Group, we will continue to implement cost-reduction measures

at Tokyo Monorail Co., Ltd. and all other subsidiaries, target-

ing increased profitability and strengthening corporate structure

throughout the Hitachi Transport System Group. In terms of

Global, the intention is for all of Hitachi Transport System’s 16

overseas subsidiaries to operate at a profit and show healthy

revenue growth. We will further expand our North American

and European operations while stepping up our efforts to win

new customers in Asian markets.

Hisanobu Naka, President and Representative Director

24

24


F o r a B e t t e r W o r l d

Hitachi Nonprofit Foundations

• The Odaira Memorial Foundation

• The Hitachi Scholarship Foundation

• The Kurata Foundation

• The Youth Rehabilitation and Welfare

Center

• The Correctional Services Foundation

• The Environmental Research Center

• The Hitachi Foundation

We believe that a company has a

responsibility to serve and enrich society.

And we know that our prosperity

depends upon the health and well-being

of the people around us.

Seven Hitachi-endowed foundations

support research in science and technolo-

gy, education, environmental protection,

international cooperation and other wor-

thy causes. A corporatewide goal is to

make a strong social contribution to local

communities and to operate in harmony

with the environment.

Environment

Hitachi developed environmental

management systems that meet criteria

specified by the ISO 14001 series of

environment management standards.

As of March 1999, more than 140

Hitachi facilities had acquired ISO

14001 series certification. Subsidiaries

engaged in software, services and other

nonmanufacturing businesses will move

to obtain certification during fiscal 1999.

In fiscal 1998, Hitachi launched an

annual environmental report and

unveiled its Green Procurement Guide-

lines, a basic policy statement that out-

lines its commitment to use parts and

materials with minimal environmental

impact.

As one of its energy conservation

efforts, Hitachi also made progress in

introducing gas turbine cogeneration

systems at its manufacturing facilities.

This initiative is in line with measures set

out in Hitachi’s Environmental Action

Plan, which is aimed at helping to pre-

vent global warming.

Hitachi continued with its initiatives to

reduce the use of lead in new products by

adopting lead-free solder. In fiscal 1999,

Hitachi aims to reduce the amount of

lead used in new products by the parent

company to 50% of the 1997 level.

Education

Hitachi has been sponsoring an

international schoolteachers’ exchange

program since 1987. Under the program,

teachers at schools located near Hitachi’s

operations in Europe and the United

States engage in exchange activities with

teachers at schools located near Hitachi’s

Japanese facilities. The program includes

school visits, homestays, discussions

with fellow teachers and other activities

aimed at strengthening mutual under-

standing. To date, more than 120 teach-

ers have taken part in the program.

Community

Hitachi’s overseas subsidiaries carry

out grass-roots philanthropic activities

designed to meet the needs of local com-

munities. In the United States, employee

teams, called Community Action

Committees, make financial contribu-

tions to local nonprofit organizations

and carry out volunteer activities, while

The Hitachi Foundation, based in

Washington, D.C., supports activities for

the benefit of the community and the

underserved.

In the United Kingdom, The Hitachi

Europe Charitable Trust, established by

Hitachi companies in Europe in 1991,

supports local and national initiatives that

meet the needs of Hitachi’s founding

philosophy.

In Thailand, books and other teaching

materials were donated to elementary

and junior high schools through the joint

efforts of Hitachi Asia (Thailand) Co.,

Ltd. and The Hitachi Scholarship

Foundation’s alumni.

In Thailand, teaching mate-rials were donated to

schools through the jointefforts of Hitachi Asia

(Thailand) Co., Ltd. and TheHitachi Scholarship

Foundation’s alumni.

Hitachi has been sponsoringthe Hitachi InternationalSchool Teachers ExchangeProgram since 1987.Activities include schoolvisits, homestays and dis-cussions that promote mutu-al understanding.

25

25


Chairman of the Board Tsutomu Kanai

and Director

Vice Chairman of the Board Hiroshi Kuwahara

and Director

President and Director Etsuhiko Shoyama

Executive Vice Presidents Yoshiki Yagi

and Directors Shigemichi Matsuka

Yoshiro Kuwata

Yuushi Samuro

Takashi Kawamura

Senior Vice Presidents Kazuo Kumagai

and Directors Tadashi Ishibashi

Kaichi Murata

Katsukuni Hisano

Kotaro Muneoka

Toshihiko Odaka

Corporate Auditors Nobuji Kamachi

Iwao Matsuoka

Takashi Kashiwagi

Kazuo Morita

Yoshio Okawara

Shinji Tamagawa

B o a r d o f D i r e c t o r s a n d C o r p o r a t e A u d i t o r s(As of June 29, 1999)

Kaichi Murata

Katsukuni Hisano Kotaro Muneoka

Takashi Kawamura

Yoshiro Kuwata

Yuushi Samuro

Yoshiki Yagi Shigemichi Matsuka

Tsutomu Kanai Hiroshi Kuwahara Etsuhiko Shoyama

Kazuo Kumagai Tadashi Ishibashi

Toshihiko Odaka

Documents

Review of Operations - Hitachi · power amplifier modules for mobile terminals and gallium arsenide compound semiconductors. In addition, Hitachi has commercialized and started volume