R&D: a Key Driver in Hitachi's Global Growth

2014 R&D strategy R&D: A key driver in Hitachi’s global growth Solution-oriented R&D for Hitachi Global Business

10 April 2014 Keiji KOJIMA, Ph.D. Vice President & Executive Officer Chief Technology Officer President & CEO, Research & Development Group Hitachi, Ltd.

1. Foreword 2. Leading Social Innovation Business 2.1 Transforming through a customer-driven R&D model 2.2 Expanding service business 2.3 Enhancing world No. 1 product business 3. Global R&D 4. Strategic steps for the future 5. Summary

2015 Mid-term Management Plan - Achieving Growth and Hitachi’s Transformation -

Innovation Global Transformation

Strengthen service Deliver Innovation to Transform Hitachi: businesses that maximize Customers and Society To deliver innovation by the utilization of IT and globally standardized and speedy bring about innovation operation

Management focus R&D directives • Promote R&D to expand service business 1. 1. Innovation •• Development of innovative technology to support worldworld-- class No. 1 product business

• Contribute to overseas 2. 2. Global business through Global One Hitachi approach

• Transform through a 3. 3. Transformation customer-driven R&D model

President

Kokubunji-shi Tokyo R&D Group Technology Strategy Office

Technology strategy planning Hatoyama-machi, Health Care Group Saitama Central Research Laboratory Expand business coverage, New areas in Power Systems Group anticipation of future societal needs HitachiHitachi--shishi,, Ibaraki Infrastructure Hitachi Research Laboratory Energy, Societal, Industrial and Life infrastructure, Systems Group Materials and Key devices HitachinakaHitachinaka--shishi Information & Telecomm. Yokohama Research Laboratory Systems Group Information platform technology, Monozukuri technolory Construction Yokohama-shi, Machinery Group Design Division Kanagawa High Functional Materials Vision design, Experience design & Components Group Overseas research centers Automotive Akasaka, Contribute to expanding regional business Minato-ku, Tokyo Systems Group Collaboration with key customers

*as at April 2014 © 2014 Hitachi, Ltd. All rights reserved. 6 1-4 R&D: Key Driver for Global Growth Expand the Social Innovation Business globally --LeveragingLeveraging R&D capability and global network --

Promote open innovation with customers and business partners for contributing to solve customers’ issues

Closely tied to customers locally providing R&D capabilities

Develop the world-class cutting-edge R&D with combining systems, products and IT on the Cloud

Increase and enhance global R&D bases Europe China North America

Hitachi China Materials Technology Innovation Center (2013/4) European Big Data Lab. Japan U.S. Big Data Lab. (Univ. of Manchester) (2013/4) (2013/10) • Central Research Lab. • Healthcare services • Hitachi Research Lab. Hitachi South America • Yokohama Research Lab. R&D Division (2013/6) • Design Division

Approx. JPY400 billion invested in Hitachi Gr. R&D, approx. 4% of revenue

R&D investment trend R&D investment trend by business segment

Information & 81281.2 5000500 6 情報・通信システム Telecommunication 87.9879 R&D Systems As a % of Revenue R&D investment as a % of revenue [%] 売上高研究開発投資率 19719.7 investment Power systems電力システム 165 16.5 FY2012 5 24624.6 FY2011 4000400 Social infrastructure社会・産業システム & 225 Industrial systems 22.5 43443.4 Electronic電子装置 systems・システム & 473 4 Equipment 47.3 17217.2 3000300 Construction machinery建設機械 164 16.4 43443.4 3 Highly functional高機能材料 461 materials & Components 46.1 58358.3 2000200 Automotiveオートモティブシステム systems 528 52.8 2 Digital media & 20820.8 デジタルメディア・民生機器 236 Consumer products 23.6 10.1 1000100 金融サービス 3 1 Financial services 0.3 R&D investment [billion yen] yen] [billion [billion investment investment R&D R&D 69 その他 6.9 Other 74674.6 25225.2 0 0 Corporate全社 items(本社地区) 24024.0 200001 02 03 04 05 06 07 08 09 10 11 12 Fiscal year 0 200 400 600 800 1,000100 Billion yen

Annual trend in R&D investment return 6 1.40 R&D investment[ROI]as a % OPM R&D expenditure/operating profit margin (%) 1.20 5 R&D expenditure/Revenue (%) 1.00 4 0.80 3 0.60 2 0.40 1 Operating income/Revenue (%) 0.20 0 0.00

Operating income income income of of % % as as revenue revenue Operating Operating 2000 01 02 03 04 05 06 07 08 09 10 11 12 R&D expenditure as a % of of of % % a a as as revenue revenue expenditure expenditure R&D R&D

Annual trend in number of R&D personnel

2013 2015 2020 Business target Business strategy roadmap [Business Group-led]

Sponsored Frontier & Sponsored Current business Platform 30% research research research R&D Investment 50 * % Adv. sponsored Next-generation Adv. research business sponsored 20% research *FY2013

Technology roadmap [Technology Strategy Office-led] Strategic allocation

Frontier & Next next-generation business Platform 5% Service 15% related Research FY20132013年度 2015年度FY2015 research

Transform to a customer-driven research model for the growth of Social Innovation Business globally 1. Uncover and share problems held by customers Uncovering and sharing the fundamental objectives, potential needs of customers Ethnographic research 2. Continuous co -creation with customers Greater innovation by quickly repeating the cycle of uncovering and solving problems Ex Approach

3. Develop innovation from a vision of the future Illustrate future social issues and a society where those issues have been resolved, and develop disruptive technology to achieve this vision Vision design

Provide solutions by extracting potential problems and hidden needs that customers may not be aware through on-site observations by researchers

Research on maintenance of UK rail cars Ethnographic research on maintenance work was conducted at the Ashford Depot of the high-speed passenger train Class 395 → Derive measures to improve on-site work efficiency

Other research examples North America Data center (storage management software) Proton beam therapy equipment construction site China Software development site Germany Needs survey of construction machinery Australia Construction machinery maintenance activity South Africa "" Mozambique "" Egypt Plant construction site

Share and analyze problems & solutions for operation and services with stakeholders in the planning phase, to effectively develop system requirements

1. Capture current situation 2. Develop ideal outcome 3. Validate feasibility Identify objectives by Create the ideal image of new Validate feasibility of new capturing the reality of actual operations placing importance system through prototyping work sites on experience Record: 65* cases of upstream research applied (2009-2013) Investigate worker-hour for tasks, visualize issues (Retail) Point of •• External marketing customer •• Sales agents Establish customer management system (Retail) contact/ •• Sales counter Improve call center system (Electric power company) •• Back office Call center Reform external marketing operations (Insurance company) •• Equipment Reform distribution operations, staff training (Electric power company) maintenance Maintenance Improve plant construction process management system (Hitachi Group) operations, •• Construction Visualize data center work issues (Hitachi Group) etc. •• System mgmt. •• Disaster prevention Develop disaster prevention solution for evacuation shelters (Municipal govt.) * Number within the Information & Telecommunications Systems Company, Hitachi, Ltd. © 2014 Hitachi, Ltd. All rights reserved. 14 2-1-4 Vision Design

Capture future societal issues, and illustrate them in detail from citizens’ perspective as a solved problem in society Capturing trends Kizashi (Issues in 2025)

PEST analysis P: Politics E: Economy S: Society T: Technology

* Vision design of UK healthcare in 2025 led to collaboration with NHS GM Diabetes prevention service for the U.K. Health guidance to insured citizens to prevent diabetes (10% medical expenses in UK) Insurer Hospital Insured NHS GM Healthcare vision video presented to NHS GM

Identify customers’ issues & needs, and achieve innovation through service business * 2015 Mid-term Management Plan target: Ratio of revenue from services 30% (FY2012) ⇒240% (FY2015) Services Civil Telematics Logistics Transport Energy Healthcare planning Security

Mining Management support service Agriculture Upstream research Finance O & M in collaboration Outsourcing & Operations service with customers Manufacturing Facility & Equipment maintenance service

Service platforms Propose Transformation to knowledge, Collect / Compile management initiatives analysis, assessment (Analytics) High-speed data access Innovative ExApproach Vision Design Ethnography platform sensors Innovative service platform using the cloud & big data

Identify customer issues/needs Health management service for [Customer] health insurance associations • Health insurance association Health Healthcare data insurance [Issues] Hitachi • Preventing disease & promoting association Draft Health health of subscribers Insured measures guidance • Revitalize business by controlling • Predict medical • Guide weight medical expenses expenses Insurer • Determine loss • Prevent diabetes Ministry of Health, Labour and Welfare eligibility “Data Health Project” (2015 ∼ ) Propose Assess improvement benefit [Pre-emptive activities by Hitachi Kenpo] Propose measures & health guidance Coverage: Hitachi Group employees Interventive guidance “ Harasuma Diet ” Healthcare big data platform • Successful weight loss 50% Nephropathy • Difference of JP 60,000 yen* for Arteriosclerosis Verified with data from 3 year cumulative medical expense Complications Retinopathy 110,000 subscribers of the Cardiovascular disease Hitachi Kenpo Error margin in medical expense prediction: Lifestyle related Diabetes within 5% illnesses Hyperpiesia Hyperlipidemia

Elevated blood glucose Identify patterns Abnormal Elevated blood pressure Lipid abnormality hidden in the data with test result Obesity machine learning * Business example 14 on health insurance business based on data analysis of employees, in the 2013 health business Disease transition model casebook of the Ministry of Health, Labour and Welfare, Japan © 2014 Hitachi, Ltd. All rights reserved. 18 2-2-3 O&M services

Identify customer issues/needs CloudCloud--basedbased service for mining operations management [Customer] • Mining company

[Issues] • Increase the management efficiency of mining equipment operations • Introduction to small mines or remote mines

Shovel Dump truck O&M service platform Global e-Service on TWX-21 Mining Ore storage Data Equipment Document Big data site site collection management management analysis (M2M) FMS: Fleet Management System WENCO: Wenco International Mining Systems Ltd. © 2014 Hitachi, Ltd. All rights reserved. 19 2-2-4 Physical security services

Identify customer issues/needs Security service for largelarge--scalescale important facilitiesfacilities [Customer] Integrated IT management service • Facility management company for important facilities • Municipal government offices Surveillance system [Issues] • Wide area security • Diverse risk management • Increased convenience

Entry procedure Hand luggage inspection Security gate

Service platform

Finger vein Multiple location Suspect authentication dangerous substance tracking technology detection technology technology for touch panels © 2014 Hitachi, Ltd. All rights reserved. 20 2-2-5 Cyber security services

Identify customer issues/needs IncidenceIncidence--preparedprepared security service [Background] • Increasingly sophisticated Analysis service Managed security service cyber attacks Monitor • Cloud service provider system OODA* Loop Increasingly complex intrusion information systems Request • Outsourcing of tasks (cloud) Sensitive data [Issues] • Establish pre-emptive technical Result Counter measures against unauthorized Server measure access and information leakage Process all under encrypted Quick and rational decision Attacker state (Secure data escrow, making (Prevention, Early Unknown malware analysis) detection, Restoration) Sophisticated attack Internal perpetrator Security platform technology Group of systems System intrusion Association rule mining Complex over encrypted data Analysis report Exploit data Encrypted Data system 2e81780 4a4e4d6 c90cb39 1a519b8 91ff280 a1780c3 b9e2e81 dcd1ce1 Sensitive data c3f8a95 87dcd1c 19b84dd d26e5cd 6dd7a0a 0b47f85 5dd7a0a 9e2e817 Cloud service provider d26e5cd f808aea e14a24e ec90cb9 3f817ca Outsource ・・・・・・12780c3 ⇒ ae0b247 In-house system

Encrypted DB

Data owner Data analyzer Customer company Privacy Preserving Data Analysis** Automatic analysis of unknown malware *OODA ：Observe, Orient, Decide, Act ** The searchable encryption method developed is part of research results from the 2010 project commissioned by the Ministry of Internal © 2014 Hitachi, Ltd. All rights reserved. 21 Affairs and Communications, for “R&D of technology for information security countermeasures in large -scale virtual server envir onments.” 2. Leading Social Innovation Business 2.3Enhancing world No. 1 product business

3T MRI Health Care Group Proton beam cancer therapy equipment 2-3-2

Nuclear power multinuclide 2-3-3 Power Systems Group removal facility 5MW off-shore wind turbine

European rail signaling 2-3-5 Infrastructure System verification Systems Group Wind tunnel test facility 2-3-5

Information & Flash module 2-3-6 Telecommunication Systems Group Data access platform 2-3-6 Construction Machinery Group Hybrid shovel High Functional Materials & Components Group Dysprosium-free magnets

Automotive Systems Group Technology for automatic 2-3-7 operation

Proton beam therapy system PROBEAT-RT Compact system 70% previous model Applicable to moving organs

Real-time tumor-tracking Conventional design radiotherapy Rotating gantry (Hokkaido University) New design Irradiation nozzle 22m Treatment room Integrate Patient Injector Spot-scanning proton LINAC beam therapy (Hitachi) Real -time tumor tracking Rotating spot scanning proton gantry Footprint beam therapy system reduced to 70% Synchrotron Proton beam Scanning Spot magnet irradiation 7.8m Hokkaido University Flat Scan Irradiation 5.1m panel gate signal detector

Conventional Marker New Tumor position Respiratory (30Hz) movement Position threshold Time Completion ceremony X-ray tube (17 March 2014) Highly accurate irradiation of a tumor influenced by respiratory movement *A part of this technology was developed together with Hokkaido University under the Funding Program for World-Leading Innovative R&D on Science and Technology ("FIRST Program") initiated by the Council for Science and Technology Policy. and granted by the Japan Society for the Promotion of Science (JSPS). **This integrated therapy has been submitted for manufacturing & marketing approval under the Japanese Pharmaceutical Law. © 2014 Hitachi, Ltd. All rights reserved. 24 Technology development for 2-3-3 Fukushima Daiichi Nuclear Power Plant

Technology development for Fukushima restoration Adsorbent for simultaneous removal of Submersible shape-changing robot to 2 radioactive substances investigate narrow spaces Submersible crawling swimming crawler Able to move along floors and walls in water as well as 3D swimming

80% waste reduction by simultaneous Freely moving along floors and walls in water adsorption and filter use Shape-changing crawler Filter Able to enter through narrow Adsorbent pipes as well as stably maneuver uneven heights.

Birds’ eye view Overview of processing facility for contaminated water Received order for multinuclide removal facility Floor surface Changing shape Within pipes (METI project; Operation planned from mid FY2014) Switching traveling function by changing joint positions © 2014 Hitachi, Ltd. All rights reserved. 25 Technology development for 2-3-4 Fukushima Daiichi Nuclear Power Plant

水中走行遊泳型クローラ

Certification acquired for expanding European rail business European rail signaling system European standard compliant safety certification crosswind safety assessment facility SIL4 certification attained EN14067-6 compliancy confirmed (highest safety integrity level) (In a testing facility specially constructed to simulate crosswind environments that trains will experience during operation) Brake pattern Movement authority ETCS On-board

Train position Brake control

Limit of authority Location

Generating flow with low turbulence as specified by the standard

Platform for big data & cloud services HighHigh--speedspeed data access pplatform:latform: Flash module: HAF HADB Platform Original flash module realizing high-speed Data access platform for high speed analysis data processing at low cost of petabyte (PB)-order big data *1 *2 × • Throughput: Approx. 3 × SSD , 182 × HDD • Approx. 100 faster than previous Hitachi model • Response time: Equiv. to SSD, 12.5 × HDD • First registration as industry standard benchmark “TPC-H” 100 terabyte (TB) class (Oct. 2013) Flash module Hitachi Advanced Data Binder (HADB) Platform Hitachi Accelerated Flash ( HAF )

Physical volume: 1.6TB, 3.2TB New line-up released Masuda Prize (Commercialized Nov. 2013) Oct. 2013 Best 10 New Products Award Technology developed Technology developed 1. High reliability: On-line data refresh function Implementing “Out-of-Order Database Engine” †‡ (regular data diagnosis/recovery function) principle proposed by Prof. Kitsuregawa and Project ‡ 2. Smart management function: optimization of Assoc. Professor Goda refresh intervals depending on memory status HADB uses the result of “Development of the Fastest Database Engine for the Era of Very Large Database and Experiment and Evaluation of Strategic Social Services *1 SSD 400Gbyte model supported by Hitachi Virtual Storage Platform (VSP) Enabled by the Database Engine” (Principal Investigator: Prof. Masaru Kitsuregawa, *2 HDD 146Gbyte model supported by Hitachi VSP which is supported by the Japanese Cabinet Office's FIRST Program (Funding Program for World-Leading Innovative R&D on Science and Technology). † National Institute of Informatics ‡ the University of Tokyo © 2014 Hitachi, Ltd. All rights reserved. 28 2-3-7 Technology for automatic operation

Leading technology development for automatic operation Robotics technology to Automatic driving technology predict & avoid danger Situation learning technology for robots to Surround view technology determine a safe path to avoid collision with people at intersections, corners and doors Uses 4 cameras (front/rear/left/right) to recognize obstacles and parking spaces Predict probability of sudden encounter

Door扉曲がり角Corner Cameras Surround view 一時的Shadow ofな物陰 large objects Auto-parking technology Avoidance by changing course and speed Integrated control technology for steering, braking and acceleration Detect blind area

扉通路 Predict danger potential

1. Build-up global R&D network 3-2 Big data Automotive US Big Data Lab taking a central role in US, Japan, Europe and China cooperating in leading collaboration between research bases the development of engines & chassis in Japan, Europe, India and Brazil complying with regional regulations 2. Build-up regional value-chain 3-3 Railway Nuclear Power Healthcare Established European Rail Establish European Nuclear Established European Big Data Research Centre Research Centre Lab in the Innovation Centre of (Oct. 2012) (∼Sept. 2014) the Univ. of Manchester (Oct. 2013) 3. Global standardization of work 3-4 3-5 Design cloud Materials procurement

Globalization of the design environment Raise the local procurement of materials using the cloud by Hitachi Group companies in China HGC-IA: Hitachi Global Center for Innovative Analytics © 2014 Hitachi, Ltd. All rights reserved. 31 3-2 Global collaboration in Big Data R&D

Overseas research bases leading the expansion of big data business

Global Big Data Innovation Laboratory (GBDIL) Denmark Big Data Lab Europe (∼ Sept. 2014) • Environment & Energy Nth. America • Transportation • Healthcare Japan European Big Data Lab (Oct. 2013) • US Big Data Lab (Apr. 2013) Healthcare •Central Research Lab. • Storage solutions •Hitachi Research Lab. • Big data analytics •Yokohama Research Lab. •Design Division Sth. America

Brazil R&D Division (June 2013) • Agriculture • Mining

Hitachi Global Center for Innovative Analytics (HGC--IA)IA) (Hitachi Data Systems, Hitachi Consulting, Information & Telecommunication Systems Group) © 2014 Hitachi, Ltd. All rights reserved. 32 3-3 European Nuclear Power R&D Centre ( to be estab. by Sept. 2014)

Fusion of advanced European technology and Hitachi’s ABWRtechnology To be established with HEU/ERD

European Nuclear Research Centre (ENRC) Safe & highly efficient Introduce U.K. and European advanced nuclear power technology technology Increase recognition of ABWR technology, • Raise plant utilization and train technicians • Reduce radiation exposure Identify local development needs

Joint research Solutions for midmid--toto--longlong term issues U.K. universities

Advanced plant maintenance technology • Reduce waste volume • Lower Vast experience in decommissioning tech. decommissioning costs

HEU: Hitachi Europe Ltd. ERD: European R&D Centre ENRC: European Nuclear Research Centre ABWR: Advanced Boiling Water Reactor © 2014 Hitachi, Ltd. All rights reserved. 33 3-4 Global standardization of simulation-based design environ.

Realize an environment to access Japan’s supercomputer from design & development bases worldwide Raise global design & development efficiency Global use of most advanced facilities Japan US India

Achieving over 100-fold increase in transmission speed with WAN * accelerator and data compression High -speed data transmission High -speed data transmission Full-use of WAN accelerator bandwidth Full-use of WAN accelerator bandwidth Data compression Data compression

India: Data center Japan: Data center USA: Data center

Data Data 4Mbps 100Mbps Data Supercomputer Analytical tool Knowledge Analytical tool / PC cluster Knowledge Analytical tool Knowledge

Hitachi Group HIL/R&D Hitachi Group Hitachi Company A Hitachi Group HAL/R&D Company C Company B Company A Speed: 120 times Speed: 170 times

Promoting local procurement of materials in China to reduce product costs

Hitachi China Materials Innovation Structure for construction machinery Technology Center Established n the School of Materials Science Hitachi Construction Machinery China plant and Engineering of Shanghai Jiao Tong University (April 2013) Quality and characteristics assessment of Chinese Expand materials applications of Development of Chinese material manufacturing processes for Chinese materials and design support FY2013 record Approx. High-pressure fuel pump component Exclusive Hitachi laboratory 20 cases Hitachi Automotive Systems China plant Joint research

SJTU Sch. of Materials Science & Engineering Mass production of pump body at the Guangzhou Plant Advanced analytical technology for Chinese materials

Societal macrotrends Social Innovation Business Paradigm shifting basic research “Distributed/Shared/ Circulatory” society Services Human-centric science Extended free trade zones •Robotics

•Visualization of the brain 活動値 3

1 World economic growth led • 0 Visualization of behavior -1 -2

-3 • -4 by emerging nations Visualization of the body -5 -6

-7 Change in global market structure IT (Cloud) Information sciences Realizing a sustainable society •Quantum information Securing Water •Perpetual storage • resources/Energy/Food Solutions Solutions Artificial intelligence Sophistication of transport •VR communication systems Renewal of aging infrastructure systems Products Frontier physics Actions toward an aging society •Atomic resolution measurement CO 2 reduction •Frontier simulation •Atomic level fabrication Increased recycling of •Energy science resources

Human symbiotic robot: EMIEW Business microscope Pursuing human functions such as Optimizing organizational activity predicting & avoiding danger, flexible based on human behavioral data in communication with humans association with business performance

Optimization Robotics of behavior Name tag sensor node Creating new service

Single cell analysis Visualization Visualization Optical topography Analyze individual cells of the body of the brain To accelerate research in cancer Measurement of brain functions therapy and regenerative medicine 発現量 in daily life 200 活動値 100 3 2

0 0

-1 Expression 遺伝子種類 Gene ID -2 Messenger -3 RNA Complimentary Gene expression -4 Single cell -5 DNA analysis -6 This work is supported in part by Research Program of Innovative Cell -7 Biology by Innovative Technology grant from the MEXT. © 2014 Hitachi, Ltd. All rights reserved. 38 4-3 Information science

Secret data optical transmission **１１ Encryption for the cloud Secret communication technology Search over encrypted data & developed using quantum fluctuation Privacy preserving data analysis 品物1 品物2 品物3 品物4 品物1 品物2 品物3 品物4 購入者1 1780c3 b9e2e81 dcd1ce1 cb9e2e Transmitter Large Small Receiver 購入者1 1780c3 b9e2e81 dcd1ce1 cb9e2e 購入者2 7dcd1c 19b84dd d26e5cd 7f8e91 購入者2 7dcd1c 19b84dd d26e5cd 7f8e91 fluctuation fluctuation 購入者3 0b47f8 dd71a0a 9e2e817 0a43a5 0b47f8 dd71a0a 9e2e817 0a43a5 Random number Time 購入者3 購入者4 0a43a5 06dd723 6e5cd2c Detector 購入者4 0a43a5 06dd723 6e5cd2c Encrypted DB 1 購入者5 513f81 43a587d Encrypted DB 2 generator 購入者5 513f81 43a587d 購入者6 c1a19b e2e8178 c1a19b e2e8178 購入者7 9b84dd 43a587d d2c513f

HASH 購入者6

HASH 購入者8 ff808ae 19b84dd 06dd7a0 Common 購入者7 9b84dd 43a587d d2c513f

Optical electric field Optical ff808ae 19b84dd 06dd7a0 Common key 購入者8 key Random number transmission

Actual Optical fiber Encrypt data Decrypt Searchable Encrypted analysis *2 encryption Data mining over Technology to search data Correct receiver Unauthorized encrypted data receiver while in the encrypted state SiSi--qubitqubit **１１ SemiSemi--perpetualperpetual storage Qubit – an elementary device in quantum computing - Fused silica storage with DVD comparable recording density realized on silicon & durability of a few hundred million years Source Qubit e -e -

Localized on Superposition the left |0> ) (a|0>+b|1>) Drain Fused silica storage Si-qubit fabricated in a *2 DVD comparable Few hundred million year commercial CMOS line recording density durability (Heat resistance Qubit: Quantum bit Electrostatic potential (270MB/inch 2) 1,000 ℃, 2 hrs.

*1 This work was supported in part by the Project for Developing Innovation Systems of the Ministry of Education, Culture, Sports, Science and Technology (MEXT), Japan. *2 The searchable encryption method developed is part of research results from the 2010 project commissioned by the Ministry of Internal Affairs and Communications, for © 2014 Hitachi, Ltd. All rights reserved. 39 “R&D of technology for information security countermeasures in large -scale virtual server environments. 4-4 Frontier physics

Theory & Simulation Atomic resolution holography electron microscope (Grain boundary width 1nm, single side 50nm particle) Observation of electro- magnetic fields with atomic level resolution

Main body of the electron microscope New Materials Spin current control Simulation of • Magnetic materials magnetic flux reversal Hitachi Cambridge Laboratory Environmental technology Frontier measurement • Battery materials

Life sciences • Bio materials 7.4m

SPring8 External partners: RIKEN, Japan Science & Technology Advanced measurement Atomic resolution Agency (JST) using a synchrotron radiation electron holography This research is granted by the Japan Society for the Promotion of facility (Non-destructive microscope Science (JSPS) through the "Funding Program for World-Leading Innovative R&D on Science and Technology (FIRST Program) initiated elemental analysis) by the Council for Science and Technology Policy (CSTP). © 2014 Hitachi, Ltd. All rights reserved. 40 4-5 Open innovation led by overseas R&D centers

Univ. of Birmingham RWTH Aachen Univ. Tsinghua Univ. EERC IBM (HEU/ERD) (HEU/ERD) (HCR&D) (HAL/R&D) (HAL/R&D SIR)

Map data linked chassis control Build-up solution Joint research with Technische ＆ Carriage abnormality portfolio for Oil leading consortium in Universität München Gas business adv.semiconductor detection using (HEU/ERD) acoustics measurement Internet of Things measurement Engine combustion Railway analysis & simulation Semiconductor Green ICT Energy maintenance measurement Automotive

2014/2/28 News release IIT Hyderabad A*STAR/DSI Fudan Univ. Univ. of Campinas (HIL/R&D) (HAS/R&D) (HCR&D) (HISA/Brazil R&D)

Diesel generator (2 units) Identify India’s unique energy needs by analyzing energy demand curve within universities Study Micro-grid Joint project with & preempt future Chinese business market changes HCR&D: Hitachi (China) R&D Corporation Practical verification through partnership through discussion SIR: Semiconductor Innovation Research Project of genome analytics with university EERC: Energy and Environmental Research Center platform with university HAS: Hitachi Asia Ltd. Genome Next-generation Pioneer new DSI: Data Storage Institute analysis cloud markets A*STAR: Agency for Science, Technology and Research HISA: Hitachi South America, Ltda. © 2014 Hitachi, Ltd. All rights reserved. 41 4-6 Innovative R&D through industry-govt.– academia alliance

Promote mid-to-long term research aligned with national science & technology innovation strategy 20092009--20132013 20142014-- (Funding Program for World-Leading FIRST* Innovative R&D on Science and Technology) Comprehensive Strategy on STI (June 2013) High-speed data access Oct. 2013 platform New model Chairman & CEO NAKANISHI Hiroaki assumes released appointed as member of the Council for Science & Principle Investigator: ∼ Masuda Prize - Technology Policy (Nov. 2013 ) Prof. Kitsuregawa Best Ten New (University of Tokyo) Products Awards (Impulsing Paradigm Change ImPACT Program through Disruptive Technologies) Particle beam cancer High risk/high return 5 year project to generate therapy equipment March 2014 disruptive technologies which will transform society. Principle Investigator: Commenced Budget: 55 billion. To be approved: July 2014. Prof. Shirato therapy (Hokkaido University) SIP Program (Strategic Innovation Promotion) Cross ministerial PJ to realize innovations in science Regenerative Medicine March 2014 & technology with CSTP acting as the control tower. Mass culturing (10 issues) Principle Investigator: prototype Nikkan Kogyo Prof. Okano Monodzukuri (Tokyo Women’s Medical Univ.) Renkei Prize COI Program (Center of Innovation) Atomic resolution electron March 2014 holography microscope Completed Program to realize revolutionary innovations which 1.2MeV Principle Investigator: cannot be achieved by industry alone through Dr. Osakabe Electron industry-academia collaboration; removing barriers (Hitachi Central Research Lab.) microscope in field and organization. 12 sites appointed. *A Cabinet Office project to support 30 researchers in becoming world leaders in their fields by granting 1.5-6 billion JPY for 5-year projects (2009-2013) © 2014 Hitachi, Ltd. All rights reserved. 42 5. Summary

R&D contributing to the global growth of Social Innovation Business

1. Leading Social Innovation Business Transform through a customer-driven R&D model Expand service business Enhance world No. 1 product business 2. Global R&D Build-up a global R&D network Build-up regional value-chains Global standardization of work 3. Strategic steps for the future

Promote paradigm-shifting basic research Development of innovative technology through open innovation

2014 R&D strategy R&D: A key driver in Hitachi’s global growth Solution-oriented R&D for Hitachi Global Business

10 April 2014 Keiji KOJIMA, Ph.D. Vice President & Executive Officer Chief Technology Officer President & CEO, Research & Development Group Hitachi, Ltd.