Global Business Expansion

Hitachi Chemical’s Value Creation Process

Strengthening the functions of regional headquartersHitachi Chemical assigns the role of regional headquarters to core Group companies in priority regions to establish an effi cient regional management and business operation structure. This allows us to pursue marketing strategies that respond to demand trends in each region and en-gage in R&D, manufacturing, and sales activities that conform to local demand. Hitachi Chemical centralized management and strengthened governance of Group companies in China by establishing Hitachi Chemical (China) Co., Ltd. as the regional headquarters for China in fi scal year 2011. This put in place a structure for fast decision-making led by local staff at business sites closest

to  customers and strengthening governance. Hitachi Chemical also launched regional headquarters in the U.S. and Thailand in April 2015.

Introducing the global standard backbone IT system (AX)The Hitachi Chemical Group introduced its global standard backbone IT system (AX) to integrate the backbone IT systems of all overseas Group companies and manage in-formation required for global management in a fast and accurate manner. AX covers sales, purchasing, and pro-duction control and is designed to improve effi ciency of core business at each business site in combination with the Group’s accounting system. Using reference system for performance information of each site and basic informa-tion in the chemical substance management system, AX also enable us to standardize business operations to a high level.

Image of Global Standard Backbone IT System (AX)

Regional headquarters in Thailand

Sales Purchasing Inventorycontrol

Productionplanning

Productioncontrol

Qualitycontrol

AX Performancemanagement system

Chemicalsubstance management system

Accounting system (IFRS compliant)

Developments in Fiscal Year 2014

Basic ApproachOur overseas business expansion policy set out in our fi s-cal years 2013–2015 Medium-term Management Plan calls for maintaining and improving our profi tability in high-end products in the high functional materials busi-ness through product differentiation by leveraging our material engineering and sales of products overseas. In the automotive business, our goal is to improve profi tabil-ity, expand overseas sales channels, and accelerate devel-opment of next-generation products by increasing over-seas production to become a global supplier. In the storage devices business, which we position as a future

mainstay, we aim to speed up overseas growth and estab-lish a solid business base to propel growth in earnest in fi scal year 2016 and beyond. We plan to strengthen our production, marketing, and sales structures to capture demand in emerging markets and grasp opportunities for market expansion. We also seek to become a global company whose management is controlled by a group-wide governance structure. To this end we run compliance education pro-grams and audits as well as strengthening risk manage-ment that takes local conditions into consideration.

What Makes Hitachi Chemical Different?Over the past several years Hitachi Chemical has been building a structures to allow it to grab a share of the globally expanding demand in market segments it serves. It has been strategically investing in capital equipment, mainly to boost production capacity, with focus on

emerging economies. In fi scal year 2014, overseas sales accounted for 52.8% of net sales. Overseas production’s share of net sales also rose, reaching 33.1%. (See KPI graphs opposite.)

Materiality Report Business

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Annual Report 2015

Hitachi Chemical’s Value Creation Process

Initiatives for Strengthening Global Business

JapanHitachi Chemical Co., Ltd.Consolidated subsidiaries: 19 companies

The AmericasConsolidated subsidiaries: 8 companies

ASEAN and IndiaConsolidated subsidiaries:13 companies

Europe, AfricaConsolidated subsidiaries: 7 companies

ChinaConsolidated subsidiaries: 26 companies

Pioneering South African marketExpatriate personnel based in South Africa to pioneer local market in high quality resins to make a point of difference

Regional headquarters company launched in ThailandIntegrated four consolidated subsidiaries to improve customer service and operational efficiency

CSB Battery Co., Ltd. becomes consolidated subsidiaryTo accelerate global expansion of storage device business by maximizing synergies with the Hitachi Chemical Group’s superior lead storage battery technology

Regional headquarters company launched in U.S.To grow storage device market in addition to electronic materials, automotive components, and diagnostic reagents businesses

Number of the companies includes newly launched regional headquarters as of April 2015.

0

100

200

300

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 20142013 (FY)

Asia

181.5181.5181.5 171.6171.6171.6 188.6188.6188.6 215.6215.6215.6

34.6 29.128.3

34.1

239.6239.6239.6

42.5

43.4

216.1200.7

216.9

249.7282.1

215.6215.6215.6

34.1

239.6239.6239.6

42.5249.7282.142.4

46.750.6 52.8 51.1

53.7

(Billions of yen) (%)

Other Overseas share of net sales (revenue)*

JGAAP IFRS

400

0

10.0

20.0

30.0

2010 2011 2012 2013 2014 20142013 (FY)

40.0

16.9

18.7

23.0

28.4

33.1

28.7

33.6

(%)

JGAAP IFRS

*Terms in parentheses are used for IFRS.

KPI Overseas Net Sales (Revenue)*/Overseas Share of Net Sales (Revenue)*

KPI Overseas Productions’ Share of Net Sales (Revenue)*

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Annual Report 2015