Hitachi, Ltd. (6501) Earnings Call Transcript & Summary

It's time. So we would now like to start the meeting for making Hitachi High Technologies a wholly owned subsidiary. The presenters today are Hitachi, Ltd. Executive Vice President and Executive Officer, Keiji Kojima; Senior Vice President and Executive Officer, CSO, Yoshihiko Kawamura. So first of all, Kojima would like to explain the outline of this deal.

Ladies and gentlemen, thank you very much for your attendance today. From my side, I would like to discuss Hitachi making Hitachi High-Technologies into a wholly owned subsidiary. Next slide, please. This is the key message I would like to deliver today. IT, mobility, energy, industry, smart life, there are 5 sectors, 5 solutions that we're trying to provide to offer value, increase value in society. And in the 2021 medium-term management plan, we are to make an investment for growth amounting to JPY 2 trillion to JPY 2.5 trillion, and we're turning Hitachi High-Technologies into 100% subsidiary. This is going to be an important investment. We would like to strengthen measurement and analysis platform so that we can drive our Lumada business. And by so doing, we would like to push for digital transformation and achieve growth for the overall group. That is the key message today. Moving on to Page 2. Last week, I attended the World Economic Forum in Davos. Executives are very much aware of social values and environmental values on top of the economic values that's become a major trend today. Moving on to the next page. We are implementing social innovation business to achieve exactly that, digital space or cyberspace and the real physical space. We offer IT times OT times product in both spaces. We have the track record and experience that we would like to leverage to help achieve social innovation in society. That is our fervent wish. Moving on to the next page. In the real space -- in the physical space, we collect various data, analyze that in the cyber space and feedback the results to the physical space. That is the overall thinking. In many industries, as digitization persists, collecting, measuring and analyzing large volumes of data is going to be crucial as a capability. And we're turning Hitachi High-Technologies into a wholly owned subsidiary, and that is because of what I just said. We would like to incorporate Hitachi Technologies capabilities into Hitachi. Page 5 gives 2021 medium-term management plan and the strategic rationale of this move this time as part of the plan. As I said earlier, the measurement and analytical capabilities of High-Technologies are to be leveraged to promote social innovation business and accelerate growth. That's our thinking. So establishing the platform for measurement and analysis, that's what I would like to elaborate on later. With that, we would like to strengthen Lumada business and health care and industry. Hitachi High-Technologies applications for measurement and analysis can be offered, and we would like to pursue business transformation and accelerate growth, leveraging these capabilities. Next page. So turning High-Technologies into 100% subsidiaries, with that, what kind of growth opportunity are we looking at? They are twofold. One is in the area of health care analytics. In this area, we would like to make an entry. There are lots of TAM or market opportunities. So this is one area. Now another is related to mobility and industry areas related to mobility and industry. Based on measurement and analytics capabilities, we would like to enhance various social systems and bring about greater productivity in various industrial systems. As you can see from the pictures on the page, Doctor Yellow in railway, there's a system to measure rails, and it's Hitachi High-Technologies who provide such systems for measurement for the railway business. And I believe that this could play a greater role, and we would like to take this opportunity to spur further growth. Page 7. So with High-Technologies being 100% subsidiaries, what can be achieved? There are 3 things. One, as I'm repeating many times, we are to strengthen Lumada. So integrating High-Technologies measurement and analysis systems and Hitachi digital technologies, such as AI and data analytics, we can achieve fusion in combination between the 2 to strengthen the strategy for Lumada. Second is that this will lead to strengthening of health care business. The diagnostic imaging business of ours is to -- sold to Fujifilm as you know. What to do with our health care business after that, you may ask. And we have in vitro diagnostic business as a result of co-creation with Roche. We have a top market share. And this business will be at the core of our health care business. In June last year, I talked about this in Hitachi's IR day. So we would like to implement the specifics of that strategy. Data from in vitro diagnostics can be leveraged to reinforce our health care business. And third, front human resources and they are those who can put together projects in different localities, and Hitachi High-Technologies have globally competent procurement capability. So a global front business and procurement capabilities can be brought to bear to add to our fundamental capabilities to drive competitiveness. Now let me explain this one by one. So please turn to Page 8. This is the strengthening of Lumada strategy, and I have explained the way we are thinking about this a few times. It's simple. So the -- in the medical and semiconductor area and in the industrial area, we will enhance our measurement and analysis technology. There will be many diagnostic data. So Lumada will analyze that using AI and analytics to create new insights and more specifically, to make the diagnostics more accurate and improve the efficiency. We can improve the QoL, and in the semiconductor and industrial area, the quality can be improved. Development period can be shortened so the customers -- clients, customers, productivity, profit can improve. So this is -- it connects to Lumada and measurement and analysis technology. That's the significance. Page 9 shows the health care businesses, what business opportunities we are anticipating. So health care business. Hitachi High-Technologies will become a wholly owned subsidiary, and once that is done, this in vitro diagnostics will be the core. So the data coming out of that will be the test data of the in vitro diagnostics. So we call this LAS, laboratory automation system. There's the laboratory automation market. So we will assess -- access that -- assess that. For that existing customers like Roche, we will collaborate with them to achieve -- utilize data and automate the laboratory system. Next, using this in vitro diagnostics data and add more data, PHM, population health management market can be addressed. This is an emerging market. We can approach this market. PHM, as you may know, finding the disease, it's not just finding and treating the disease. The day-to-day life and in vitro diagnostics data are utilized more to improve the health care efficiency and improve QoL. So post-treatment can be made more efficient, effective. In -- value-based medicine is now the direction in North America, and so we think this market will be the first to take off. In Japan, we have the regional comprehensive care and similar markets. So in each region, we will see these movements. We think this market will be large, so we want to address these markets. So Hitachi High-Tech's in vitro diagnostics and our IT team can collaborate effectively, including M&A, to expand this business. And one more point is the regenerative medicine, iPS, the auto-cultivation facility is already injected by Hitachi. A high-tech microscope and other technologies will be utilized to test the cell to reduce the cells to become cancerous. So this culture and test, this value chain will be created and cultivate this market. We think this will be the growth opportunity for us in health care business. Next, Page 10, please. This is the -- about the global procurement functions. Hitachi High-Tech has great capability, one of which is the deal -- securing deal originating capabilities. So we will utilize that human resource to the maximum. Social innovation business will be expanded globally. This is a big mission for us. So the structure, talents are now being enhanced, and we think this team will be very useful. So this is one key point. Another is the procurement capability. Going forward, we need to enhance our procurement capability and have more cost capability. So -- and Hitachi High-Tech's procurement functions need to work hand in hand as to see the global procurement function in each region and P2P, the enhancement of efficiency and in some cases, outsource. By doing these 2, we want to improve our efficiency. We've been doing this through smart transformation project, but we will do this even further to improve the efficiency. Next, Page 11, please. So this is the overview of the transaction towards the wholly owned subsidiary. You are probably aware of this through a press release, so I will not go into detail, so JPY 8,000 per share tender offer price. Including premium, we think there will be participation tender. And Page 12, please. This is the rationale from the financial strategy. The positioning of this investment is the part of JPY 2 trillion to JPY 2.5 trillion investment for growth set out in 2021 midterm management plan. So we will utilize the cash on hand and borrowings for the growth, including this transaction. And financial stability will be a D/E ratio of 0.5x. We may temporarily exceed, but this will be the level that we will maintain. And lastly, Page 13 shows the schedule of the transaction. Today, we are announcing this tender offer. And from the 17th of this month -- 17th of February, we will commence the tender offer period. And 34 business days later, April 6 is the end of offer period, and once this materializes, then we will squeeze out and make the High-Technologies a wholly owned subsidiary. We think the day 1 will be around July. That concludes my explanation. Thank you.

Let's move on to questions and answers. So our staff will bring a microphone. Please state your name and affiliation before asking questions. So any questions? I see a hand in the front row.

[Question] I have 3 main questions. The first one is as follows: synergies with Lumada. You're talking about health care business. So medical business, preventive medicine for individuals, I'm sure there's a lot of demand. When it comes to semiconductor business and synergies thereof, it will come later, I think. But how will it manifest?

[Answer] Semiconductor business, in the value chain for that, High-Technologies have 2 products. One is CDM testing equipment; and second, Etcher, which comes earlier in the process. They have 2 products in the value chain. And the business model, as you know, is based on thorough co-creation, TSMC and Intel, together with them, we create a laboratory, and thoroughly, we would conduct data analysis for the design to come. So that's the kind of the business model. Given that, in the semiconductor business as well, we will pursue co-creations with customers and data analysis. And there, we expect a lot of synergies to be generated. In the case of CD-SEM, microscopic measurement technology is key. Inclusive of that, as part of measurement and analysis platform, I think semiconductor will be good application, and profitability is also high. In the semiconductor industry, I think the industry is assessed better and volatility is coming down. So I think we will do quite well in that industry.

[Question] So semiconductor is growing quite well in this earnings reporting, but the demand fluctuate quite a bit. And I think Higashihara-san is saying that Hitachi should focus on something that's stabler rather than something with greater volatility. I think one thinking is to call the business out. But as Kojima-san said, because in the semiconductor business, there's a lot of synergy to be expected from Lumada, so you will keep it, and you think that's the right decision.

[Answer] Well, for CD-SEM and nano process for both, while semiconductor is still making progress, it's now based on 3D technology. It's becoming finer and finer. Semiconductor is not yet a commodity business. It's becoming more of a stock-based business. Volatility is coming down, and that is why the industry overall is rated higher by investors. So immediately, we have no plan to do anything special. Not just semiconductor but all the businesses for Hitachi, we look at our portfolio all the time and try to optimize it as much as we can. That's our basic idea. So I have no intention of saying that semiconductor is a second area that we will not touch.

[Question] And lastly, I would like to ask about human resources. You said that you will utilize human resources from the front business at High-Technologies. Is that separate from utilization of human resources for Lumada?

[Answer] Well, front business people, there's insufficiency -- deficiency in 2 areas. One is the kind of people who can thoroughly engage with customers, identify their challenges and problems and offer solutions. So we need that front people capability, so communication capability. And second is utilizing digital technology. How can we come up with solutions? So solution delivery type of capability and people. We need 2 groups of people. In the case of High-Technologies, I think they are strong in the first type of people. And for the second type of people, globally, we're thinking what to do. We are now formulating various steps to reinforce such [ business ].

[Question] So you're going to utilize High-Technologies' people to offer solutions. So it's separate from the Lumada delivery capability. But Lumada delivery capability is going to be separately developed?

[Answer] Yes, that is the case.

So the gentleman in the back, please.

[Question] I have 2 questions. First is in the current -- in the previous medium-term management plan period, you're thinking -- or the way of using money was, if you're investing in something, you thought you might as well use money for something that does not exist in the group. And the -- you have the control over the subsidiaries, so [ many ] collaboration is possible. But this time, you are making Hitachi High-Technologies a wholly owned subsidiary. So instead of taking in some outside external capability, you are making this company that you already have control over a wholly owned subsidiary. So did management's thinking change? That's my first question.

[Answer] I think the biggest force of -- is speed. In the digital era, the changes around the world is accelerating. So in Hitachi High-Technologies, they have Board meetings and many resolutions are made, and we have another different organization. And if we have this structure, can we win in the global competition? I don't think so. So not being so engaged in digital but for the lack of better word, if we can use time, then we wouldn't have taken this option. But in this digital era, we have to combine many things with digital. If we are promoting business under this pressure, simply put, things have to be reported to me to keep up with the speed. So we are changing the way of thinking. So we are now thinking this wholly owned subsidiary is also necessary.

[Question] My second question, this may not be decided yet, so if you could just give me a general direction. The semiconductor area, in your existing segment, it is in the industry segment. Will it remain in the industry segment? Or not? So after the integration, health care will be in smart life, and railway will be in mobility. So as one vertical, will semiconductor remain in the industry? Or just a general direction, please.

[Answer] After the integration, the structure -- the management structure has not been fully decided. It's not finalized. So if I could share with you my view at this point. If Hitachi High-Technologies becomes a wholly owned subsidiary, then it will be in Smart Life segment. Then railway, the measurement equipment or the industrial measurement equipment will -- there are many other collaborations. So it will be done as one of that from life sector because the technology development and the foundational part is the R&D for measurement and analysis facility, and I will supervise that. And based on that, we will work with various sectors and the headquarter. That's my thinking.

Any other questions?

[Question] I have 3 questions I would like to ask. The first question to Kojima-san. This time, you're making this acquisition. And when did you convey your intention to acquire them to Hitachi High-Technologies? Hitachi Technologies is going to be a minority shareholder, 48% -- is minority shareholder, 48%. And are you expecting support from other minority shareholders? Or will you embark on [ hospital ] TOB if that's going to be necessary? What's your thinking behind that?

[Answer] Kawamura speaking. When was it when we communicated our intention to acquire High-Technologies -- to acquire them about a year ago? And since a year ago, we continued negotiation. And in recent times, we compiled the document of agreement. So it was a year ago when we first communicated.

[Question] In recent times, you signed the document, you said. When was that?

[Answer] After January 1. Into New Year, we set out the conditions and put together documents, so in January.

[Question] If it happened in January, it's just a short while ago. I don't think we have had time to enlist cooperation or support from other shareholders. Is there any concern that some of the shareholders may oppose to this?

Well -- [Answer] of course, Hitachi High-Technologies will go through their BOD, and a third-party committee is put together to go through the necessary procedures. So certain procedures are followed, so in that regard, no such concern exists.

[Question] The benefits of turning High-Technologies into a wholly owned subsidiary but semiconductor business is not mentioned as part of the benefit. 2001, when High-Technologies was established, a semiconductor business is integrated, so -- and then it was carved out and so forth. And so I still don't understand why you're trying to integrate carve out, integrate or to sell it, perhaps in the future down the road, if there's an opportunity. What's your thinking on that?

[Answer] Sorry for repeating what I said already. 2001, we put out our measurement business, semiconductor, in vitro business, in vitro medical business. These were applications that were offered continuously. And this was carved out. And as I may repeat again, what's different from 2001 is that we now live in a digitized world. So digital analysis and measurement technologies, the 2 can be put together. Synergies can be derived. That's different from 2001. So what we're trying to do is to a promote Lumada business, and the business that High-Technologies has is going to be crucial in generating data necessary for Lumada business.

[Question] [ ExSCOPE ] as data platform they have and Lumada's business, how are the 2 going to collaborate with each other or coexist? If it's going to be part of Lumada, will that expand to Lumada's business? And would you think that, that's effective? Or is that still up for discussion in the future?

[Answer] You may know, but I was one of the designers or architects behind Lumada. I was one of the people who came out with the architecture for Lumada. Basically, we're not going to integrate into Lumada. The platform at the bottom of data, there are so many different kinds in the world. We have to be able to connect them. Once you try to align ourself to one single platform, then you will be excluding a lot of customers who are not able to do so. Well, there are many Hitachi group companies who have different technologies and offerings, and they all have to be leveraged in an agile manner. So High-Technologies may use something to be successful, and that will be turned into a use case so that it can be applied across the board, across different subsidiaries and businesses. And that is how the design is put together. We don't mean that everyone should be aligned toward Lumada. Well, use cases are established. Their values are fed into Lumada. That's how it's done.

[So question.] Lumada is close to IT, and the businesses done by different subsidiaries are based on OT, local expertise, and they are to be incorporated into Lumada. Is that the thinking?

[Answer] Yes. What is close to the physical space, there are different technologies and offerings from different businesses, and you're able to get data out of that. And by leveraging the data from different businesses, Lumada can function.

[Question] Well, thank you. Understood. Ever since last year's announcement, Hitachi High-Technologies' equity price has gone up. Market cap is over JPY 1 trillion. And because of that, have you decided to make the acquisition earlier?

[Answer] How shall I put it? We want to grow our business. We make investments into business. And we could -- or investment. That's the kind of player we are. So we're not overly conscious of the equity price. If we can get return out of the investment that we made, we shall be successful. We're not necessarily -- adapt that thinking along those lines. That's not necessarily our main thinking or aim. For Lumada strategy, what is necessary, we think, so we take that kind of strategic view. That's our basic approach. I may not be answering your question, but that's our idea.

The gentleman in blue shirt.

[Question] I have 3 questions. First, Page 9, health care business enhancement. You mentioned you are going to address the last market -- acquisition of last market. So this is a layman's thinking, but laboratory automation system, I think it will have a good impact. But why have you not been addressing this so far? And by using Hitachi Lumada, what gives you the confidence to be able to address this market going forward? That's my first question.

[Answer] Both High-Technologies and Roche are aggressively addressing this market. And right now, the problem with the laboratory robot is there are many equipments and the specimen have to move around. Samples have to move around. And the interface is different. Things that you need to do is different. So High-Tech and Roche's basic strategy is others, they course the in vitro diagnostic platform. We want to integrate it into one, and the specimen samples and everything will be put in there. And in the integrated fashion, we want to realize this automation. And in order to do that, the software needs to connect and data need to be analyzed. We need this whole set. So software data analysis platform will be sizable. So both for -- for both Roche and High-Tech, digital, IT, software, they do not have very strong skills yet, so Hitachi Lumada want to collaborate and make this great LAS system. So that's what we want to address.

And as a follow-up, Roche, have you heard anything from Roche?

I cannot be too clear about that. But in the collaboration with Roche, we are taking these actions. We've been working with Roche for over 40 years, and R&D and other activities, we are collaborating very strongly. So we want to work together.

[Question] My second question is your thinking on business portfolio. President Higashihara said he wants to generate JPY 1 trillion business in health care. Health care is still small. So how do you think of growing the business into a JPY 1 trillion business, if you could explain again?

[Answer] The product-related business and solution-related business have to be considered separately. Product-related business, the volume play has to be at least JPY 1 trillion in size. Otherwise, we cannot survive in this world because there's commoditization, and so we have to compete with certain level of volume. So that's the story. On the other hand, health care and others, in vitro diagnostics, we have the key equipment. If we -- combining this to a vertical solution, it's combining them to create the vertical solution. So it's not just about volume in this area. So JPY 100 billion to JPY 400 billion, JPY 500 billion with growth potentiality, with high profitability. That's what we want to aim for in the health care business.

[Question] I understand. And last question, I'm sorry, I'm repetitive. But in 2017, Hitachi Kokusai was taken out, deconsolidated. Now your view on the semiconductor production equipment market, Kojima-san, how have you changed your views?

[Answer] This world of semiconductor is becoming more connected. We are thinking of this as an entire value chain now. So Hitachi High-Technologies' strategy, as I understand, is the next-generation semiconductor process. The production manufacturing etchers are now first invited in, and then to make that, we think of how the testing has to take place. So for Hitachi High-Technologies, Etcher is -- takes the customer demand and identify what you need to do. So that's the value chain model. And use that in CD-SEM. And the data is connected in the value chain. And Mr. -- President Aoki said the edge, the border, which becomes -- the edgy part becomes the growth potentiality. So from the stand-alone equipment, I think we're moving in that direction, and we hope to utilize this movement. That's the -- what High-Tech and we are thinking of.

Any other questions? Please go ahead.

[Question] Just one question. I would like to ask about the acquisition price. Earlier, Kawamura-san said that, about a year ago, you started contacting High-Technologies. I think back then, the equity price of High-Technologies was JPY 4,000. This time, you're saying that the acquisition price is JPY 8,000. Very high and yet, you're embarking on this acquisition to turn High-Technologies into a wholly owned subsidiary. Do you think the price is appropriate? How do you see that? I would like your view. And another point is, a year ago, you must have had an idea as to how much you were prepared to pay. And actually, the acquisition price is double what it was a year ago. And I'm sure the business plan must have changed. Even with a higher acquisition price, I think you thought that it justifies the acquisition, and you must have come up with a different business plan to justify the TOB. So the profit or the synergies that you are envisioning today as opposed to a year ago, what would that be?

[Answer] So a year ago, their equity price was JPY 4,000, and it's doubled today. What's our assessment on that, I believe that's what you're asking. We pursue fair value naturally. A year ago, we looked at the equity price. That was the starting point. And 3 methodologies, we confirmed the fair value: One is the traditional cash-flow-based valuation, translating that into present value; and second, based on equity price, equity price fluctuates. In terms of the equity price, what is the most appropriate acquisition price? Third is comparison of comps, comparables in the industry. So through these 3 methodologies, we had a number of discussions. We calculated fair value many times, and ultimately decided on the acquisition price we're announcing today. So considering all that work done in the past year, we have come up with this fair value, and I believe the price today works. And of course, things have changed compared to a year ago, and we have decided on this price we are announcing today.

Just to supplement what he said. DCF included, we looked at various methodologies. We asked for advice from FA. Not that valuation has risen all that much. It's true that in this industry, multiples have risen. But if you are based on DCF, we look at High-Technologies' medium-term business plan. What is the certainty, probability? We calculate based on that. And that hasn't changed all that much. So the acquisition price is well within the fair value range, and that was the understanding of the FA as well. I hope you'll understand.

[Question] Understood. So according to what you explained, semiconductor equipment business, because volatility is now different, it's done, you have made a decision to expand this business as Hitachi. So you are to perform TOB at the price of JPY 8,000. And after a while, you may -- was it changed your mind saying that semiconductor business is volatile, and you would want to carve this business out or sell it? And in that case, the price would be much lower. So are you sure that you want to expand the semiconductor business going forward?

[Answer] I'm sorry for repeating, but Etcher and CD-SEM business, these are the 2 pillars of the business model for High-Technologies from how I see it. And it's the electronic microscope technology for measurement, that's the basis of this. That's how we look at their business. And what kind of synergies can be derived in combination with Lumada? What is the volatility? We made an overall judgment. And as a result, we made a decision to turn this business into a wholly owned subsidiary.

[Question] So enhancement of this health care business. So cyber, physical system, I think it's a data-driven world. So how you can develop this business, especially from monetization point of view? So in areas related to smart city, I think you need patients here. So what time line do you have in mind? And which order do you want to expand this business and monetize? For example, initially, you will monetize by maintenance and then automation and then system of system. So if there are key words that you could share with us, I'd appreciate it.

[Answer] Thank you very much. So starting with the time line. So we have steps 1, 2 and 3. We will start the investment at the same time. And when will the harvesting time phase be? Step 1, from 2021 medium-term management plan, I think we can start harvesting. And step 2, in North America, we are starting to see the emerging start-ups, but it will be our 2024 medium-term management plan. This is when we are thinking of harvesting the fruit. And step 3, this will mainly be the laboratory initially, and we are delivering to the pharmaceutical companies and iPS cell and cell, the cancer and cell culture. If we think of all these area, it will be the next medium-term management plan, 2027. So to repeat myself, the investment will be simultaneous, but the harvesting phase will be 3 years apart from each other.

[Question] Step 2, where -- which area do you think you can monetize first?

[Answer] Step 2, in [ PAT ] market, the areas that are starting to generate profit is the insurance companies. The insurance is paid to the patients in the hospitals. So based on value-based medicine, this system can be optimized. And we receive money from the insurance companies for that. So that's what we have in mind. I think that is the one typical business model. There's still some inefficiencies. The money is being paid, but for the money that is being paid, the analytics can optimize the current system more significantly. And this will be a win-win for the health care system and the patients and for related parties. So I think that will be the first monetization point.

[Question] In this health care business, the people who can promote the digital transformation, how much people do you have in OT and IT? Are those who have knowledge on the front line? Compared to other business areas, maybe you have fewer people in health care, and if that is the case, you may need M&As.

[Answer] This has some regional differences, including overseas markets. And this PHM market is first taking off in North America, so we need some inorganic measures. I cannot talk about specifics now, but that is what we will do in the future.

Any other questions? I see hand in the back.

[Question] I have one question regarding semiconductor manufacturing equipment. With the lineup that you mentioned earlier, can synergies with Lumada really be expected? Semiconductor manufacturing equipment is becoming finer and finer and interaction between processes are becoming crucial. With the lineup of Hitachi, do you think that you can actually derive synergies? Or do you think you need to complement, strengthen that?

[Answer] That's a wonderful question. Well, I have not done enough homework, and that is something that we need to discuss further. We really have to listen well to customers. Intel, TCMC, we have joint laboratories that we run with them. So we need to look at what's happening there to come up with a strategy to strengthen that. That becomes crucial.

[Question] I have 2 questions. In health care, the in vitro diagnostics and the particle therapy systems will be at the core. The x-ray -- Medical has x-ray, but you sell that and you are choosing particle therapy systems. So not x-ray but choosing particle therapy systems. You can expect synergy? What was the background that led to this decision?

[Answer] So your question is about x-ray, the image capturing equipment?

Yes. Well, Hitachi Medical had x-ray analysis equipment. So you sold that out -- off and you chose particle beam therapy, PBT, as a source of synergy. So you decided that this combination is promising. What led to that decision?

[Answer] So there's the -- for x-ray, there's the imaging equipment to judge whether it's a lung cancer or not. And Hitachi Medical, this imaging, it was the imaging equipment. And PBT, this is a treatment equipment, so cancer cell is targeted and killed. So that's the PBT treatment. So what we're thinking of is that this PBT has low invasiveness. It's minimally invasive. This is rather detailed, but PBT, the cancer -- the exact point of cancer, the energy can be released to exactly on the cancer position, so it does not impact the channel in the middle. So that's why PBT is drawing attention. It does not impact the other organs, other tissue. It can target the cancer itself. That's the advantage. And there are many patients we can save with that. And we -- from social value point of view, we want this minimally invasive treatment. So people can take 2 or 3 days off for treatment while continuing working and target the cancer and kill the cancer and continue working. So this will dramatically impact or contribute to the QoL of people. We think this is crucial. So that's why particle beam therapy is what we are trying to invest and enhance, and we purchased Mitsubishi's business, and we are now #2. We're coming close to world's #1 business. The x-ray imaging equipment is a commodity. So if we do this more, we need to create more synergy and image -- imaging. So Fujifilm is very strong in the diagnostic imaging, and so we thought that the business can grow better if we leave it in their hands.

[Question] I understand PBT well. So my question is x-ray is commoditizing, so global #1 business model, in pursuing this business model, you thought that combining it with PBT is -- has more sense, makes more sense to grow in the future.

[Answer] Yes. I may have not answered directly, but yes, that's what I think.

[Question] In Hitachi, Ltd., you are taking in Hitachi High-Technologies. You already have a close relationship, a very long-lasting relationship. So by making it a wholly owned subsidiary, you can achieve high growth rate and high profitability, you said at the outset. So by taking in Hitachi High-Technologies, what kind of growth and what kind of profit margin can we expect? We will be watching this business in Hitachi. So how do you think it will change the growth rate and profit margin? What level do you anticipate? And would you disclose this to external parties like ourselves?

[Answer] The growth opportunities, if we combine this with IT and digital, there will be more growth opportunities as I mentioned earlier. So how can this be made visible to you? I will see how I can do that because it's an important point.

Any other questions?

[Question] So this time, you are turning High-Technologies into a wholly owned subsidiary. You talked about synergies. But what is the quantific effect? When will that realize? If you could comment more specifically to the extent that you can.

[Answer] That's exactly the question it was posed to me by the President. We're now implementing the 2021 medium management plan. In June, we're going to have another Hitachi IR Day. The last time we had that event, I gave a preview as to what's going to happen. And this time, given that this deal is going to be completed, I would like to share the outlook of what the synergies are going to be. To the extent that I can, I would like to say, what I can. This question, at this moment, it's difficult to share details, correct.

My second question, you talked about utilizing front line people and collaborating with Hitachi's procurement division. So the consumer business, given Hitachi's profitabilities, target synergies with Lumada, I'm not really sure how it will mesh with what you're proposing in terms of Lumada.

Well, [Answer] the trading capabilities, it could mean a lot. For example, there's this procurement capability to source materials as part of industry solutions. Half of that is engaged in that capability.

So that can be combined with Hitachi's procurement capability or Hitachi's procurement function?

I think we need to sort out the capabilities and divisions from an overall point of view. Well, as Hitachi Technologies are saying, in areas where profitability cannot be expected, they're planning to withdraw. So we have to sort out the businesses so that we can keep the businesses that meet the profitability criteria for Hitachi.

So we would like to take one last question.

[Question] I have one question. Lumada, you are the father of Lumada, so I want to ask you this question. Lumada, there are areas that you will not know until you actually try. So sorting of the business, so you are aiming for synergy in Smart Life. And if it doesn't work out, then you will carve out without any sanctuary. Hitachi Logistics is now like that. So you carved out, but it turns out that it uses Lumada. So as there was a press release, will you be flexible in taking it in again? Is that the way you think about the businesses?

[Answer] Yes, you're exactly right. The situation is changing very rapidly. On the other hand, including R&D, the technology is changing. So if we do something too quickly, if we become too haste, we will not be too successful. So we have to be flexible. So we're not fixated on the idea sticking with the portfolio. I would love to do that, but the situation does not allow me to do that. So we want to have a good dialogue with the capital markets and come up with the optimal direction and take concrete measures.

With that, we would like to close today's briefing. Thank you very much.

Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]