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

The time has come to start the Hitachi Investor Day 2021. Thank you very much for attending this meeting despite your busy schedules. And today's meeting will comprise 2 parts. First of all, from 10:20 to 12:25 will be the a.m. session, the morning session, and the afternoon session will be from 10 past 1 to 5:00. And please refer to the detailed time schedule that is being distributed to you beforehand. The materials used for this meeting will be available on the IR site of Hitachi Limited as well as our news release site. In the Japanese channel, you can select your language of choice. And to listen to the English translation, please use the translation button on the bottom side of the Zoom screen. Depending on the device, the location will differ. But in the case of the PC, it is located below on the Zoom screen. Without further ado, we would like to start the Hitachi Investor Day and receive the CEO remarks from Toshiaki Higashihara, Executive Chairman and President and CEO. Higashihara-san, please.

Good morning, everyone. Thank you very much for attending the Hitachi Investor Day 2021. On the 28th of April, we had the meeting on the 2021 mid-term management plan. And after that, I had the opportunity to engage in dialogue with the investors in the United States as well as Europe. I believe that the dialogue is important for areas in management as well as environment, human resource management and diversity. I appreciate the dialogue I'm having with institutional investors and I shall continue to engage in dialogue going forward. I have also one point to report. Yesterday, it was announced, at the TSE as well as METI, DX names 2021. In this category, Hitachi was awarded #1 position because Lumada and digital transformation was highly evaluated. And in addition, we were able to promote structural reform based on Lumada at the core. We shall continue these efforts going forward. And in the global market, the social innovation, digital transformation is what Hitachi will continue to be focused upon. Next, I'd like to look back on our activities so far. In the 2021 mid-term management period, the area of focus in the -- 5 areas that we have been focused on: IT, industry, mobility, energy and life -- smart life. In each 5 areas, we have made efforts in addition to the realignment of the subsidiaries. And in terms of 2021 revenue budget, that has been impacted by the COVID-19. But 8% operating profit margin has been achieved for the 5 sectors. So in this year, cost restructuring will be implemented in the [ swiftest ] manner so that we will be able to enhance our earning power. In addition, the social innovation business is an area where we are aspiring to become a global leader. Therefore, we have been dealing with many assets. They are -- automation is a good case in point. ABB Power Grids is also another example. We have also announced the GlobalLogic acquisition recently. With these acquisitions, we now have a strong framework to become global leaders. By utilizing these assets going forward, a stronger Hitachi will be established going forward. With respect to Lumada, on the other hand, in 2016, we launched Lumada. It was customer focused in the beginning to resolve the problems on the part of the customers. For example, the operation of the plants could be one client to minimize the operation time in the plant as well as enhancing quality assurance. These were the pain points of the customers. By sharing these challenges with the customers, we worked together in a collaborative creation to generate solutions. In pursuing collaborative creation, we need significant resources. As a framework, we have established in the form of an experience, by sharing challenges with the customers and to create solutions together with the customers. And when it is effective, we will establish that on Lumada. It is an end-to-end solution that we have been able to develop. This is what we mean by customer-based business model. But looking at the past several years, environmental issues and supply chain disruption because of disasters and resilience issues have come to the fore. COVID-19 is another good case in point. Safe and security and health care are social infrastructures that are before us in a significant manner. So increasingly, what we have to do is to resolve these social problems and challenges. In order to do this -- we cannot do this by Hitachi alone, there is a limit to what we can do. On the 5the of November, we have announced the Lumada Alliance Program. We made Lumada into an open platform to engage many stakeholders to the platform so that an ecosystem can be established. So far, tens of companies are already participating. Together with the stakeholders, social challenges will be surmounted together. This is a new value-based business model. This is the shift we are making on the part of Hitachi today. Obviously, product generation will be necessary as well as a customer-based business model must be accompanied. And with that, a value-based business model will also have to be pursued. This will be the approach of Hitachi going forward. This value-based approach will mean that within Hitachi, we have to transcend the sectors and transcend BU for further integration. A strong leadership is called for to realize this process. On the 23rd of June, Kojima-san will be promoted to the CEO and President, and he will lead this effort going forward: environment, resilience and safe and security. This business will be pursued under his leadership. And in addition, Lumada must also be further strengthened. GlobalLogic will be joining us going forward. In transcending sectors, we must bring to bear synergies. I hope you can have high expectations on what is in store. Organizational transformation as well as operational transformation are necessary. In addition to that, IT resources, human resources development is necessary. In order to further promote the social infrastructure business, social issues must -- is a problem that each individual must have a sense of ownership. And they must engage surrounding stakeholders, take leadership in pursuing such challenges. This is the type of human resources we require. I had the opportunity to have a dialogue with Audrey Tang of Taiwan. And the source of his activity -- or her activity rather, is to make everyone happy. What is necessary to make people happy is her source of activity. It's the source of her power. And what is common is the powering good of Hitachi. There is a common thread between the 2. Powering good for the world. That is the type of human resources I hope to nurture going forward. In closing, today is Hitachi IR Day. You'll have the opportunity to discuss with Hitachi leaders of the different sectors as a place of dialogue. I hope that you can have a frank exchange of views. And with that, I would like to conclude my CEO remarks. Thank you very much for your attendance today.

That concludes the CEO remarks. We would like to prepare for the next session. So please wait for a moment. We would like to move on to the session overview of strategic direction. We would like to provide you with the explanation of strategic direction of our business. The presenter is Mr. Keiji Kojima who is the current Executive Vice President and Executive Officer, General Manager of Smart Life Business Management Division, who is to be appointed President and COO after the Annual General Shareholders' Meeting to be held on June 23. We will be switching the screen, please wait for a moment. Mr. Kojima, the floor is yours.

This is Kojima, Executive Vice President and Executive Officer. I will be serving as President and COO from June 23, 2021. Today, I will be giving you the strategic direction of Hitachi's business. Please move on to the next slide. This is Hitachi's vision: to create social, environmental and economic value through the Social Innovation Business and ensure sustainable growth and profitability to return the benefits to stakeholders. We have OT times IT times products. By comprehensively providing these services, we would like to provide solution to the society. In OT, we would like to digitize tacit knowledge on-site and use AI to ensure an advantage. In IT, we would like to lead the digitization (sic) [ digitalization ] of customer business process through co-creation. In products, we would like to expand globally through the partnerships so that we would be able to globally expand. OT times IT times products. The use cases as well as the solution derived from it, that would be accumulated on Lumada. And we would like to create a software asset, which is quite competitive. That's our strategic direction. Please move on to the next slide. In the 2021 Mid-term Management Plan, we considered expanding our Lumada business so that we can become the global business leader, and we have strengthened our business portfolio. As for Lumada, in 2016, and we have launched the business itself. And we wanted to improve the co-creation SI. And we have Vantara launch and -- for Global IT platform. And for creation of ecosystem, we started Alliance Program. And we acquired GlobalLogic for global co-creation. And we have gradually strengthened our business. On the other hand, for OT/products portfolio enhancement, JR Automation, Hitachi High-Tech, Hitachi ABB Power Grids, Hitachi Astemo, joint venture with Arçelik, we acquired those companies and customer channels. Through M&A activities and the establishment of joint ventures. In 2021 midterm plan, we have promoted the structural reform. It is not our final goal. This is a starting line towards our continued growth. We now have basic foundation in place. I would like to talk about Hitachi's vision for 2025. First of all, growing with digital technology. Under the difficult situation of the pandemic like we are facing now we want to have operating income over JPY 1 trillion, and we aim to have half of the overall profit to be earned by Lumada business. Second is deepening ESG management, become one of the world's leading companies in diversity and inclusion, environmental management and corporate governance. The third is returning of profits. We want to become a more attractive company for various stakeholders, including employees and shareholders. For society, Hitachi would like to be able to provide environment, resilience and security and safety. By expanding R&D investment, we would like to accelerate the innovation and we would like to challenge ourselves to provide solution to the societal issues that we are currently facing. In the next Mid-term Management Plan, the biggest responsibility that I have is to capitalize on the M&A adds so that it would contribute to the improvement in the corporate value. We need to further improve the quality of management. We will be focusing on the improvement of the value of our assets. We will simplify our management. We will be clear -- we will be making clear the benchmarked companies. And in order to accelerate with the transformation, we will digitize (sic) [ digitalize ] management. GlobalLogic utilization will be quite critical. And Mr. Tokunaga will be touching upon this. But I, myself, will be working hands-on in this area. And we need to grow in the area where we'll be able to capture growth. We are Japan centric. We will become global centric. Hitachi ABB Power Grids has a global management foundation. This is an important asset for us. With that as a basis, we would like to create a common global platform for our corporation. Moving on to the next slide. The society is changing rapidly. We cannot think of the future an extension of the current situation. We would not be able to improve the corporate value in the thinking "business as usual." From -- what we have to do is to conduct the R&D investment by backcasting from 2050. In order to visualize that, I would like to show you a table of industry forecast for 2050. And to give you the example of the results of the -- at R&D. Together with experts from outside, we have created our vision for the future, and we are backcasting it from 2050, and we are establishing various projects, academia as well as the local expertise. By capitalizing on everything, we would like to improve our corporate value. Please move on to the next slide. Our mission is to create innovation in social infrastructure by leveraging data and technology through the Social Innovation Business to support people's happiness. I talked about the strategic direction. In spring of next year, we will be announcing the next midterm plan. Specifics and quantitative vision of Hitachi will be shown then. Thank you very much for your kind attention.

Thank you. The overview of the strategic direction has been concluded. We would now like to make preparations for the next session. Our next presentation will be from the IT Sector. The presenter will be Toshiaki Tokunaga, Executive Vice President and Executive Officer, Head of Systems & Services Business and Head of the Social Innovation Business. Please wait a minute, we are going to switch over the screen. Tokunaga-san, please.

Thank you very much for your time today. I am Tokunaga. I am heading the IT Sector since April of this year, succeeding Shiotsuka. I would like to ask for your continued support going forward. I would like to take a few minutes to explain to you the growth strategy for the IT Sector. So I have outlined here what my key messages are. The first point is that the IT Sector has certainly evolved into a business that's capable of generating double-digit adjusted operating profit margins. Against the backdrop of the expansion of the Lumada business, which drives the company's Social Innovation Business and the results of the structural reforms, the IT Sector has evolved into a business that can steadily generate double-digit adjusted operating profit margins even against rapid changes in the business environment. Secondly, the acquisition of GlobalLogic, which was announced at the end of March to accelerate the global expansion of Lumada is progressing as planned toward closing by the end of July. The third point is that the IT Sector will take a leap forward to become a global player. And together with GlobalLogic, I am confident that the IT Sector will be able to leapfrog into a global player by combining the accumulated SI capabilities in mission-critical areas with GlobalLogic's digital engineering capabilities. And finally on this page, I am convinced that we can achieve both growth and profitability in the Lumada business. In the high-growth global DX digital transformation market, we will expand the Lumada business through the acquisition of GlobalLogic and, at the same time, we will continue to maintain high profitability in Japan to achieve both growth and profitability. So this is the agenda for today. I will be, first of all, talking down to the IT Sector, the sector that I am leading. Now IT has the Financial Institutions Business Unit and Social Infrastructure Systems Business Unit as well as Hitachi System, Hitachi Solutions in the front office and also, we have the overarching Services & Platforms Business Unit. The IT Sector's 2020 revenues was approximately JPY 2 trillion. We have more than 70,000 employees, engaged in business in 47 countries and regions. From this fiscal year, we have introduced the leadership organization. The Financial Institutions Business Unit will be head by Ueda, and the Social Infrastructure Systems Business Unit will be led by Nagano and Services & Platforms Business Unit by Abe. Now we have also announced the acquisition of GlobalLogic. And together with Hitachi Vantara, they will be comprising the Hitachi Global Digital Holdings. Let's look back on the history. From the founding to currently, the -- really see the reservation system as well as online systems has been developed to support the lives of people as a social infrastructure and its mission-critical systems in terms of hardware as well as software. This type of SI technology, which is a mission-critical system, is the base foundation of the IT Sector. In addition, big data, AI and IoT and other digital initiatives are being pursued. In 2016, we have launched Lumada and have been dealing with social issues as well as issues in terms of corporate management, aspiring to become a global leader in the Social Innovation Business. Now this slide shows the business activities of each business unit and major group companies in the IT Sector. Due to the time constraint, I will not explain in detail, so please refer to it later. Next, I would like to talk about the IT Sector's positioning in the Hitachi Group. The revenues for the IT Sector in 2020 accounted for 21% of the revenues of the Hitachi Group. In terms of adjusted operating income, the IT Sector accounted for 53%. And therefore, in terms of operating profit, IT Sector has become a business that drives Hitachi today. And if we look at the breakdown within the IT Sector, Front Business is accounting for 64%; Services & Platforms, accounting for 36%. Regarding the revenues breakdown of the Front Business, let me give you further information. Although this is a simple [ aggregate ] before eliminations, for the Financial Business Unit, it's accounting for about 20%; Social Business Unit is accounting for the upper 20 percentage; Hitachi Systems, approximately 30%; and Hitachi Solutions, high teens in terms of percentage. Regarding the breakdown between Japan and overseas, for the actuals in 2020, domestic accounted for 75% and overseas accounted for 25%. The challenge [ we're seeing ] going forward is to expand our global businesses. Next, I'd like to talk about the management strategy for the IT Sector. First, let's look at Hitachi's business goals. As explained in the recent presentation, the progress of the 2021 Mid-term Management Plan, Hitachi will promote the Social Innovation Business to secure sustainable growth and earnings. Specifically, we will leverage Lumada to focus on the 3 domains of the environment: resilience and safety and security and engage in problem-solving businesses that solve social issues and corporate management issues with the aim of improving people's quality of life and increasing the corporate value for customers. In order to realize the vision of the Hitachi business that I have just explained, the IT Sector will proceed with its business based on the vision shown on this slide. Specifically, through co-creation with customers around the world and alliances with partners, we will leverage Lumada to drive the Social Innovation Business with the power of digital technologies, thereby realizing Hitachi's growth. In order to realize the business vision I have just explained, I will manage -- will lead the IT Sector based on the 2 policies that I will now explain. The first is to strengthen our support of customers in digital transformation, or DX. DX has become the most important management issue for corporate growth and sustainability, a success or failure of DX is a key management issue that determines the growth of the company. And the IT Sector will be directly linked to the ability to stay close to our customers and strengthen our support for the management issues. In order to support our customers' DX, I believe that innovation and reliability are 2 essential capabilities in order to identify customers' management issues and propose and provide solutions to those issues. It is essential to promote customer co-creation backed by innovative digital engineering capabilities. In addition, mission-critical SI capabilities, such as the utilization and the integration of existing IT assets, will always be necessary for management transformation through DX. The integration of the IT Sector and GlobalLogic will make us a player with both of these capabilities, and we believe there are significant growth opportunities in the IT Sector as the DX market expands going forward. Secondly, we are expanding our global business. We strongly believe that the global expansion of the initiatives aforementioned is essential for the growth of the IT Sector. GlobalLogic has the frontline capability to develop co-creation activities with customers globally and the software delivery capability to solve customer issues. These are drivers that will greatly contribute to the growth of the IT Sector. Next, I would like to talk about the progress made in the IT Sector in the context of the Mid-term Management Plan. In the fiscal year ending March 31, 2021, the IT Sector operated in an uncertain environment due to the spread of COVID-19. However, even under these circumstances, the IT Sector achieved the highest-ever adjusted operating income of JPY 269.4 billion. The operating profit margin was 13.2%, significantly higher than the previous year. This was due to the results of the structural reforms and efforts to reduce loss costs as well as the growth of the highly profitable Lumada business. I believe that the IT Sector has evolved into a business entity that is able to consistently generate double-digit operating profit margins even in a changing business environment as demonstrated by these results. On the other hand, as for fiscal year 2021, the spread of COVID-19 is likely to continue. Therefore, we have set our revenue forecast at JPY 2.1 trillion because of highly uncertain conditions. However, with the intention of achieving growth that exceeds market growth, we will operate our business with a target of JPY 2.2 trillion. In fiscal 2021, although there will be modernization burden with the acquisition of GlobalLogic, which will be downward pressure on our operating income, we expect to continue to achieve double-digit operating income margins in excess of 12%. As a result, the company expects to achieve an operating margin of more than 12% in the period of the 2021 Mid-term Management Plan, and EBITDA is expected to exceed JPY 1 trillion. The Lumada business is also continuing to grow steadily. In fiscal 2020, Lumada business sales for the entire Hitachi Group exceeded JPY 1.1 trillion. This is a result of the various business expansion measures shown on the right-hand side. In fiscal 2021, with the addition of GlobalLogic, we are now within range of our midterm target of JPY 1.6 trillion. In terms of profit margins, on the other hand, the Lumada business has already secured a profit level of over 10%. And with the acquisition of GlobalLogic, we aim to achieve an even higher profit level going forward. As a result of these initiatives, we expect Lumada sales to grow at a CAGR of over 24% during the 2021 Mid-term Management Plan period. And we believe that we have now entered the phase of business growth exceeding the market growth. The scale of the Lumada solutions expansion is progressing steadily as well. By focusing on the 3 areas of environment, resilience and safety and security in the Social Innovation Business, we will further accelerate the development and the lateral deployment of Lumada solutions aiming to achieve both revenue growth and profitability improvement. The acquisition of GlobalLogic, which was announced at the end of March, will be explained to you once again at this juncture. GlobalLogic is a global provider of services that digitally transform customers' businesses, whether it's advanced experience design and design -- digital engineering capabilities. In other words, GlobalLogic is a company that supports customers' DX journeys. GlobalLogic has served more than 400 customers and has 8 design studios and 30 delivery bases, engineering centers, around the world to support these customers. In fiscal year 2020, the company reported net sales of approximately USD 928 million and EBITDA ratio of 23.9%, continuing to grow by more than 20% year-over-year and maintaining high profitability. As we have explained at the end of March, we are planning to make GlobalLogic wholly owned subsidiary by the end of July 2021. I would now like to explain the progress in the acquisition process of the GlobalLogic. We have formed a company-wide team and are proceeding with the various tasks towards closing as scheduled, making full use of Hitachi Group's M&A track record and experience. The regulatory approval procedures, which are essential for closing, are progressing as scheduled. GlobalLogic's most important asset is its human capital, and employee retention is a key factor in the success of the PMI. In that regard, we are making good progress in this area, GlobalLogic employees' key resources have been identified and making steady progress. GlobalLogic employees have not only welcomed this M&A but have said that the culture fit with Hitachi is very strong, which is very encouraging for us, and we are eagerly looking forward to welcome GlobalLogic to our group. In addition, we are steadily moving forward with preparations for the post-closing organizational structure and governance design as well as for the rapid creation of synergies after closing. Now I would like to talk about the growth strategy for the IT Sector. This line ensures the trends in Global IT investment and global DX investment. In terms of the global IT investment, North America and Europe account for about 2/3 of the global total and are expected to continue to expand steadily. In addition, despite the uncertain economic climate, DX investment is expected to expand rapidly in all industry with a CAGR of 15%. On the part of the IT Sector, we are establishing a business foundation in the left-hand bottom in terms of providing high-reliability SI. But now going forward, we have been expanding our business in 2 directions. The first direction is to expand the SI activities globally. The establishment of Hitachi Vantara and the acquisition of the Pentaho are one of the steps we have taken to realize this strategy. The other is the horizontal direction shown in the figure, expansion into co-creation SI in Japan. As I explained, we have launched Lumada and are on a growth trajectory. Driving the Lumada business across the company by continuously strengthening our digital human resources. Now for the next major step in the transformation of the IT Sector, to achieve the next phase of growth, we have acquired GlobalLogic. It is in the right-hand side. In other words, we will accelerate the global expansion of Lumada by supporting our customers' DX activities in the areas shown here. In addition, we will actively utilize Hitachi's existing assets for the further growth of GlobalLogic. As I have explained, the acceleration of GlobalLogic's growth through the years of existing Hitachi assets will be pursued from 3 angles. The first is cross-selling, in which we will provide GlobalLogic's DX services to customers or corporate customers while providing Hitachi's mission-critical SI services to GlobalLogic customers. This cross-sell area is an area where we can reap early results, and we plan to aggressively expand our activities immediately after closing. The second is the utilization of software assets accumulated in the Lumada business to date. In the Lumada business, we have accumulated more than 1,000 use cases. And we have also developed the Lumada Solution Hub, a platform for horizontal deployment of these cases. By leveraging these existing assets, GlobalLogic will be able to develop a business model that utilizes software assets rather than the traditional time- and material-based business model. The third is the development of a new Lumada solution that integrates Hitachi's strengths in OT, IT and products. We aim to develop new solutions for Lumada by combining Hitachi's wide range of products with GlobalLogic's digital engineering capabilities to create high value-added products and software created through co-creation with our customers. In North America and Europe where Hitachi's business footprint is already launched and the market size isn't large, Hitachi plans to strengthen its collaboration with GlobalLogic through ties with the Hitachi ABB Power Grids, Hitachi Rail and JR Automation. Now based on these strategies, what business position will the IT Sector take in the future is explained here. We are unlike other IT-centric or OT-centric players as the OT and IT knowledge base, mission-critical SI and the innovative experience design and digital engineering capabilities are required increasingly. In the digital transformation domain of social infrastructure where we can utilize Hitachi's wide range of products, we can gain a competitive edge by providing value in the areas of the environment, resilience and safety and security. This slide shows the overall picture of in social infrastructure and Hitachi's strength in this area. In the digital society going forward, Hitachi will provide total support for the entire cyber physical system from products to applications that will realize digital transformation in social infrastructure and work to solve social and corporate management issues. Hitachi's strength in this area are twofold. The first is the ability to use cant's wine range of products and to provide applications that solve social and corporate management issues by analyzing the collected data and using GlobalLogic's digital engineering capabilities. This type of application will increasingly be provided. The second strength is to further improve the outcome. We have the knowledge and ability to control the physical space in real-time basis and the results of the data analysis mentioned earlier. In other words, we can perform mission-critical SI. We have named this the cyber physical system mission critical-IoT. With mission-critical IoT at its core, we will accelerate DX of social infrastructure and expand the Lumada business of the entire Hitachi Group. The mission-critical IoT that I have just described is beginning to show results. In the manufacturing industry, the IoT Compass Lumada solution that digitally twins the production floor reproduces the 4 Ms of physical space -- in other words, machine, material, method and human data -- in cyber space to optimize the entire factory. In the future, we will further evolve the IoT Compass to achieve resilience that can be used to respond to unexpected situations such as sudden changes in the business environment and provide corporate customers with value that only Hitachi can provide. Next is summary. Before summarizing today's presentation, I'd like to introduce the IT Sector's effort to achieve Hitachi's Carbon Neutrality 2030, which we are focusing on, on a company-wide basis. In the IT Sector, we are actively working to reduce CO2 emissions through the use of digital technology. First, let me give you internal company. In order to visualize electricity demand and to accelerate the use of renewable energy at the Omika Works, it is consolidating and visualizing information from smart meters to forecast electricity demand. In addition, by linking the energy management system with the production plan, we are curbing peak power consumption and have already achieved reductions in contracted power consumption. On the other hand, there are examples relating to customers. We were selected as the system vendor for the demonstration project under the Smart Grid Development Master Plan led by the Thai government. In response to fluctuations in electricity demand due to weather, which is an issue in the expansion of renewable energy, we will support grid stabilization by ensuring supply and demand balance. We recognize that the use of digital technology is essential for reducing environmental impact, and the IT Sector will continue to actively work to provide environmental value. Finally, let me conclude. The IT Sector aims to grow into a global digital company that leads the DX market by providing digital solutions to social issues and corporate management issues. To achieve Hitachi's corporate goal of 10% adjusted operating margin in fiscal 2022, the IT Sector will continue to maintain a double-digit adjusted operating margin and contribute to corporate performance. In addition, by capturing the growth of the high-growth DX market, we will lead the Hitachi Group in achieving Lumada business revenue of JPY 3 trillion and adjusted operating income of JPY 500 billion in FY 2025. That is all. Thank you very much for your kind attention.

Tokunaga-san, thank you very much. We would now like to take questions and answers. In addition to Mr. Tokunaga, we will have Yoshihiko Kawamura, CFO of Systems & Services Business Division to respond to the questions. [Operator Instructions] We will first take questions from the Japanese channel and then the English channel. We will take questions from the media, institutional investors as well as analysts. Yasui-san, please.

I have 3 questions, regarding GlobalLogic, mainly. First question is -- my personal image is that Hitachi Vantara or Hitachi America is going to change through the GlobalLogic. With Pentaho and JRA and with the other acquisitions, you'll have a wide array of companies. So with that, what is going to be the ultimate state of United States going forward? Regarding GlobalLogic, it's very free and very agile in terms of its activities. Do you think that this is going to drive change of culture in Japan? Because in terms of development in Japan, it has an image of taking too much time. So do you think the IT culture in Hitachi will change as a result of global SI and GlobalLogic integration? As we mentioned, they seem to be on both extreme ends, taking so much time and very agile in development. They are at opposing ends. So how is this going to be overcome? How will you overcome this difference?

Thank you for the question. Now to your first question, regarding GlobalLogic, in the U.S. business, how do we intend to grow the U.S. business going forward is the question. I think I mentioned this during my presentation, in terms of IT market size, North America is the largest. There is no doubt about that. In fact, furthermore, as asked by your question, in terms of Hitachi's assets, we have a good assortment already, JR Automation and Hitachi ABB Power Grids and Hitachi Rail. And in addition to the OT side, we have Hitachi Vantara as well, the IT service player, exists in our portfolio. So in the U.S. market or North American market is very large, and it is a market with significant potential. Therefore, this will be the market focus for us. For specific numbers, in the Mid-term Management Plan to be formulated going forward, we will give more clarity, but we intend to grow faster than the market. And that is the basic strategy of our sector. To your second point regarding GlobalLogic becoming part of Hitachi, Hitachi's culture as well as Japanese culture could undergo change as a result of this addition. As you rightly mentioned, in Japan, the business of the IT Sector and the type of businesses engaged by GlobalLogic are different in nature. The substance is different. The IT Sector was focused on mission-critical systems with high reliability, taking time to develop. And that is the reason why we have a long-standing relationship with our customers through the system development. On the other hand, GlobalLogic has speed in development. It's their advantage. But whether we can combine the 2 is the challenge. And I think it can be done, according to my view. And I think it is going to have a beneficial impact on the IT Sector in Japan as well. Why do I feel it can be done is because of corporate culture. We have a very good fit in terms of corporate culture. The substance of the work is different. The process differs. However, the GlobalLogic employees are all saying the same thing. Hitachi's aspiration, corporate philosophy of contributing to society, the reason for existence resonates with them. And that is the reason why they're very keen to join the group. On the other hand, for Japanese market, we have been rolling our mission-critical projects. But from the point of view of modernization, GlobalLogic's engineering abilities can unleash modernization that is required in Japan. Therefore, in Japan, we can utilize the power of GlobalLogic to grow the business going forward. And regarding your standpoint, I think I've already covered this point already on the part of Hitachi and IT Sector. Whether this is going to be a successful integration is the question. The substance of the work that we have been doing look different. But culture fit is extremely high. And the undercurrent is that we have a common corporate culture. So by thoroughly implementing PMI, that we -- and the [ investors ] of GlobalLogic has been showing appreciation regarding this M&A. Therefore, we are convinced that this PMI is going to be successful.

I have 3 questions. First is regarding Lumada. In 2017, a bit old, but you talked about risk reduction and sales increase and cost visualization and cost reduction. You broke it into various components, and you gave us the product. As of the year ending March 2021, the sales breakdown, what is the sales structure? If you could quantify, I would very much like to know. So that's my first question. Second question you just mentioned -- explained GlobalLogic. GlobalLogic's innovativeness -- innovation, innovativeness is the keyword today. So in what kind of project did you evaluate GlobalLogic's innovativeness? And as you are planning to enhance the innovativeness, so what kind of image, what kind of projects should we anticipate? So that's my second question. Third question, as you mentioned at the outset, Mr. Shiotsuka's team, the operating income ratio, double-digit was achieved. Today, you explained various policies and strategies. So under Tokunaga-san's team, how do you plan to grow the IT even further? What is uniqueness, distinctiveness or strength that you would like to leverage? Those are my 3 questions.

Thank you for the question. So first question was about the Lumada business breakdown. Right after launch, fiscal year 2017, the Lumada business structure and the way we look at it is changing slightly, so we cannot just have a simple apple-to-apple comparison. But roughly speaking, Lumada core business and Lumada-related business, we categorize into 2 and track our growth: Lumada core business, our digital and IT solutions; and Lumada-related business, our OT and product where Lumada -- the OT and product where Lumada business will go in together. In the year ending March 2021, fiscal Year 2020, Lumada core was a little over JPY 470 billion, and Lumada-related business was a little less than JPY 640 billion. So that was total over JPY 1.1 trillion. And your second question was about the innovativeness of GlobalLogic. To give you a better image, we think there are 2 main strengths GlobalLogic has. One is the collaborative creation activity with customers. This is strongly pursued. As of -- when we announced the M&A at the end of March, we mentioned this, over 90% of their customers said -- have been working with GlobalLogic all along. This means customers' DX partner -- they are customers' DX partner. It's a strong proof. And not just their co-creation capability, but the second strength is making GlobalLogic even stronger, which is strong digital engineering capability. For example, a product is digitalized and taken into the IT world -- IT arena. So product is digitalized, and customers are capturing growth. Many GlobalLogic customers have achieved this, and this can be applied sufficiently to Hitachi. So Hitachi's broad-based product lineup can be merged with GlobalLogic's capability and connect this to Lumada's world. The data that Lumada needs will be captured this way and will be made into container as Lumada solution. So this enhancement of Lumada business can be done with GlobalLogic. That is the future growth of GlobalLogic and their future contribution to Lumada. And third question, since I became in charge of IT Sector, the focus -- my focus is your question. There are mainly 2 points. First, connect with Hitachi, entire Hitachi and realize the overall growth. Until now, we've done structural reform and reduced cost, loss cost, to become the IT Sector with the top-class profitability under Mr. Shiotsuka and the predecessors' hard work. I am succeeding this trend to shift more to growth. This is an important mission for us. To realize that, Hitachi overall has to be connected well. And second point, this initiative will be expanded globally. This needs to be realized while I am in charge of IT Sector. So 2 main missions.

Next, Tanaka-san, please.

I just have one major question. So what you want to do is very clear in your message. But in order to improve the profitability, what kind of business model are you going to be introducing? This is IT, so there could be projects or it could be subscription, it could be a different approach or hardware or package for sales could be an approach as well. What kind of model would you be introducing in terms of improving your profitability? And what numbers are you intending to achieve on an annual basis? In this regard, utilizing GlobalLogic's technology, if the hardware is sold as a result of this business, is it going to be posted as Lumada sales? In what way? So the target revenues, I want to know how the specific numbers are posted.

Regarding your first question, how can we improve profitability going forward is the gist of your question. I think there are 2 approaches we can think. First, what is easy to understand is the following. The IT Sector has been involved in mission-critical system integration. That has been the focus in specific projects. High profitability will be maintained or improved further. I think that is very important to continue. Loss cost reduction must be realized. Freeze gate management will be required for this process. We have been improving this process over long years. This is where we stand today. And how far we have come in terms of enhancement is being evaluated through benchmarking with IT vendors globally. We believe that we have sufficient competitiveness against the global IT vendors. So we shall continue to do this. And as a project, we will maintain high profitability. That's the first point. Second point is regarding the context of the GlobalLogic. GlobalLogic was based on time and material type of business. EBITDA margin was around 20% and above. And that has been their business model so far. And going forward, in order to enhance this further on the part of Hitachi, there are 2 things that must be done. First point is to enhance the technological power. As Kojima-san has already mentioned today, R&D will be further strengthened. Second, as I mentioned during my presentation, software asset utilization type of business model must be expanded further because this is what Lumada has been envisioning from the very beginning. Lumada Solution Hub is the platform that has been prepared for this purpose. And on top of that, the use case, as well as solution core accumulated assets, will be mobilized for higher scale. By so doing, profitability can be enhanced. I think this will prove to be very effective going forward. In terms of percentage, we are not disclosing these numbers yet. So I shall from asking -- responding to that part. Now regarding your second question, with GlobalLogic and product business, with closer linkage between the 2, how is it going to be impacting Lumada business and how the revenue is going to be posted? Now as I mentioned at the outset, Lumada has 2 categories. The second Lumada-related business is where this will be posted. Therefore, when Hitachi product is increasingly utilizing GlobalLogic's solution, then this related business portion will continue to increase in terms of revenues. That is my take. And with GlobalLogic and Hitachi together, we hope that we can be successful in this approach.

Regarding the second part, I have a follow-up question. What is going to be posted is -- product revenue is going to be posted in the related category or only the area that pertains to the GlobalLogic involvement will be posted.

Regardless of the GlobalLogic's involvement or not, Lumada-related business has already been posted and registered. And as a Lumada business, if products can contribute to providing values to customers, then it is already included in the related business of Lumada regardless of the involvement of GlobalLogic. Lumada -- it will be a part of the Lumada business because it contributed to enhancing the value for the customers, then it will be registered as related business revenue.

We will also take questions from the English channel. [Operator Instructions] We do not see any questions from the English channel, so we will go back to the Japanese channel.

I have 2 questions. In the material, it says Omika Works' power consumption reduction. So as the next development, including energy and others, how do you plan to improve the efficiency? And do you plan to deploy this to other companies and develop this as a business? And do you have any challenges? And the synergy with GlobalLogic in this area, will you plan to utilize GlobalLogic's solution to enhance this even further? Second question, I just talked about the efficiency of the plans. Hitachi's existing IT business, customers like in finance and in transportation, for customers in these sectors, do you plan to utilize GlobalLogic asset for future possible improvements? Do you have any concrete examples for us to understand this better?

Thank you for the question. So first, our carbon neutrality and renewable energy, utilization in Omika Works. Needless to say, Eco-assist solution is already provided to our customers. And we will expand our offering to our customers going forward. On the other hand, by adding GlobalLogic's -- and not just GlobalLogic, by adding Hitachi's other sectors like Hitachi ABB Power Grids and other sectors, we can collaborate further to enhance this business even further. Of course, we will continue doing that. And this will lead to our One Hitachi strength. So this will not just be contained in one plant. We will use the track record to offer more values to our customers. We will hone the solution and expand the business going forward. And your second question, finance and transportation sector in the areas Hitachi is already having the existing business, how can we leverage global logic's capability? So to answer that question, we are now discussing the synergy with each sector this discussion started. It is a sensitive timing right before closing, so we cannot have a deep dive on the details of the business with GlobalLogic yet. But as IT Sector, in finance BU and the social BU, Social Infrastructure System BU, we think we can collaborate with GlobalLogic and generate many new solutions. For example, in financial institutions sector, we can combine with IoT to have utilized system integration and settlement and IoT payment settlement platform can be created. And in transportation, ticketing, MAS solution can widen to those areas very quickly, so we can have a very broad-based business opportunity. The concrete cases will be pursued in the next medium-term management plan after closing with GlobalLogic, and we would like to clarify and disclose them. Thank you. I hope this answers the question.

The time come and to bring this session to a close. This will be the conclusion of the presentation of the IT Sector. We will resume with the Industry Sector presentation from 11:45. Thank you. [Break]

Next, we will start Industry Sector briefing session. Executive Vice President and Executive Officer, General Manager of Industry Business division, Masakazu Aoki, will explain. We will switch the screen, so please wait for a moment. Mr. Aoki, please.

Hello, everyone. This is Aoki. I would now like to explain the business strategy of Industry Sector. There are 3 key messages today listed here: first is digital transformation accelerating in the new normal era; second is the expansion of total seamless solutions utilizing Lumada; and third is the development for global growth. I will follow these contents to explain, starting from overview of the Industry Sector. This is the positioning of the Industry Sector. So it consists of Industry & Distribution business unit and Water & Environment business unit in Hitachi, Ltd. as well as Hitachi Industrial Products, mainly in charge of product business, and Hitachi Industrial Equipment Systems, a total of 4 entities. Next is the business overview. Fiscal year 2020 revenue was JPY 858.1 billion, of which Industry & Distribution business unit was 36%, and Water & Environment business unit was 20%, and the Mass production business was 28% and Built-to-order business and Industrial Products business was 16%. Now if you could look at the pie graph, the solution business grew with the acceleration of DX under new normal and acquisition of automation business. So compared with the same graph 2 years ago in the IR Meeting, it now accounts for 56% of the total revenue. Next is the sector structure. I continue serving as the leader and operate the sector with 4 CEOs and Presidents here. Next is the business domain of the Industry Sector. From the bottom of the slide, we have products used in customers' manufacturing sites, then OT that operate and control such facilities, and IT that manages and controls them. The broad-based business domain from workplace to management is under one sector. This is our uniqueness. Next is the progress of 2021 midterm management plan. So we made steady progress through the strengthening of the integrated operations in the Industry Sector, although COVID-19 has somewhat impacted the plan. Let me start from the bottom of the slide and work my way up. In response to the market change, we focused on selective investments and securing profits through fixed cost reduction and more stringent project management to respond to COVID-19 impact. To increase business resilience, we shifted resource to digital business and to accelerate DX and increase the number of solutions matched with the needs of the new normal to respond to market changes from the offense and defense. In basic policies and progress, as acceleration of the expansion, we acquired JR Automation in December 2019 and established Hitachi Industrial Holdings Americas in April 2020 to strengthen our business base in North America. In expanding and strengthening total seamless solution, which we explained in this meeting 2 years ago, we scaled digital solution utilizing Lumada, and Lumada core business increased by 6% year-on-year. In April this year, we acquired Kyoto Robotics, a developer of intelligent robotic system to expand business by further enhancing Products x OT x IT. This shows fiscal year 2019 results and onward. The fiscal year '20 -- fiscal '19 full year results was revenue of JPY 909.4 billion and adjusted operating income of 7.5%, excluding COVID-19 impact, an increase in both revenue and income. Including the COVID-19 impact, we expected a significant decline in revenue and operating income. Therefore, we started with a forecast of JPY 761.8 billion and 3.2%, respectively. Despite difficult situation under COVID-19, we shifted to digital business and expanded our global business. Therefore, FY '20 results, shown in red arrows, were up JPY 96.3 billion in revenue and up 2.5 percentage points in adjusted operating income ratio against the forecast revised downward. We were able to control the significant part of COVID-19 impact. The revenue and increase (sic) [ income ] are forecast to grow as a result of capturing new DX needs despite the continued impact of COVID-19. And beyond that, we will aim for revenue of over JPY 1 trillion and adjusted operating income ratio of over 10%. Next, this shows the trends of the results of the main companies we acquired, starting with JR Automation in North America. As shown on the left graph, after we acquired JR Automation in fourth quarter of fiscal year 2019, we were impacted by COVID-19 in the U.S. in fiscal year '20. But by eagerly exploring the new demand and pursuing PMI, the orders and revenue grew considerably. And the growing business areas are as shown on the right pie chart. We shifted from automobile-centered portfolio to a bigger portion from e-commerce and medical, growing under the new normal and accelerating the shift in our business portfolio. And furthermore, in fiscal year 2021, we will expand Robotics SI business featuring digital fusion. Next is Sullair in the U.S. In the first quarter of 2020, we saw a large COVID-19 impact in the U.S., and orders and revenue fell significantly. But a steady expansion of new customer base, flexible production system and increase in the cost competitiveness of products, such measures were taken to improve the resilient structure. So in the fourth quarter of fiscal year 2020 was 118% year-on-year, and this recovery is still continuing. Both companies in the U.S. that we acquired are implementing solid PMI and realizing growth in expansion despite the unprecedented difficult living and economic environment. Next is the expansion of total seamless solutions. Changes in the market conditions and aims of the Industry Sector. First, left side of the slide, changes in the market environment. This includes drastic changes due to COVID-19, increase in geopolitical risks, increasing environmental awareness and shift to a recycling society. In response to that, on the center of the slide, the customers' management perspectives are changing as well. Environment, resilience, and security and safety, these 3 values are important. With the acceleration of DX, such as the reduction of required labor, automation and contactless solutions that are becoming increasingly sophisticated and a new normal, the gaps between companies and organizations, the so-called boundaries that I mentioned in the last IR Meeting, is becoming more evident. Solving this issue is becoming more important. Industry Sector connects boundary through total seamless solution from workplace to management and solves issues to maximize customers' total profit and contribute to value creation. Next is the comparison to competitors. In this diagram, the vertical axis is the scope of the provision of solutions. From the bottom to the top, partial layer, adjacent layer and full layer. Horizontal access is the approach for resolution of customer issues. From left to right, package proposals, customer requirements and collaborative creation with customers. And the size of the circle shows the ballpark revenue. With the changes in the market environment, boundary issue from market -- management to workplace and supply chain is becoming evident. Therefore, it is more important to solve the issues, not only from individual optimization of partial layers but also from overall optimization of the collaborative creation with customers and product, OT and IT. So Hitachi will leverage and deepen total seamless solution-based on domain SI knowledge to differentiate ourselves. Now let me once again explain the total seamless solutions applied to boundary issues. The boundary issues exist in vertical, horizontal and place. Starting with vertical. By connecting boundary between management and workplace with digital, top management can understand workplace situation and make quicker decisions. Next, horizontal. By connecting boundaries such as manufacturing, supplier, distribution and market with digital, we can enhance the efficiency through overall optimization. And lastly, place. A place where different industries connect with digital. When new places are born, people and information are connected and global market opportunities are created and new value creation opportunities are offered. So we will address these boundary issues with total seamless solutions. This shows the expansion of total seamless solutions utilizing Lumada. In co-creation with customers, the 3, mentioned at the bottom, the technologies, like AI and mathematical optimization technology, domain knowledge and customer relations are the 3 strengths that support us. Today, let me talk about the ones in the yellow, the recent case examples, starting from the next slide. So this will be a lot of information. But in order for you to understand the aim and the progress of the business in our sector, we will introduce the outline of 6 Lumada digital solution cases. Start -- first is connect supply chain globally. Right side, green box. We respond to the value chain that changes variedly and contribute to employees' work style reform through automation of planning of Daikin. For Daikin's chemical business, 5 manufacturing bases and 9 sales bases are connected globally to provide production and sales planning and execution support solutions that quickly respond to changes in demand. On the left side of the slide, SCM. By using SCM optimization simulation, we can present approximately 60x more manufacturing and sales measure patterns than before in the short time, and the effects of introduction is shortening the time to determine by approximately 95%. With that, the bottlenecks through switching manufacturing can be eliminated and high-profitable products by utilizing surplus capability can be increased. Supply chain, aiming to maximize business KPI, can be optimized. Second is the connect sales, workplaces and markets. On the right side, green box again, please. Seiyu had cumbersome order placement operation. This was reduced drastically, which allows focusing on kitchen operations and customer services. In the future, they will aim to reduce stockouts and food loss. Workman, we contributed to stockout control and inventory optimization of 100,000 items that have different sales turnover ratios. Now the left side of the slide, please. This uses Hitachi's digital solution for retail, AI, demand forecasting-based automatic order placement service. And the effects of introduction for Workman is the shortening of order placement operation from approximately 30 minutes to 2 minutes. In both cases, these are the cases where Hitachi contributes to productivity improvement of sales, workplace by automating order placement operation based on demand forecast by AI. And third is MonotaRO case to connect workplace and management in logistics field. Green box on the right, again. Response to labor shortage through automation using robotics and realize data-originated and sophisticated operation of the distribution center. Now bottom part, in MonotaRO's workplace, 300 compact and low-floor, automated guided robot Racrew has been delivered with 400 more planned to be delivered. And Hitachi is managing all control systems in WCS. Now WMS refreshment. Distribution center was sophisticated through WMS renewal and use of robotics. We aim to optimize. And fourth is connect workplace and management in logistics field, green box. Respond to decrease in number of truck drivers, accident preventive measures and real-time operation management utilizing IoT technologies. This uses Hitachi Transport System's unique safe operation management solution using AI and Hitachi Digital Solution for logistics. On the bottom of the slide, you can see biological data of driver and the vehicle behavior and other driving operation information is accumulated on the cloud and managed and analyzed to realize both safety and efficiency improvement. Fifth case, provide a place for connecting different companies. Alfresa. Through collaborative creation with pharmaceutical wholesaler Alfresa, we provide Japan's first platform for integrated management of cell and tracing information throughout the value chain for regenerative medicine products to respond to strict quality control and traceability and analyze and simulate the supply chain. In regenerative medicine, it is crucial for multiple companies and organization to share individual sample identification information to ensure product quality. So we offer common service infrastructure for all stakeholders involved in regenerative medicine products and connect boundaries existing between different companies and organizations. And sixth case is connect workplace management and supply chain in food field. So we contribute to the production system that quickly responds to change in demand and reducing environmental burden of Nichirei. Left side of the slide. By introducing Hitachi's proprietary system combining AI and mathematical optimization technology, time required to automatically produce optimal answer from among maximum 16 trillion production patterns per plant was shortened to 1/10. Now center, right, shows the improvement of refrigeration equipment of Nichirei Logi Group, in charge of logistics, product, OT, IT, eMilia-based cloud service infrastructure, integrated energy facility management service is offered. We also offer solution to improve operation and maintenance efficiency of refrigeration equipment. Next is the global growth development. This is the progress in North American market. In July 2017, we added Sullair and strengthened the North American product business. And next, we entered into robotics SI business that is expected to show high growth. And KEC in April '19 and JR Automation in December. And Kyoto Robotics in April 2021 to enhance and expand robotics SI business. We will collaborate with GlobalLogic going forward to reinforce the fusion of robotic SI and digital. And from fiscal year 2022, we will develop this end-to-end digital solution, connecting management and workplace. Now we established Hitachi Industrial Holdings Americas to manage the North American business of Industry Sector strategy with Sullair and JR Automation under the umbrella in April 2020. The ones in blue will be explained from the next slide onward. First is fusion of robotics SI and digital. JR Automation offers automation of large-scale robots, processing equipment and conveyor collaboration between ERP and MES for the processing of aircraft components of Rolls-Royce in North America and offering the optimization solutions. On the lower right, you can see the business formation. We have partnership with Siemens and ABB as well and JR Automation is managing the entire project in a turnkey manner. Going forward, Hitachi and JR Automation synergy, including GlobalLogic, will accelerate the fusion of robotics SI and digital and expand the business. Next is strengthening the functions of robotic SI: acquisition of Kyoto Robotics. It has intelligent robotic system equipped with world-class 3D vision sensor, and we will leverage this to strengthen our robotic SI business. 99.99% 3D object recognition rate, masterless and industry-leading depalletizing capability will become our strong weapon to strengthen our logistics and FA domain business. Now this is the use case of intelligent robotic systems. This is the case of NTT DOCOMO's logistics operation reform and optimization, upgrading of logistics center operation through OT and IT is promoted towards full automation through Kyoto Robotics' intelligent robotic system. We started connecting the operation reform for logistics optimization. And from 2017, on material handling, WCS, WMS, OT and IT efficiency was realized. And from 2021, we've been utilizing 3D vision of Kyoto Robotics to automate the workplace through piece-picking robot to aim for full automation of more sophisticated logistics center. Now this is the strengthening of global development of robotic SI business. First, strengthened robotic SI feature digital fusion through the execution of cross-regional comprehensive activities. We use North American strategy of Hitachi Industrial Holdings Americas as a basis and strengthen integrated activity across borders using technology know-how of JRA, KEC, Kyoto Robotics and Hitachi, and use that as a basis to expand globally to Europe, ASEAN and Japan. Now conclusion. Initiatives for creating environmental value. We will create sustainable environmental value as well as economic value through collaborative creation with customers. In Digital Solution business, we will reduce CO2 by optimizing production, supply chains and distribution. And in Utility Solution business, we reduce CO2 by making advanced technology-driven improvements to the efficiency of water resources cycling systems. And in Industrial Products business, reduce CO2 by applying energy-saving and/or IoT schemes to products. In the Industrial Sector, we create sustainable environmental value by offering total seamless solutions. Now this shows the intensive action for the growth of the industry sectors. There are 3 main intensive actions from left. Facilitating the evolution of total seamless solutions, accelerating growth globally and strengthening the management base. With this, we will aim for the business growth and business value enhancement in the Industry Sector. And lastly, conclusion. By implementing the business strategy and intensive actions for future growth, we forecast revenues of JPY 880 billion, adjusted operating income ratio of 8.2%, overseas revenue ratio of 24% and ROIC of 8.7% for fiscal year 2021. And beyond that, we will aim to achieve revenues upward of JPY 1 trillion and adjusted operating income ratio exceeding 10% as the best solution partner for industrial customers. This concludes my explanation. Thank you very much for your attention.

Thank you very much, Aoki-san. We would now like to start the Q&A session.

The question will be answered by Mr. Aoki as well as Vice President and Executive Officer, CEO of Industry and Distribution Business unit, Mr. Kazunobu Morita and CFO of Industry Business division, Mr. Kazuyuki Irie. [Operator Instructions] We will start from the Japanese channel. [Operator Instructions] Any questions?

I have 2 questions. First, you raised many use cases. Co-creation with customer is increasing. This was very easy to understand and clear. I liked it. And with this, how much increase in revenue are you seeing or the added value or profit? How much increase are you realizing? It's still difficult image. So on Page 17 and 18, for example, with these solutions, how much increase are you seeing? Could you quantify, if you can? That's my first question. Second question is about the operating income ratio, profitability. In the industrial and machinery segment, in general, when the logistics turn stronger, you can achieve double-digit profitability in many cases. Some of your products are at that level already, but overall, double-digit profitability is not achieved yet. And looking at your plan this fiscal year, it's 8%. So it is still falling short of the double digit. So when you target 10%, for example, what are you lacking? What is your shortcoming? What do you need? So you do collaborative creation and the outcome of the co-creation will lead to higher profit and will bring you up to 10%. If you have -- could give us an image, I would appreciate it.

Thank you for the question. So the first question is the collaborative creation type solution. How much is the outcome reflected in numbers? It is difficult to answer, especially for fiscal year 2020, as the COVID impact -- overall impact [ has ] dropped by 15%. So JR Automation was acquired. And so we have to make adjustments and corrections. But my image is, from the 15% drop, we were able to come up by 10% through these solutions, so increase of 10%. So when we recover to fiscal year '19 level -- last year, we wanted to aim for JPY 900 billion or above in fiscal year 2021. So if we assume that this impact will disappear, then we think we can recover to that level. That's how much increase we're seeing in the solution sales. Now how are we contributing to the profit? I think that was part of your question. There's still very challenging solutions. So I'm not saying the profitability is bad, but the value there -- and I think this is related to your second question. We have products in our business, too. So the cost is incurred. And how -- the key is how much business we can increase, where we can be paid for higher value, added value. So that will be the key. So I -- there are more key cases. I just talked about some of them today and talked about boundaries. So offering the big breakthrough will become Hitachi's value and the value -- big value for our customers, not just simple cost reduction, bigger value than just simple cost reduction. So that is what we call by total seamless solution. So the product volume is necessary. We need that. In fiscal year 2021, this year, the base business is -- we are a manufacturing company. So we are impacted by the market condition, good and bad market condition, and we cannot help it because we are a product manufacturer. But once we recover to the normal volume level, then we think we are strong enough to be able to see 10% in sight. I hope I answered your question.

Next is Mr. [indiscernible].

I would like to know about the planning for the performance. This fiscal year's performance planning, the sales revenue will still be impacted by COVID-19, so it would not be growing so much. But in terms of the profitability, it will be growing to 8.2% is significantly higher. So at what stage are you in currently to get to this level of numbers? So could you talk from a qualitative perspective? You talked about solution business, that even though your business was impacted by COVID, solution was not impacted so much. So that's why the profitability is going up even though the sales revenue is staying flat. So could you talk a little bit about that? And the second question is, if you look at your midterm plan, so there is an increase of JPY 100 billion in revenue and the margin will go up to around 10%. So if the revenue goes up, the marginal profit of 10% can be achieved. So do you think that there would be a linear growth? Could you explain a little bit about your view on this, the business mix? We'll be changing to total seamless solution, and I believe that in that case, there would be higher profitability. So I would like to know how you view this.

Thank you for your question. The profitability for fiscal year '21, improvement of the profitability and how we accumulate the sales revenue. I think that I should elaborate further on those points. For fiscal year '21, in sales revenue, compared to the increase in sales revenue, the profitability tends to go up higher. So this target is not something that's easy to achieve. But by having a recovery in the volume, the profitability will be going up, but that's about half the story. In terms of the contents, so the recovery of North American market, which was hit hard by COVID at first, and also Japan market and the global market under COVID environment, we now know the optimal fixed costs. And during fiscal year '20, we have conducted various initiatives. But for fiscal year '21, we clearly know what the costs incurred are. In fiscal year '20, we did see some losses. So we are able to see more clearly about what those losses are. And so with that in mind, we believe that we can achieve 8.2% in profit, which is JPY 72 billion in value, and we believe that this number is achievable. Going further, so your question is that, is 10% sufficient for the JPY 1 trillion that we are aiming at? In our business, we still have room for growth. 50% of the total is related to solution business and now hardware is less than half. So the marginal profit is not linearly going up just with the increase in the volume. We are focusing on SI. So if the utilization of the plant is 100%, the marginal profit will be going up, but our business is not like that anymore. In the midterm plan, we would like to, of course, aim higher, but we are not a simple hardware business anymore. So the style of generating profit will be different going forward. That's all for my answer.

Next, we will take questions from the English channel. [Operator Instructions] Any questions? We do not see any questions on the English channel. So we will shift back to Japanese channel. [Operator Instructions] Mr. [ Yasui ]?

I have 3 questions. First is the progress of digitalization due to COVID. This is a big theme. In the Industrial Sector, did this actually happen? You may say the change was not as big as we anticipated or just an image, your take on how much digitalization progress you saw or the changes in the business model or paradigm shift. If you could talk about that, appreciate it. Second question. In the presentation material, Page 12, JR Automation -- sorry, Page 11, JR Automation, our profit improvement, especially in medical, a big improvement. Revenue has doubled and medical is growing. So maybe this is too big an improvement, a one-off improvement due to COVID. So will there be a reactionary fall? Is this sustainable? And third question. Aoki-san, when we acquired JR Automation, Sullair and JR Automation combined revenue was JPY 130 billion, and there are many customers. So you said you wanted to aggressively expand the business. This time, you acquired GlobalLogic, too. So as mentioned by Tokunaga-san, about the expansion plan in North America, both quantitative or qualitatively, could you talk about the growth rate from the companies that we acquired?

So let me answer your third question first. I think it was the IR Day in fiscal year 2019 where we said that those acquisitions in North America were mid-sized acquisitions. So that was total JPY 130 billion, and we said we wanted to increase this to JPY 200 billion. For fiscal year '20, it seems like we stepped back. But looking at the recovery from the second half, this target of JPY 200 billion seems to be achievable or reasonable target for 2024 midterm management plan or fiscal year '25. In that time frame, we think we can achieve JPY 200 billion. Automation in the U.S. and capital expenditure trend are solid and steady, progressing steadily. And U.S.-led digitalization and automation is now -- is much stronger than what we thought and felt before the acquisition. And I talked about one digital case. And I cannot talk about many cases because we cannot talk about customers' names, but many SI operators and digital are integrated. The movement towards the smart factory is strongly advancing more than in Japan. And more complex digitalization was considered when we acquired JR Automation. But this time, we also acquired GlobalLogic. So various delivery structure is now in place. So one missing piece was filled, was acquired, and this will be Hitachi's strong weapon going forward. So to repeat myself, the JPY 200 billion target, we think, is achievable. And your second question was the question on the pie chart on Page 11. Medical is growing significantly. It says revenue, but I think this is orders, no? I think this is order number. In terms of order, as you correctly mentioned, order nearly doubled year-on-year basis. And it does not show numbers here. So I'm sorry, this is not clear cut. The automotive ratio declined, but this is not a drastic decline. It is not declining much. Automotive is not declining much. Medical care, and this includes general industries, grew significantly. And as you correctly mentioned, part of this is special demand COVID countermeasure. The Warp Speed strategy was implemented. Operation Warp Speed was implemented in the U.S. And JR Automation strength is that we can respond in an agile fashion. And we recognized the strength. Once again -- I'm sorry, this was revenue. It's not orders. It's revenue. I'm sorry, I was wrong. So you said maybe we will see a decline in fiscal year 2021. This is partially incorporated into our budget. But looking at the order trends this year, the momentum has been maintained. The special one-off demand part will decline, but the automotive, thanks to the EV shift backed by the environmental trend, including the emerging new players, we are seeing a big shift to EV. So the speed and the dynamism of the investment is seen. And when it comes to EV, the vehicle structure changes dramatically. The structure changes. And so the automation line to meet that is a must for Tier 1 manufacturers. It's indispensable. And so this trend will not stop. And as I mentioned in today's cases, adding digital to that will be our growth factor, our driver and our differentiating factor. And your first question was about COVID-19, the paradigm shift of digitalization under COVID, remote work and Daikin's example is about changing the product this way or changing the product from line A to line B. It's simple if it's just about one factory, but if it is a shift from factory in France to factory in the U.S., it will be a big move. And it requires face-to-face discussion. But with this solution, we can have simulation in the headquarter and decide everything. So this will be one need that can be met in a remote situation. Morita-san, anything to add?

Thank you. I am Morita from the Industry & Distribution business unit. So regarding your first point, is there really digitalization needs under COVID? As Aoki-san just mentioned, for example, in the case of Daikin, COVID and the geopolitical reasons, supply chain is changing now. So given these changes, where should products be made, how? Source of profit is now showing effect? MonotaRO and Hitachi Transport System, the co-creation example was shared. Even before COVID, people started coming less to the manufacturing sites. This had been a challenge. And with COVID, this challenge has become more evident and has been shifting at a greater speed. So we can solve these challenges through digital. So this digitalization need is emerging and becoming more evident and accelerating under COVID. So it's surfacing and accelerating at the same time. Thank you.

Thank you very much. It's time for us to conclude this session. We would like to conclude the Industry Sector session. We will have lunch time now. We will resume from 1:10, and the presentation will be made on Mobility Sector. We will conclude the Zoom session now, but you would be able to use the same URL for Zoom for the afternoon session. Please gather around 1:05. Thank you. [Break]

Ladies and gentlemen, we would like to start the afternoon session of Hitachi Investor Day 2021. The afternoon session will be from 1:10 to 5:00. Once again, those of you utilizing the Japanese channel, you can also use the language selection button and you would be able to hear the original English. Please select the language that you would like to listen to from the lower portion of Zoom. According to your device, where the button is different. But in the case of PC, it's in the lower portion. We would like to now start the presentation of Mobility Sector. Presenting is Executive Vice President, Chief Environmental Officer; Mr. Alistair Dormer. Alistair-san, please.

Good afternoon, ladies and gentlemen. My name is Alistair Dormer, Executive Vice President for the Mobility Sector. And I'm joined by Shinya Mitsudomi, CEO of Building Systems business unit here in Tokyo; and by Andrew Barr, CEO of Rail Systems business unit, joining via Zoom from London. With Andrew joining remotely, to hopefully avoid any technical mishaps, I will talk you through the Mobility Sector presentation, and invite Andrew and Shinya Mitsudomi-san to join answering your questions. So please turn to Page 1. I have 5 key messages to give you today. Number one, we are ambitious and confident to outperform the market, targeting JPY 1.85 trillion top line, double-digit profitability and above 13% ROIC in 2025. Now whilst the pandemic has been a very difficult management challenge, we are enjoying strong recovery in buildings. In China, gaining #1 market position, and we have secured some amazing major new contracts for rail in the U.S. Number three, we are focused on profitability and growth. During 2020, we launched transformation programs to reduce costs, improve competitiveness and strengthen our global governance. We are targeting further growth expansion in Asia for our Buildings business and expanding on our increasing presence in the U.S., aligned to the Biden administration plans for public transportation investment. Point #4, we continue to invest in new technology to both enhance public safety and to play a part as a climate change innovator. And finally, we have acquired 2 notable companies and continue to divest noncore assets. Perpetuum is an intelligent IoT sensor company which is playing a key role in the connectivity of product designs and Yungtay is a really great business and the #1 elevator company in Taiwan with bases in China. You may remember that Hitachi brought an initial stake in Yungtay back in 2018. However, we have now increased our stake to 70%, and have agreed to acquire the remaining shares by the end of the year, which is really great news. Please turn to Page 3. Now this shows the Mobility Sector within Hitachi. Throughout the presentation, I will refer to the Rail business as RSBU and our Buildings business as BSBU. I apologize for the jargon. Let's turn to Page 4. You can see our relevance. In 2020, Mobility contributed 13% of the overall Hitachi revenues at JPY 1.2 trillion, which was a 5% year-on-year growth compared to 2019 despite a very strong COVID headwind. Turning to Page 5. Let us have a look at the business units and leadership. RSBU contributes 45% of Mobility revenues with a balanced portfolio of rolling stock and signaling in turnkey, topped up by a growing Maintenance business. The business is fully global with a presence in 38 countries around the world and a full product and service lineup. So let me introduce Andrew Barr, CEO. Andrew has been with Hitachi for 17 years and has been CEO of RSBU since April 2019. Andrew was previously CEO of Ansaldo STS following the Hitachi acquisition in 2015 and has overseen the full post-merger integration of STS into the group. This has established a truly global footprint for the Rail business to build on. Now let me introduce BSBU, which is split between new installation elevators and escalators and service and solution businesses. In Japan, the market is very mature, and our business is dominated by service. However, in China and Asia, the market is still growing strongly. So our new installation business is dominant, but with significant opportunities for expansion in our service business. Mitsudomi-san is a highly respected business leader who became a CEO in April 2020. He has immediately applied his global business experience gained from a career in Hitachi's global rail business to kick off the transformation program within BSBU, aiming for JPY 1 trillion top line and 12% adjusted operating profit by 2025. Please turn to Page 6. Now let us look at the progress of our midterm plan. We plan to exceed our original revenue target of JPY 1.27 trillion. As you can see from the chart at the top left, our mix has changed with top line RSBU caused by the COVID pandemic, offset by organic growth in BSBU, aided by a quick recovery in China and the consolidation of Yungtay. From a margin perspective, we expect to rebound in 2021 as the volume returns in RSBU in the second half of the year, and we continue the successful transformation of BSBU. Now from an EBIT point of view, we successfully divested a second tranche of our stake in Agility Trains. As a reminder, Agility Trains were set up as 2 special purpose companies. Agility Trains West and Agility Trains East to finance the purchase of the IEP trains in the U.K. Following the successful delivery of the trains, we sold down the first tranche in Agility Trains West in 2018. And in 2020, sold down a second tranche in Agility Trains East. And in BSBU, we have been tidying up our portfolio of noncore assets, selling off some surplus land and buildings redevelopment. Now let's have a look at Railways in a bit more detail. Please turn to Page 8. Now according to the European industry body, Unife, the global railway market is expected to grow at 3% compound annual growth rate to JPY 7 trillion by 2025, which is solid. But the digitization of rail is expected to grow at 7% compound annual growth rate to JPY 1.9 trillion by 2025, which is a great opportunity for Hitachi. The chart on the right side shows our relative market share, and it should be noted that this excludes CRRC, the world's largest railway supplier, but mostly a domestic player in China and shows both Alstom and Bombardier Transport. However, Alstom has now completed the acquisition of Bombardier Transport. And this acquisition positions Alstom as the #1 global rail supply company, but this has the added benefit of elevating Hitachi Rail to global #3, which we believe gives us more opportunities in the market. On Page 9, you can see the relative position of the business as we target moving to double-digit operating profit, an JPY 850 billion top line in 2025. We expect significant post-pandemic investment in public transport to boost economic activity and reduce CO2 emissions, particularly in Europe and the U.S. and recovery in emerging markets. We are the local leader in Italy, strong in Japan and the U.K. And in 2020, we have massively delivered on our U.S. expansion strategy that we talked about at our IR Day in 2019. Firstly, we secured a fantastic JPY 84 billion contract to modernize the signaling for the Bay Area Rapid Transit system, known as BART in San Francisco, which is a huge win for us on the West Coast, followed by a huge contract valued at up to JPY 240 billion to supply new metro cars for Washington, D.C. This new contract in Washington, D.C. will be supported by the construction of a new rail car assembly plant in the Washington area to serve our North American expansion, and it will be similar in size to our Newton Aycliffe site in the United Kingdom. On Page 10, we show our strategy. Now railway is a key technology for decarbonizing mobility, and we see the combination of green technology and Lumada to be the growth engine for the future. We expect strong growth in next-generation signaling and smart infrastructure, where we can work in partnership with our recent acquisitions of GlobalLogic, and Hitachi ABB Power Grids. In addition, we are following adjacent and disruptive technologies, such as Hyperloop and are partnered to supply safety through digital signaling technology to watch this new technology development. Hyperloop has proposed future mode of transport for passengers and freight using pods traveling in vacuum tubes to enable speeds of up to 1,000 kilometers per hour. Further cost reduction is -- potential is good with AI-driven predictive maintenance and analytics accelerated by the integration with Perpetuum. The Perpetuum sensors are self-powered and fit-and-forget, so giving enormous potential for data harvest and analytics. On Page 11, we showcased some of the exciting innovations and projects we are involved in to decarbonize rail travel. In the U.K., we have a large fleet of intercity trains, the 800 series or IEP. Unfortunately, these trains were recently in the U.K. media as a few small stress corrosion cracks were found during routine inspection by Hitachi maintenance engineers. The fleet was temporarily withdrawn from service as a precaution. However, the fleet was safely restored to full operational service and repair plan is in work with our stakeholders. We sincerely apologize for the disruption to our customers' operation, but safety is our highest priority. And therefore, we did not hesitate to take immediate action. I can assure you that this issue is a very local and specific issue to this train design and is not present on other Hitachi trains. This has slightly impacted profitability for FY '21, which has been included in the forecast presented today. Anyway, these trains are very innovative and novel and that they can use either electric or diesel power. We have partnered with a U.K. company, Hyperdrive, to develop a battery to replace a diesel engine to study the feasibility of this technology and the potential across the fleet. In Italy, we are delivering hybrid trains using battery technology. And in Florence, we have successfully demonstrated a battery tram with the potential to remove ugly on-street power cables and reduce the disruption to cities implementing eco-friendly tram systems. And finally, here in Japan, we are launching a prototype hydrogen train in partnership with JR East and Toyota. So lots of exciting innovation. On the next page, we are demonstrating our support to the sustainability agenda. Our business contributes to environmental values, social values and economic values, helping save the planet and delivering safe, comfortable travel to millions of people each year. The environmental value of rail travel is completely aligned with my role as Chief Environmental Officer of Hitachi, and we will be showcasing our latest eco-friendly rail technology at COP26, the Global Leaders Climate Change Summit in Glasgow later this year. On Page 13, we have a risk analysis. The pace of global recovery from the pandemic is uncertain but initial signs are encouraging. In Europe and North America, we are hearing positive news of post-pandemic investments with figures of EUR 2 trillion in Europe and $2 trillion in the U.S. being committed. Page 14 provides a summary of what I've just said as we target over 50% post-pandemic growth recovery and double-digit profitability with recovery in all lines of business, supplemented by new digital opportunities such as Mobility as a Service. Mobility as a Service covers a range of software applications from smartphone location-based ticketing to further applications focused on the passenger experience, which we expect to grow in the coming years. In addition, we are working with a number of key customers who are seeking to transform their adjacent bus operations to electric bus. We have developed technology in partnership with our Lumada team to manage the various constraints introduced by batteries such as range and optimum life management. And we expect many bus operators will face challenges as they migrate to electric, and we have some core technology to help. Now let's move on to Buildings business unit. Please turn to Page 16. Here, we see the macro trends affecting the buildings and elevator, escalator markets, such as continued population growth and urbanization. These remain positive. However, the big acceleration we predict to be in the digitization of buildings forecast to grow at a compound annual growth rate of approaching 15% with significant potential for both cost efficiency and the creation of new revenue streams. On Page 17, we are showing the relative market position of our business compared to the competition. Whilst we are smaller than the global top 4, we benefit from a concentration of our business in Japan, China and growing markets in Asia. Our large installed base in Japan drives service efficiency and our significant volumes in China is driving standardization and both the service potential through our rapidly growing installed connected base and the platforms for targeting additional growth in Asia. We have set ambitious yet achievable targets of JPY 1 trillion of annual revenues in 2025 and global levels of profitability through a focus on standardization, scale and digitization. For the first time in many years, we have seen changes at the top of the elevator sector with ThyssenKrupp elevators being acquired by private equity for over EUR 17 billion and OTIS being separately listed. Now both of these deals have shown how highly valued this sector is to investors. And our business plans take us to a similar size to Thyssen, with a higher level of profitability. Moving to our Management Vision on Page 18. We are focused on the potential of digital, combined with a product refresh, driving standardization and simple designs and ultra-efficient service offering by utilization of over 30 years of data from our installed base and AI. We continue to collect data on our large installed base of assets, and we see significant opportunities for additional digital services to add value to both building owners and tenants. The acquisition of GlobalLogic is an exciting opportunity as we look to co-create new buildings-related applications to build on our [ Build Mirai ] IoT platform to deliver additional value. We see expansion opportunities in our Building Solution business utilizing the [ Build Mirai ] IoT platform, which can remotely monitor and integrate data from a wide variety of data sources with buildings such as air conditioning, elevators, and can monitor people flow to contribute to building's efficiency and identify security issues. To complement [ Build Mirai ], we have developed [ Build Pass ] which is a suite of applications targeted at building users to connect services within the community, which we expect to grow with ongoing innovation. We believe that the potential for digital within buildings is really significant. On the next page, Page 19, our growth strategy is to accelerate business digitization, strengthen our service offering and further streamline our cost structure. We were challenged to become a market leader in our core markets for Building Solutions through leveraging standardization of designs and delivering the benefits of scale to further drive down costs in both supply and service. Our brand remains strong as we are committed to safety and quality and further developing our key customer relationships. Throughout 2020, we launched our transformation program to further drive digital efficiencies through everything we do and deliver our full potential. I am confident that we can further exploit digital transformation and increase digital differentiation. We have become the majority shareholder for Yungtay and we'll be seeking to acquire the remaining shares by the end of 2021. We have exciting plans for growth for the business to deliver growth in Asia and open new markets in Tier 3 and 4 cities in China. So please turn to Page 20. From a regional perspective, the Japan market has been impacted by COVID in 2020, especially with many new modernization projects delayed. We have worked hard to support and retain customers and look forward to a recovery from FY '22 with our new UA-21 standard offering elevator, touchless technology and smart digital building co-creation with our customers. In China, demand recovered quickly in 2020, and we delivered a record number of new installations. We expect continued growth and see benefits from expanding into new markets with Yungtay and expanding our service business on the back of our expanding installed base. In Asia, we are strengthening our local presence and seeking further market opportunities with our competitive standard designs made in China. And finally, the efficiency and differentiation potential of digital is very much in our sites. Over the page to Page 21, please look at our growth factors and risk assessment. The growth factors have already been covered. But from a risk perspective, the office real estate market is unclear as post-pandemic working styles are yet to emerge. However, we also see this as an opportunity as real estate could be increasingly modernized and our transformation program will deliver better cost efficiency, increased standardization and simplification of products and new digital services. And finally, for BSBU on Page 22, we look at our impact on society and the environment. The pandemic has driven a lot of innovation in touchless and digital innovation to further safety and increase resilience to disasters. We have committed to the Hitachi target of 100% reduction in CO2 emissions from our manufacturing facilities by 2030 through energy saving and switching to renewable energy and are committed to reducing the impact of our products and services on the environment. In R&D, we continue to invest in research for energy savings, COVID safe environment, and disaster protection. So in conclusion, on Page 24, we show the top level numbers. We plan to grow by a further 5% for 2021, with profitability recovering in RSBU to pre-COVID levels. ROIC moves up to 10.6% and will be greater than 13% by 2025. On Page 25, we look forward to a bright post-pandemic future for Mobility. Business transition projects are underway and delivering early benefits. And we seek further expansion, building on our hugely exciting massive contract wins in the United States for rail and the opportunities from the post-merger integration with the excellent Yungtay and expansion to our Buildings business in Asia. So finally, on Page 26, I want to leave you with our ambition. In 2025, we are setting aggressive yet achievable targets, shooting for JPY 1.85 trillion top line, double-digit profitability and above 13% ROIC. Thank you very much for your attention.

[Interpreted] Thank you very much, Mr. Dormer. We would now like to open the floor for questions. In addition to Mr. Dormer, we also have Mr. Shinya Mitsudomi, Vice President and Executive Officer and CEO of the Building Systems Business Unit; as well as Mr. Andrew Barr, Vice President and Executive Officer, CEO of the Railway Systems Business Unit answering questions. [Operator Instructions] Mishuzima-san, please.

[Interpreted] Today I have 3 questions. I have a question regarding the building system. All 3 questions for the Building System. First is for the period ended March 2021. What is your view in terms of profitability? How do you evaluate the profitability and talk about the background leading to this? In the first half in China, the mass market was acquired. And therefore, revenues increased as well as earnings and profitability improved. But in the second half, the profitability declined. After the Chinese New Year, the mix changed, what is the background? So please elaborate further for the period just ended. The second question is regarding China. Again, your take on that. Now -- but some timing seems that -- for new builds, I think there will be harvest time in terms of increasing business. And it seems that the third quarter and fourth quarter, the profitability was declining. Do you think that the profitability is going to improve going forward? Please illustrate what is midterm, long term and short term in terms of profitability. Now you have talked about the ROIC of the Building System. In the Mobility System, ROIC overall is 10%. And I think it is going to be higher. Is it 20% for Building Systems? Please talk about the ROIC for Building System.

Mitsudomi-san, would you like to answer?

[Interpreted] Thank you. Answer to your first question regarding '21 March period that's just ended, especially for China, you have asked a question regarding profitability and the background on the road. In terms of improving profitability for China, it seems that the second half has declined. But overall, it has been very stable in terms of profitability. So there is no source for any concerns. And regarding your second question, as you have rightly pointed out for the Chinese operations, based on new buildings, we have been able to grow our business. Demand remains very strong. And because of the structural reforms for renovations as well as new buildings, we have been able to grow our business. Going forward, service ratio remains lowest. We believe that it will continue to increase. We have high expectations. But there is an impediment. The remote maintenance that is being introduced in Japan, where people do not have to be sent to the site, has not been introduced in China because of legal constraints. But we are moving toward deregulation of this. That means that remote maintenance will be enabled, which will mean higher profitability from that type of business. In the time frame, it should be realized in several years down the road. To your third question regarding our ROIC. In terms of sector, we are discussing, but not as a BU. Therefore, I'm very sorry to say that we cannot respond to this question. But basically, the average for -- is better than the Mobility Sector average in terms of ROIC for our business unit. Thank you.

[Interpreted] Next is Osaka-san.

[Interpreted] Can you hear me? In the U.K., the Class 800 and Class 385, the issue with the rupture. Earlier, Dormer-san mentioned that it is limited to certain trains, and it's not happening in the other trains. And the reason why it is not going to be seen in other trains is because of the design or the material? Could you elaborate on those points? That's my first question. The second question is related to Hyperloop. You talked about Hyperloop in the presentation. So how would you be taking initiative in the project of Hyperloop? If you could elaborate on that, I would appreciate it.

Thank you very much for 2 excellent questions. As Andrew Barr has been right in the middle of the Class 800 issues in London, could I ask Andrew to comment on those 2 questions, please?

Yes, thank you for your question. With regards to the issues on the Class 800 trains, they are quite specific to that design of train, which is only used in the U.K. As was mentioned earlier, we believe this was stress corrosion cracking, which was exacerbated by the use of the lifting equipment of the trains in the depots. However, we are running the trains in service, and we are confident that they can continue and are able to operate safely. We don't believe this issue applies to any other trains in the Hitachi fleets in other parts of the world. With regards to Hyperloop, it's quite an exciting opportunity for us to take part in that project. We joined it as an input for the control systems using our signaling technology. And we've been able to actually input a lot of work into the design of that system. And so we're going to be continuing to support the project as it moves forward. At this point in time, it's an exciting project which we're keeping an eye on to see in which direction it takes next, but it's a good chance to be at the start of a project as this new technology develops. Thank you.

[Interpreted] Next question, please. We will take questions from the English channel now. [Operator Instructions] There is an English channel person wishing to ask a question. Boehring Kurvata-san?

Yes. I just wanted to ask about market opportunities in the U.S. regarding Rail business. So as you pointed out, the Biden administration is proposing to invest in transportation, I believe, about USD 100 billion within the JOBS plan. So I guess the 2 projects you -- project wins you mentioned, the BART and the Washington, D.C. projects are, I guess, not included in this upcoming investment. So should we think that these investments going forward, public investments should provide further upside to your current earnings forecast? Thank you.

Okay. Thank you very much for your question. I -- it's not clear to us whether the investments in BART and in Washington, D.C. were included in the Biden administration big numbers. But regards of that, the market opportunities in the U.S. look very, very positive. We have included growth in the U.S. in our forecast because as you can see, we are forecasting top line growth of 50% over the next few years for RSBU. And that growth will come in the U.S., but also will be coming in other emerging markets. So the good thing is, we've been in the U.S. for a number of years with our signaling business. We've now established a strong presence on the West Coast with BART and we will be establishing our railcar manufacturing facility in Washington, which is very important for Buy America. So I'm very optimistic about our future potential in that market.

[Interpreted] [Operator Instructions] We still have some time, so we would like to take the question from the Japanese channel. [Operator Instructions] Hirakawa-san?

[Interpreted] I have 2 questions. The first question, Dormer-san, in your presentation, you have mentioned about the CO2 reduction initiatives are going on. In the railway market, CAGR 3% is what you're aiming for. And the investment increase in the Western countries, does it -- would it be impactful so that it would go beyond the CAGR 3% level? That's my first question. My second question in the Rail Systems business, in improving the profitability, I think that you have named some items. Out of that MaaS, what kind of sales are you envisioning? And what is the profitability that you're envisioning? And would you be conducting a low-cost operation with the plant in the U.S.? How would you be able to conduct the low-cost operation? Those are the 2 questions I would like to ask. Thank you.

Thank you very much for your good questions. And let me take the first one as I am Chief Environmental Officer, and then pass the second one to Andrew. So from a CO2 perspective, we are seeing enormous interest and, finally, enormous amounts of investment committed to environmental infrastructure, both in North America under the Biden administration, as was previously mentioned, and in Europe, but also plans now in place here in Japan and in China. We see rail as a climate change innovator. We see further investments will be put into rail systems. The 3% compound annual growth rate, I believe, is probably on the low side considering we've just come through a pandemic and the fact that many governments are looking to make significant investments in railways to take people away from road transportation, which is obviously, much less environmentally friendly. Andrew, could you comment on Mobility as a Service?

Yes. Thank you for your question. Slide #14 in the pack gives you a little bit more detail, and you can see the impact that MaaS has on our projections to FY '25 and also the consequential profitability increase. This is a new business area for us, so we're looking at adjacencies in our business. So where we already have good relationships with customers, particularly in places and cities, we're looking to expand that by using other parts of Hitachi, particularly digital and our partnership with GlobalLogic, to actually enhance people's journeys by adding digital impact to the overall journey through that information and the management of the complete total rail system. So it's quite an exciting development for the overall business. And as you can see, actually makes quite a difference to the way that the business will perform. With regards to the Washington plant, that's a very important new plant in our business. We want to make that successful and to continue to deliver for many years to come. So we're looking to make sure that we target key opportunities for rolling stock in the U.S. that enable it to have a strong performance in particular to be profitable. So we are already, in addition to the Washington order, looking for other orders that can follow on to enable us to keep that plant performing well into the future, in line with the investment that we've already heard that's being made by the Biden administration. Thank you.

[Interpreted] The time has come to bring this session to a close on Mobility Sector. The next session will start at 2:00 on the topic of the Energy Sector. Thank you. [Break]

[Interpreted] Next, we will proceed to the presentation of the Energy Sector. The presenters will be Toshikazu Nishino, Executive Vice President and Executive Officer; Claudio Facchin, Senior Vice President and Executive Officer, CEO of the Power Grids business unit. We'll be switching over the screens. I beg your indulgence, we'll be starting shortly. Nishino-san, please.

[Interpreted] This is Nishino speaking, Executive Vice President. Thank you very much for your attendance today. I would like to talk about the current status of the Energy Sector as well as the growth strategy of the sector going forward. Today, there are 3 messages I wish to share with you. The first is the growth in the renewable energies. Therefore, we have tailwind in the business environment. Second point is regarding the ABB Power Grid acquisition has led us to prepare for the business growth going forward. PMI for this area is proceeding very smoothly. Even though we have been beset with COVID-19, 1 year later than the scheduled time, it is likely that our target will be met. And for the next medium-term management plan, the double-digit growth should be achieved even with respect to the amortization. Even with amortization, I would like to give you an overall explanation first. And then the Power Grid business unit will be explained by the leader of the Power Grid business unit, Claudio Facchin, will provide the explanation on that part. First of all, let's look at Energy Sector's positioning. As you can see here, Power Grid Energy and Nuclear Energy business unit within the Energy Sector. The Power Grid, the T&D business is included in this area. And Claudio Facchin is leading this business unit. Energy is mainly renewable energies as well as related services. Nuclear Energy is the service that we have been providing from the past and we start dealing with Fukushima are also included in this business. This is looking at the positioning of the Energy Sector, 13% in terms of revenues are shown here. And on the part of the Hitachi ABB Power Grid has now been added. Therefore, the sales is 68% as shown here and the global revenues are increasing significantly. This is the current state. And as you can see from this page, the composition has changed significantly from the energy business of the past. Therefore, new changes have been made and this process has run its full course. There is hardly any relating to fossil fuels any more. From the left hand side, Power Grids business is shown here. Domestically, the 50 hertz and 60 hertz, the connectivity is being managed by Hitachi. We are making improvements to the energy environment in Japan. And the wind power generation, HVDC is also integration that we are pursuing. This is also a tailwind for us. A significant business growth is seen here. Energy business in the middle, this is wind power generation as well as solar power generation. Services are increasing significantly here and there's high expectations for growth. Semi power -- semiconductor is developed and used on the part of Hitachi. This is only for energy, but from mobility, railway as well as automotive, systems are utilizing our power semiconductor. Third area is our Nuclear Energy businesses. So low carbon is expected, and we are now working on the decommissioning at Fukushima as well as providing support for restart of nuclear power plants. Next, I would like to talk about the growth strategy going forward. I mentioned that there is tailwind in the market. The Zero Carbon is called for overseas as well as Japan as well. Green growth strategy was announced only last week. And on the right-hand side, I'm not going to go through each of these points, but there are areas that we are handling. We are making a significant commitment in terms of green growth. We have been front-loading this trend to establish a business to accommodate these needs. From the morning today, Higashihara-san as well as Kojima-san has mentioned that Hitachi is very much focused on providing value to society, environment, resilience and sustainability. Security and safety are very important for us. Inclusive of stable supply of energy, these are all areas where our sector can make a significant contribution. Then why can we make our business stronger? I'm trying to talk about strategy, left-hand side should you refer to. This is in comparison with the other peers. The pie chart showed that Hitachi is the top runner, overwhelming first place in the world. This presence in the market can be combined with the digital in the second column for further modernization. This is what we are proposing. Grid is old infrastructure and the modernization thereof is a culture, which can be driven by digital technologies. On the right-hand side, it is -- talks about service solutions and that can be enabled by digital. On the part of Hitachi, our -- it's very similar to Hitachi overall status. Digitalization utilize for modernization, as you can see here. And Higashihara-san and Kojima-san mentioned that service solutions will become increasingly our focus going forward. And we can realize this in our sector as well. And this is going to be the source of our competitiveness. Next page, please. Now when we talk about the Services & Solutions and growing the market, the global footprint will be of utmost importance. This is showing the global footprint for our business. As you can see here, we have a good coverage of the world. And in Europe and the Americas, as well as India, now trying to recover from COVID-19. Energy-related investment as well as green investment is increasing, which is a tailwind for us. In this area, orders are increasing very significantly for our sector. It is driving the growth in performance. Please note, there are 5 boxes below. Percentage is shown here as well. When we talk about the Infrastructure business, it is considered to be very similar to the growth in the GDP. And as I have already mentioned today, out of energy, the area of growth have been the focus of realignment of our portfolio. And these are areas where the growth of the company expected higher than GDP, as shown here. Now I'd like to talk about cost, which is issue in terms of operational excellence. The internal distal and back office shared services, as well as CRM for digital to support our customers are outlined here. All these 3 areas are the assets that existed in ABB. We are now combining this with Hitachi to enable this further. Operational excellence can be further enhanced. Hitachi's overall level can be enhanced as well. The bar graph is shown in green. It is green for a reason. Carbon neutrality will be achieved by '30, in fiscal 2030. So we have to lead this effort. In order to realize this plan, the energy usage within Hitachi has to become greener inclusive of the hydrogen, renewable energies as well as wind power will be utilized. This will be the direction for us going forward. Now for the sector overall, I would like to summarize. This is showing the '21 to '22 and the '24 to '25 changes that we hope to achieve. You can see revenues are increasing very significantly in terms of the investment environment is tailwind for us. There are also synergies that can be brought to bear inclusive of digitalization. And this is achievable according to our view. There are 2 broken lines in the curves. When we make acquisitions inclusive of digitalization, there will be one-off costs that will be incurred. And the red below is including that. And with regard to that is showing on above this is also PPA included -- is reflected as well. For '21, we'll be able to achieve the midterm management plan and target 1 year delay. And in '22, '23, we should be able to achieve double-digit. In terms of the operating income ratio. This is the overall summary for this part. Hitachi ABB Power Grid is now included in our sector. We will continue to drive value together. As I have already mentioned, renewable energy's investment is tailwind for us by utilizing this. And we will be able to achieve the midterm management plan 1 year delayed and '22, '23 we should be able to achieve double digit. I think this is a commitment that we can make for you. From here onward, this is -- by the way -- this is our slogan. Hitachi ABB Power Grid, Claudio Facchin will follow now and talk about the current state as well as strategy going forward. Claudio, please.

Thank you, and good afternoon, everyone. Next slide, please. Let me start by giving you an overview on how we come together as Hitachi ABB Power Grids and Hitachi, to create a unique customer value proposition. We are bringing together leading platforms, both on the energy side and on the digital side. And as Nishino was just mentioning, with the primary goal of enabling sustainable energy future. We serve utilities, industries, transport, and infrastructure, and we serve them with a broad portfolio of products, systems, services and software. And of course, joining forces with Hitachi, we have a tremendous opportunity to leverage the Lumada ecosystem that brings in the OT, the IT and of course, all the sectors within Hitachi that creates additional opportunities for us and access to market. Now on the next slide, allow me to give you a recap. Starting with who we are, well positioned, #1 leading player globally, present in over 90 countries and with a well-balanced portfolio in terms of regional presence, in terms of technology and also very important with an unparalleled, unmatched installed base. We are in attractive markets. We see the market CAGR around 3% on an approximately $100 billion total market that we serve. And what is more important is that we have a number of what we call high-growth segments such as renewable integration, power quality, grid-edge solutions, automation and software. And all these segments are growing 2x to 3x the market. We're transforming ourselves. We continuously drive improvements looking at growth, portfolio and business model competitiveness and world class execution. And of course, we leverage our 2 foundations, innovation and people. And all of that will allow us then to deliver on our commitments, profitable and sustainable growth. But it's not going to be only about growth, as you can see in the right-hand chart, we are pushing a shift on the portfolio. We know that the new needs, the future needs of the market will be toward more services, toward more digitalized products and systems, and therefore, pushing with our strategy towards that direction to strengthen our #1 position and continue to grow faster than the market. If you go now to the next slide, starting with the market perspective, on the next slide, first of all, it is clear to everyone, and we see this more and more by all stakeholder representing, and confirming that electricity will be the backbone on the entire energy system. And finally, what we show here is that we see the world aligning into #1, the urgency to mitigate climate change; and #2, that to achieve carbon neutrality, electricity precisely will be at the center and will be the backbone of this entire energy system. When you look at the increasing number of countries and regions that have committed to climate neutrality by 2050. When you look at, then also, the IEA recent report that shows that the global grid investment need to almost triple and reach $800 billion by 2030, in order to expand, modernize, digitalize electricity networks. And this represents over 1/3 of the USD 2.2 trillion expected to be invested in the global power sector. Now what I want also to highlight is that also according to the IEA Board Energy Outlook 2020, it is not enough to avoid new emissions. We have to focus to meet the 1.5-degree global warming containment goal also on the existing infrastructure. And that is an important part for us because, as I mentioned, we basically have access to the single largest installed base in the grid and the networks. And therefore, we are also investing to make sure that we help our customers on decarbonizing the existing infrastructure. Finally, it is also clear that this is a global challenge and that will require global collaboration. And once again, now being together with Hitachi, we have an opportunity to strengthen our base, to strengthen opportunities, to collaborate with customers and partners. And when you look at then the next slide, as presented, environment, resilience, security and safety, the 3 key areas for Hitachi are also at the heart of our approach to enable an acceleration of the energy transition based on social, environmental and economic goals. When it comes to environmental, for instance, integration of large-scale renewables. When it comes to resilience, we're addressing the infrastructure. We push our efforts to minimize the impact and mitigate the consequence of unexpected failures. And of course, looking at security and safety, we are right at the center as serving mission-critical infrastructure operation on securing with flexible, physical and cyber technology concepts, the safe and secure operation. Now let me give you a few examples on how jointly with Hitachi. If you go to the next slide, we can support this energy transition and our customers to meet their goals. On the next slide, you see that with electricity being at the center of the energy transition and both renewables expected to be the biggest contributor, HVDC, a technology that we pioneered, will hold the key to integrate large-scale renewable, often remotely connected. And of course, in the case of offshore wind, also vast majority that requires technology to minimize the losses and connect reliably. We, as the market leader in HVDC, have an unparalleled track record with over 120,000 megawatts. That means roughly half of the world's installed base. And if you look at on this slide, we're representing a specific step that we took by continuously innovating, that we delivered our HVDC light substantially with lower losses, and we managed to reduce by that, the footprint during the life cycle of about 2/3, which means potentially saving millions of tons of CO2. And of course, as I mentioned, offshore, one of the key applications that sees HVDC -- and as a technology to enable that transition as well as, of course, interconnections. Now another example on the next slide is collaborating with customers and partners to reduce carbon footprint of the electricity system. We have launched just recently our EconiQ eco-efficient portfolio that delivers superior environmental performance compared to conventional solutions. And also recently, we have been collaborating to announce the use of a game-changing eco-efficient insulation gas that is expected to accelerate the adoption of industry standard solutions. On the next slide, it's about digital. Digitalization across the power value chain holds the key to addressing new supply and demand complexity as well as optimizing performance and asset management. Joining forces with Hitachi Lumada ecosystem, we are uniquely positioned to create additional value for customers by turning data into actionable insight. And in this sense, we already took the first steps by seamlessly integrating the portfolio of asset performance management, of enterprise asset management and workforce management into the Lumada ecosystem. And last but not least, we also look forward to the planned addition of GlobalLogic to the Hitachi family, as we already see opportunities to generate additional synergies in the future. On the next slide, resilience. It's an increasing area of focus that needs to be addressed by deploying best-in-class technology. And as an evidence of this, we just show some of the recent large-scale power cuts that we have seen globally. And when it comes to our efforts, when it comes to developing technology that helps our customers and help mission-critical infrastructure to manage, mitigate and limit the impact on those unpredictable events, whether it's natural disasters, weather patterns and, of course, physical and cyber attacks. On the next slide, it's about also accessing the third largest economy for us, Japan, which is also one of the largest markets and with the recent commitments on carbon neutrality also generates a number of significant opportunities for us to be part of this acceleration and to be part of supporting Japan energy transition. The commitment to net zero by 2050 is there, but it's also important that there is a clear commitment to reduce 46% emissions by 2030. And part of that plan will also be to massively invest in offshore wind. And yet again, we have the technologies that will integrate, whether it's offshore wind, but also grid-edge solutions, also controls, automation and software that will help optimizing the overall electricity system. Now allow me to move to the next one and take a few minutes to give you the background of -- in the next slide, our business life cycle, our operating model that provides a solid platform for our ambitious profitable and sustainable growth. Starting with our mix of the business, goes from components to large systems. And this results on average conversion cycle of approximately 18 months from orders to revenues. But as you can see from the illustrative picture, it varies a lot, whether we're serving with engineering services during the development phase, when we deliver to implement the CapEx investments of our customers and more and more engaging with our customers throughout the life cycle by service, software, and also some specific products and technologies that have, yes, a shorter cycle and they create base business with, of course, earning accretion, but they also allow us to stay engaged with our customers throughout the life cycle of those assets. Larger system orders are, by nature, harder to predict. But are an essential part of our portfolio. They provide access to market, they provide pull-through and synergies for the rest of the portfolio. So as a leading player, we leverage and balance the breadth of the portfolio, making sure that we apply the right business model to each and every part of that portfolio. And as a leader in this market, we are also driving innovation on the business models. We've been pushing to deploy technologies such as offshore wind, HVDC grid connections by partnering with leading players delivering the complementary scope while we focus on our core technology and our core competencies. From a cycle standpoint, we are rather on the late cycle, but yet again, if you look at how the market is developing, we're really getting into our own cycle, I would say, and that is because of all the recovery plans pushing toward green, renewable electricity, pushing toward the energy transition. Let me now show you in the next slide. How we drive the transformation and the continuous improvements, that is an approach that has been yielding tangible results, starting from the orders received, despite the challenging times that we all faced during the pandemic, the team has done a fantastic job managing 6% growth on the service business. Also on the portfolio side, we managed to deliver approximately $700 million worth of orders for the integration of renewables with HVDC technology and, as I mentioned, with the new business models. And of course, we had to work harder during this period on delivering savings, and we managed during the last 9 months. So the 9 months starting July 1, 2020 with Hitachi, to deliver an incremental $50 million worth of savings through supply chain and operational efficiencies. So as you see from the chart below, we look at all the pillars to ensure that we deliver on our commitments. The growth element and initiatives, the portfolio and competitiveness elements, the operational excellence element and of course, now we're also adding the synergies with Hitachi. We have established a solid program with various work streams that look at creating synergies, both on the growth as well as on the cost. And Nishino mentioned a few of those in his presentation. What I want to take away here is that there was a clear dent in our COVID period during last year. We're still coming out of that phase. We're looking forward to the recovery plans to support the growth, to support our acceleration towards the double-digit commitment that we have. And it is clear also that our market outlook today, post-pandemic, it's clearly stronger, better than what it was before the pandemic because of what we mentioned before. So to conclude on the next slide, we're really encouraged by our market opportunities and we're well positioned to deliver jointly with Hitachi on our vision of powering [ good ] for our sustainable energy future. We're well positioned in a market that is attractive and has high growth opportunities, and we're leading in that market also from a transformation standpoint. We drive profitable and sustainable growth with a competitiveness focus on our portfolio and innovation as well, of course, as driving continuous improvement across execution. As mentioned, the COVID had an impact, but the market post-COVID has a better outlook, and this will enable us to deliver on our targets. Number one, we want to grow faster than the market, and that will support us getting to the upper end of our margin corridor 8% to 12% operational EBITA by 2024, 2025. So jointly with Hitachi, we will continue to look for front end as well as operational synergies, and we will continue to focus jointly on delivering social, environmental and economic value. I think we have a very solid path. The bridge has very solid foundations, and we're all excited to the journey in front of us. Thank you.

Thank you very much, Sasan. We would now like to move to Q&A. The questions will be answered by Nishino and Facchin as well as Mr. [ Higashihara ] of the Energy Business Administration division. [Operator Instructions]? Please mute and ask your question in Japanese.

I have 3 questions. The first 2 question is regarding Power Grid and the third is regarding nuclear business, Nuclear Energy. Now regarding the Power Grid business on Page 19, explanation was given. After this, $11 billion -- $10 billion is going to grow by 3% going forward, according to what you have here. Regarding this $10 billion, Hitachi ABB Power Grid available market to you. I think it's not the whole thing. I think it's part of this. So specifically, what is the available market for HAPG? Furthermore, in terms of products and services, what are areas that you do not cover? And also what are the areas that you do cover? Please distinguish between the 2? I'm sorry that it's a long-winded question, but I understand that the market is growing by 3%. But for you, if we look at the available market for HAPG, is it going to be -- I think it's going to be more than 3% growth. So if there is another number for your business independently, what will it be? So second question is relating to Page 19 as well. On the right-hand side, it shows the composition of the business areas. And on the left-hand side, the pie graph is shown and I think they are corresponding to each other. So judging from this and through 2025, in terms of hardware product, revenues are likely to decline. That is my read. Is that correct? The market is growing. So you might think that the hardware revenue will increase its own, but I don't think that's the case. So please elaborate. So that's my second question. Third question is regarding the Nuclear Energy business. Currently, for the Nuclear Energy Business Unit, I understand that a certain level of profit is generated. And as a business, it looks sustainable. But going forward, how sustainable is your business model in this area. Please elaborate? To generate profit over a long period of time, industry realignment. It may occur, and the nuclear industry may require redefining. So please talk about this in the context the overall nuclear energy environment in Japan.

Thank you for your questions. Answer regarding 1 and 2, I would like to ask Facchin to explain, address. But regarding available market for Hitachi? That's the first question for Facchin. And the second question is for 2025 in the portfolio, hardware products, is it going to increase or decrease in terms of ratio as well as amount? So those are the 2 questions for Mr. Facchin. Please respond to these questions now. Mr. Facchin?

Yes. Thank you. So starting with the available market. And of course, it depends on how we define available market, but the $100 billion that we see here is the market that we have access to and that we go after. And you're right, the CAGR of 3% is the average. There are parts of the market, whether it's trophy or even products and systems that are growing less than 3%. What I think is important for us, and this is part of our strategy, is that out of this total available market that we look at, we're focusing our efforts on, as I mentioned before, the high growth segments. And those are the ones illustrated in the chart. So it's, of course, about, for instance, electrification of transportation that creates new demand on a technology that we provide. It's, of course, on the automation, on the digitalization of the grid, renewable integration, HVDC, power quality, with FACTS devices. Data centers creates, of course, new demand that require higher power quality and therefore, again, specific technology that we deploy for that microgrids. They're all growing, as I mentioned, 2x to 3x. So it's about us focusing rather on that part of the portfolio. At the same time, ensuring that we create an installed base that allow us to generate service, life cycle services and software opportunities for us to work with our customers throughout the life cycle, as I mentioned before. Now on the chart, your interpretation is correct. The key part is that when we look at hardware, we're not saying that we will sell less hardware. What we're saying is that our strategy is to sell hardware that has more intelligence in it, that has sensing capabilities, that has digital capabilities that allow the customer to manage and optimize the life cycle of that asset with that digital capabilities that we add on those power transformers or switch here. So the overall market growth and also our portfolio need to grow following that market. Our ambition level is to grow faster than the market by delivering our portfolio and digitalizing that portfolio and increasing the share of the digitalized portfolio as well as software and services.

So let me also weigh in regarding our products and hardware. I think the content of the products that we are providing will change. It is going to become increasingly digitalized, as Claudio has mentioned. Therefore, we need to continue to provide products. And by so doing digital business can grow further going forward. When the products [ weaponized ] with digitalization is going to become increasingly important. Regarding the third question regarding nuclear energy, there are diverse discussions taking place on the part of Hitachi Limited, zero carbon, carbon neutral, the -- will require a certain level of nuclear energy. PWR is working and we are now making preparations for the restart. And on part, we have to do a good job in terms of Fukushima and also provide support for restart as well. In terms of the work for us, as well as business viability, we will do our utmost to secure that for Japan overall. And the industry overall going forward, was also asked in the question. We believe that our business can be maintained and I don't think it's appropriate for us to talk on behalf of the whole industry, but we will continue to do our utmost work in order to fulfill our responsibility. That's all.

Any other questions? Please unmute yourself and ask your question in Japanese.

So I have 3 questions. First is on Page 19. On the far right, digital service will increase, you mentioned. Before Hitachi acquisition, the digital and service shift your forecast before the acquisition, and now that it is integrated into Lumada, this growth may be accelerating from synergy. So what is the breakdown? Could you give me more image? And my second question is on Page 5. In the business breakdown, power semiconductor in energy, it's mentioned and in railways. As this part increases how much expansion, including external sales, how much increase in tower semiconductor are you forecasting? And third question, business opportunity in Japanese market, you mentioned HVDC possibility? What is the possibility -- probability of HVDC being adopted? Are there any other methods? And offshore wind is also being expected. But in power generation, you're not involved so much? Or could you elaborate?

Three questions. So I will answer all 3 questions. First, digital acceleration. The originally organic growth and the growth after they joined Hitachi, it's difficult to clearly explain. But for example, in digital system, ABB Power Grid is partially cloud, had already been cloud, but cloud-ready -- we gained great momentum, cloud-ready and great speed. And so how to use it is the key. Using Lumada is to use blocks of data to generate value. And therefore, we had to be cloud. And therefore, this may not exactly answer your question. It's not percentage-wise. But originally, ABB Power Grids had, for example, in [ EM ] it has the second best technology in the world, and this is used much in the power generation segment, but in public and industry and social infrastructure, it has to be on the cloud. And so we invested in the past year and shifted to cloud. And now many things are functional thanks to that. And we said on the power grid side and on Hitachi side as well, and we are promoting this right now. So I'm not directly answering your question, but after we joined hands, we are accelerating more. And on Lumada, we invested and recreated -- by recreated, I mean at an unnecessary basis. So we're doing that. So the number here is not a one side doing what -- we're doing it together from both sides. The shift to cloud is the key. And second, power semiconductor. As you correctly mentioned, in all areas, using energy, this is important. And so technology is shown on this. We use silicon, SIC is the new material device, and this is already launched in the market, and it's used in our rails and in automobile. It's not in big volume, but it's already launched in the market and is already used. It's proven. Now the key is which time we will invest, when to invest. Increasing volume will be necessary going forward. So what we do now is on the ABB side, this power semiconductor resource originally existed in Switzerland, it's a [ move ] and we already had one before. So both sides are combined to enhance. Combining both sales, it becomes a very high position. So your answer is -- in the automobile sector, we are already having that in-site. Semiconductor, I had experience with semiconductor in the past. It requires -- is it good to go into an area, the market which requires much investment? But we now stand in the point where we have good visibility. Now contribution to the Japanese business. In Claudio's slide, there was 1 slide showing message to Japan. And this is a clear message. So for Japanese market, including electric power company, we are receiving questions and answering those questions. And in the industrial sector, yes, there are many already. And the offshore wind and HVDC, as mentioned in the slide, 50 to 60 [ hertz ] transformation conversion, we have a few plans in place. So -- and it's still a planning phase, but in offshore wind from Hokkaido to Mainland Japan, there's a new initiative, new plans already being discussed. And we are receiving inquiries in most of them. And as mentioned earlier, this direct current, the transformer and control technology is required. And as Claudio said, we have the biggest amount of experience and we have the most advanced technology. And so for our future plan, Hitachi, we are confident Hitachi can contribute.

Next we would like to take questions from the English channel. [Operator Instructions]

I have 2 questions regarding the Power Grids business. Firstly, we understand you have a clear competitive advantage in HVDC, which would benefit from offshore wind, et cetera. But just focusing on software and automation, you are estimating market growth of up to 5% on Page 19. Do you think this is on the low side considering smart grid flexibility investments should increase going forward? Also, what is your competitive advantage positioning compared to players like Siemens, specifically in software and automation? Can you become the strongest player by leveraging Lumada and GlobalLogic? And my second question is, on the other hand, microgrids is showing highest growth of 15%. What are your capabilities in this business? I understand your strength is in the high-voltage space and low mid voltage capabilities were left within ABB. Is my understanding correct? Please advise how you can enjoy this growth market of microgrids?

Thank you very much for your questions. So briefly, let me organize the questions first before Claudio answers. First question is regarding Hitachi Group's competitiveness. HVDC is an area that's strong, but what about software and automation, seeing how do you compare against Siemens? Further explanation is requested. Second point is regarding microgrid. About 2 years ago, when we had the IR day, we received the same question. In fact, we are doing microgrid [ but ] the growth rate is very high, but the market size is not that much. But more recently, in various industries -- in the past, there used to be university campus or cities or large parks where microgrids were introduced. But we do now have to deal with these needs as well. So we are now keenly aware of this. We are very interested in terms of software as well as components. We have made acquisitions to enable this process. So first point is regarding advantage over Siemens in terms of software automation? And second point is microgrid. Please answer these questions. Claudio.

Yes. So on -- starting with the HVDC part, once again, we were the ones pioneering this technology. About 60 years ago, we have over half of the global installed base. And of course, we keep on investing in technology. I wanted to share with you, for instance, the fact that with the new design that we have now in HVDC, we are enabling also substantial carbon footprint reduction. On the software and the automation. First of all, if you look at our grid automation business, where majority of the software is, we're also their leading. We're leading in terms of portfolio. We're leading in terms of technology and presence in the market. The software part certainly now with Hitachi and with the scale and the amount of investments that Hitachi has been doing in -- within Lumada with Hitachi [ Vantara ], creating an IoT platform that enables us to access new applications, new customers, new needs that can be delivered by combining the 2. So being #1 on the grid automation space, mainly around the OT and then having one of the leading ecosystems and platforms with Lumada, it definitely puts us in a unique position to create more growth and to create more value for our customers. So that, I would say, certainly stronger position going forward for us in that space. And you might be right, the 5% growth on the software might look conservative. It will, of course, depend on, for instance, how fast many of these recovery plans will translate into investments, to precisely digitalize the grid in order to manage the increased complexity. So we're very focused on that aspect, and we're also very confident that, that will be one of the key pillars for us jointly with Hitachi Lumada ecosystem creating growth and creating value for our customers. Microgrids, you're right. Microgrids, of course, has a lot of low voltage, medium voltage content. But the key differentiator for us is the control, is the software and the digitalization that goes into microgrid. We've been in this space for the last -- over the last 10 years. So we've also been ahead of the curve in investing in this area. And for us, the key focus was making sure that we deliver an electricity system that again supports the environmental aspects by integrating renewables into a microgrid rather than burning diesel and that supports resilient aspects. By basically adding the wealth of experience and capabilities that we have on control systems, software and digitalization of the grids and bringing it into the microgrids, so that we can deliver reliable and, of course, affordable energy to remote places and to areas that are viable for these type of applications.

It's time. So we will now end the Energy Sector session. We will start the Life Sector session from 3 p.m. Thank you very much. [Break]

Thank you very much for waiting. We will now start the Life Sector session, Smart Life Sector session. Executive Vice President and Executive Officer, General Manager of Smart Life Business Management Division, Dr. Keiji Kojima will explain. We will switch the screen. So please wait for a moment. Dr. Kojima, please.

Yes. I am Kojima, Executive Vice President and Executive Officer. Let me explain the current situation of Smart Life Sector. Next slide, please. So this is the key messages for today. Promoting a Smart Life Business, which improves people's QoL by applying digital technologies. FY 2021 forecast is revenues at 10 -- JPY 1 trillion. Adjusted operating income ratio at 9.7% and EBIT ratio at 10.9%. So we expect to have double digit profit. The business portfolio that we announced in the previous meeting is being accomplished and going forward, we will make investments for new growth. Next, please. So we will first talk about the progress of the 2021 mid-term management plan. Starting with the 2021 midterm management plan. In FY '19 and '20, Smart Life Sector, Automotive System business was operated as part of Smart Life Sector. And as already mentioned, as Automotive Business became bigger as Hitachi Astemo, the joint venture with Honda was established and it became much bigger. So it became independent of Smart Life Sector and its performance will be disclosed independently. I will talk about the figures up to FY '20, which includes Automotive System Business in some segments cases and in other cases, mentions numbers without Automotive System. I'm sorry, it may be slightly complex. Now this graph includes Hitachi Astemo, fiscal year 2020 business portfolio of Smart Life Sector. It accounts for around 24% of total Hitachi Limited revenue, JPY 2,240.3 billion. These are the key businesses of Smart Life Business, semiconductor manufacturing and inspection equipment in healthcare and left side, semiconductor manufacturing and inspection equipment, JPY 218.6 billion. And center is healthcare, JPY 144.3 billion, which are the measurement and analysis technology. And the far right, Smart Life and Eco- friendly Systems for JPY 456.3 billion. In the Smart Life Sector, we steadily pursue business structural reform and operational improvement that we mentioned in 2021 midterm plan. As a result, in FY '21, adjusted operating income ratio was 9.7% and EBIT will be over 10%. On the left side of the slide, you can see the performance during the midterm plan 2021. And on the right side, you can see the comparison of the initial midterm target and FY '21 forecast. ROIC is 11.1%, excluding Hitachi Astemo, which is far from 15% target. But we will reinvest the capital gain from the sales of medical diagnostic imaging business and divestiture of 60% stake in overseas Home Appliance Business to our growth and work to improve our ROIC. This slide shows the progress of 2021 midterm management plan by business. In the Smart Life and Eco-friendly Systems business, the transfer of compressor business and the establishment of JV and overseas home appliance business, we're progressed steadily and so we plan to achieve the midterm target. And ROIC will be 16.2%, exceeding 15%. In the Measurement and Analysis Systems business, Hitachi High-Tech was made a wholly owned subsidiary and the transfer of diagnostic imaging-related business to Fujifilm were completed. And so double-digit margin will be achieved. On the other hand, Automotive Systems Business, the COVID-19 impact was large. And so achieving the operating income ratio target is difficult. On the other hand, integration of 3 Honda affiliated companies completed as planned. Revenue is being achieved and the PMI is progressing, and we are seeing a recovery. Mr. Koch, CEO, will explain in the later session on this. Now this is the changes in the revenues and adjusted operating income from FY 2019 to 2021. From fiscal '20 to '21 excluding Hitachi Astemo from Smart Life Sector and the transfer of the diagnostic imaging and overseas home appliance business and the withdrawing from low profit business of trading commercial division in Hitachi High-Tech, the revenue will be around JPY 1 trillion. With the cost improvement from cost synergies through Hitachi High-Tech PMI, the operating income will be JPY 97 billion. Now this shows the position of the mainstay products. We basically pursue the niche top strategy, narrowing down the business domain and secure first or second position in all businesses. The operating income ratio target for each business in domestic home appliance over 10%, biochemistry and immunology analyzer, over 15% and semiconductor measurement and evaluation over 20%. We will improve the operating income ratio by reducing the product cost and enhancing the earnings capacity of the solutions. Next, this is the revenues and fields to strengthen by region in FY '19 and '20. Overseas revenue is JPY 1,214.1 billion, component ratio is 54%. This includes Hitachi Astemo. Now each region's status is the Automotive segment, COVID-19 impact is becoming dominant. And as you know, China, that recovered from COVID early on, grew and is leading the growth. Now other than automobile. In Europe, in vitro diagnostics, installation is slowing in the hospitals due to COVID. And this is being resolved now, but the performance was impacted, but we are seeing a recovery. In Japan, home appliances, the demand related to the longer time spent at home, the home appliance demand is rising. And the mass merchant trading houses and e-commerce are both growing online sales, and this is expected to continue. And the key regions to focus on is the U.S. We expect the semiconductor area to grow, especially with the supply shortage. So we are increasing the investment in this area. Now the market environment outlook. The time when COVID-19 will end, we'll continue being the most influential factor. Now macro trend, for example, acceleration of the environmental management, growing awareness of health and hygiene and acceleration of digitalization will take root as new normal post-COVID. We think they will mostly be a tailwind for our Smart Life Sector business. Risks include various geopolitical risks like U.S. and China, and supply shortage of semiconductor and raw materials and surge in the fleet prices like containers. So fundamental reinforcement of the supply chain continues to be an important challenge for us. Next is our growth strategy. Smart Life sector will focus on EV, semiconductor, healthcare and home, these 4 growth fields. In EV, we will have divisions of roles. Astemo will handle components and life sector will handle systems, including autonomous driving, we will contribute to the environment and safety and security through collaboration. Semiconductor inspection solution of Hitachi High-Tech will become the wholly owned subsidiary. This will enhance its high-precision with Hitachi's Digital and AI to contribute to higher yield. And same in healthcare, Hitachi High-Tech's in vitro diagnostics system will be enhanced with Hitachi's Digital and AI to extend the healthy life expectancy and improve QoL. In home field, digitalization of household tasks and life will be promoted through connected home appliances and robots to help enrich lives. Now realizing the growth strategy that I just mentioned will directly link to the acceleration of Lumada business as shown on the left graph, life -- Smart Life Sector plans to expand Lumada business significantly from JPY 78 billion in fiscal year '20 to JPY 229 billion in FY '21, and the breakdown is on the right side. The 4 growing areas that I mentioned in the previous slide, this will be the enhancement of digitalization and utilization of AI in the 4 growing areas with Lumada. For example, integrated solutions for semiconductor manufacturing quality has been offered by Hitachi High-Tech. But by integrating it to Lumada framework, it can work with various Lumada solutions. It is counted as Lumada business from fiscal year '21. The integration of Hitachi High-Tech's measurement and analysis technology to Lumada was the purpose of consolidating the company into a wholly owned subsidiary and this semiconductor inspection is a big outcome of the PMI. Now another key to accelerating Lumada business growth is digital engineering capability of GlobalLogic, which has been mentioned a few times today. GlobalLogic develops innovative applications, software, services in automobile, health care and consumer segment. And therefore, it has high affinity with Lumada business development in Smart Life Sector. So post-closing, we will establish the concrete project structures on these themes shown here to accelerate each other's business growth. In 2021 midterm plan, we have reformed the business facing issues, including business transfer in fiscal year '19 and '20. And the cash gained here will be used to enhance the earnings power of Lumada-related business and reinvest in the growth market of health care. Health care market is expected to see a major transformation and accelerate growth with the emergence of new technology centering on biotechnology. In particular, we will strategically invest JPY 300 billion in the next 3 years in the 4 areas that are expected to grow dramatically and where Hitachi has business and technical potential and cultivate them to become the core of our growth in the next medium-term plan. This shows the 4 focus areas in the health care area. First, lower left, this is the molecular diagnosis that measures cancer gene in the blood for early diagnosis, treatment selection and the prognosis management. So this is what we call molecular diagnosis. Second is the lower center, development into regenerative medicine of high-efficiency medical cell culture, including immune cell therapy for cancer. We expect this area to grow strongly. And lower right, this is the particle therapy system with minimal invasion and high response rate that enables cancer patients to continue working under treatment. So we are trying to elevate this even further. And medical integration analytics that integrate and analyze the data and offer optimal medicine is also being considered. We will accelerate the R&D that will be the source of our competitive advantage in this growing market through collaboration with academia, including MD Anderson and open innovation through strategic alliance, including investment in start-ups, and realize precision medicine for high QoL. Next is the environmental strategy in Smart Life Sector. There are 2 pillars. One is helping reduce environmental impact by providing Lumada environmental solutions. On the upper left, it shows a solution that gathers operational data to realize high efficient operation through remote monitoring solution called exiida. In the Industry Sector, this was explained in the case of Nichirei, we are deploying this in collaboration with the Industry Sector. On the upper right, you can see a solution which is under development, which is an attempt to create a circular economy of EV battery. Another pillar is on the lower half of the page. It is our effort throughout Hitachi to achieve 0 CO2 emission in 2030. Just one example. Our new plant in Hitachi High-Tech achieved carbon neutrality, which was completed in March this year and is working on CO2 reduction for the entire value chain. Now the organization's diversity is crucial to realize new growth. As part of diversity and inclusion promoted throughout Hitachi, Smart Life Sector is actively assigning women and external human resource as members of the management team. We are also taking in broad-based external talent from Japan and abroad through hackathon and ideathon. In new business creation, we started introducing OKR, which is adopted by fast-growing IT companies and is generating track record. It is popular among the project members and is a great approach to maintain focus and excitement and to realize high engagement, so we are thinking of extending the application further. So this is my last slide. In Life Sector, we will promote the Smart Life business, which improves people's QoL by applying digital technologies in order to achieve adjusted operating income ratio target of over 10% in 2021 MTMP in fiscal year '21, if possible, and sufficiently achieve by fiscal year 2022. We will also step up our cost reform efforts of each business and strategically invest JPY 300 billion in 4 health care areas with high market growth rate to cultivate next-generation core business. Thank you very much.

[Interpreted] Thank you, Dr. Kojima. We will now take questions. [Operator Instructions]. We will start from the Japanese channel. We will take questions from the media, institutional investors and analysts. Questions, please. Mr. Yasui, please unmute yourself.

[Interpreted] This is Yasui from UBS. I have 2 questions. First is Smart Life business. So as President, what is the positioning of Smart Life business in Hitachi? Other businesses are large and competing with global players and Smart Life is a niche market. That's my image. So could you explain the positioning as you see it? And so the top of the business and top of Hitachi, I think what you learn and what you do will be different. So as yourself, now that you are becoming a COO, what will be different on what you do and how you tackle the business? My second question is on Page 10, the domestic home appliance and the bio immune measurement and analysis, biochemistry and immunology and semiconductor measurement and evaluation. It seems stable. The external environment may change. But what would you not like to see in the next 2 or 3 years? What are your concerns? Because I don't think there are too many. So if you have anything you're watching out for, please?

[Interpreted] Thank you. First, the positioning of Smart Life Sector. First is the measurement and analysis equipment. This is the entry of data. This creates data for entire Hitachi. So it is foundational, and we deploy what we have to the other parts of the company. So it is crucial. And therefore, measurement and analysis is something we cherish very much. And GLS, this is the entry point, contact point for home. It's the QoL of people. So it is a very important contact point. So we want to value this part as well. So these 2 seem small scale, I agree. So going forward, Hitachi's entire portfolio and the structure, how should I say, I think we can come up with a better structure going forward. So we want to continue discussing for a better format, better structure and share them with you at a later date. And your second question. What my concerns are in this area? This business area, for us, the concerns, in general, are usually are tailwind for our business, for example, in home field, the refrigerator and washing machine. These large products was difficult to sell online, but thanks to pandemic, due to COVID-19, it is now sold online. So the commercial flow in the business channel is changing in many areas. So I would not say this is a headwind for us. We think this is a tailwind for us given our strategy. So in measurement and analysis business, measurement and analysis are bottlenecks in many areas in the industry. So we think this continues to grow. Fortunately, the market and the market changes will be tailwind for us in this area.

[Interpreted] Thank you, Yasui-san. We would like to move on. [ Hiroshi-san ], could you unmute yourself and ask your question in Japanese.

[Interpreted] Can you hear me?

[Interpreted] Yes. We can hear you.

[Interpreted] I have 2 questions. The first question is related to Life Sector. The ratio of Lumada in Life Sector, it seems relatively low compared to other sectors. And if I look at the growth rate, if we exclude JPY 133 billion, then the growth tends to be lower. So the home appliances as well as the medical devices, how that would be related to Lumada is something that I would like to know. The second point is not related to Life Sector. In the morning session, you said that the consolidated sales revenue that you would aim to is JPY 1 trillion. In the previous midterm plans, you talked about the operating profit margins and more about the efficiency in terms of the target of the company. But this time around, you decided to put the actual concrete figure. And I was wondering, what changed your mind to have this target instead of the margin target you did before.

[Interpreted] Thank you for your question. In terms of how we grow Lumada and as well home appliances as well as the measurement, the basic foundation is network-connected devices. And we will be creating the software for the periphery, and we will utilize IT and OT for that. And there's not much difference with the overall Hitachi mindset in it. In terms of connected home appliances, we believe that there is a solid growth. At first, it took a lot of time for that to grow. But if you look at the graph, you will see that this area is now steadily growing. Under the current pandemic, there is a demand for home appliances due to stay-in-home demand. In terms of the measurement, Hitachi High-Tech company is a subsidiary which is listed. And it was very difficult for us to completely align their business plan, and that's why we were lagging behind in having an alignment with Lumada project. So that's why we wanted to have it to become 100% subsidiary. And we have. And because of that, it seems quite big in terms of the inorganic growth for integration. So in PMI, how we can align with the Lumada project is something that we have discussed with Hitachi High-Tech, and I think that going forward, there would be a more rapid growth. To your second question, we have had target of OP margin in the past. But you pointed out, we now have the target with the numbers of the sales revenue. The biggest point is improvement of corporate value. And that's what we need to work on, and we would be able to see that in the whole number for the sales revenue. So there were issues with the efficiency in the business portfolio in the past. So now we are able to have more efficiency. And now we are seeing the double-digit margin on the horizon. So now we will be eyeing on the corporate value or the volume. We would like to improve the absolute value. That's what I need to work on. That's why we decided to give you that target. Thank you very much.

[Interpreted] Thank you very much, Hiroshi-san. Any other questions? [Operator Instructions] So next, we will move to the English channel. [Operator Instructions] Any questions? We do not see any hands, and we have time left. We will come back to the Japanese channel again. So from the Japanese channel, again, we will take questions. Thank you for waiting. Mr. Yoshizumi, please. Please unmute yourself and ask your question in Japanese.

[Interpreted] I have 2 questions. First is about the semiconductor measurement. The industry environment is changing and you mentioned there's is geopolitical risk. And your main customers' policy change may have happened in the past year. So Hitachi High-Tech business, what kind of impact will this have on Hitachi High-Tech and your forecast for the next 2 or 3 years, the business environment forecast and whether the geopolitical risk will emerge, will manifest itself or not? Second question, in home, from B2C perspective, this is the only part left that, I think, is your positioning of this business in your company. The concept has been explained all along, but we live in Japan and the connected home appliance has not penetrated enough yet. So is this a business opportunity for you to improve the profitability going forward? It's a severe competition. So in order to increase your profitability, what kind of strategy do you have in mind?

[Interpreted] Your first question about the semiconductor measurement risks and market changes. As you are aware, one important customer of ours is Intel. And they have good in-house development and fabrication. They are now shifting gears to doing in-house, spending cost to in-house. So this is a positive factor for us. And geopolitically speaking, there are various risks. Now semiconductor is in short supply around the world. And so in each region of the world, semiconductor has to be manufactured. We think this trend is intensifying. So geopolitical risk, I think, is diversifying now. In the U.S., significant investment is starting. And looking at the order trends, we're seeing strong orders. So for the next 3 to 4 years, we think that will be the trend. Semiconductor will have investment in each region. So I think that will be the main trend. And so it's not so much the risk of the geopolitical risk emerging. We think this will be an opportunity for us. In home, connected home appliance, potential growth. I think it will grow for sure. Remote need is increasing. So I think this part will grow. And at the same time, the profitability here, operating income ratio is not that bad. Domestic home appliances products, may be a problem if I name numbers too much, but it is in the mid-teens percentage. And in terms of ROIC, it's 16% to 17%. So I think it is a stably growing business, and the connected home clients will increase and will increase its proportion. So I don't think we are seeing any negative trend.

[Interpreted] So I did not know that domestic home appliance have such high profitability. Which areas are a drag? Are there any areas that are drag?

[Interpreted] The conventional channels, like the agency, agents, distributor structure, we need to simplify the trade flow, commercial flow one step further because as EC increases, it will become a low operation, low capacity utilization asset. And so simplification will be the key. But please, Hitachi cannot do this alone. We have to work with the mass merchants to improve the efficiency of domestic home appliance sales channel. And this discussion is underway. Thank you very much.

[Interpreted] Next question will be from [ Sembongi-san ]. Please unmute yourself and ask your question in Japanese.

[Interpreted] There are 2 questions from me. Kojima-san, when your Presidency was announced, you talked about you wanted to enhance R&D. Hitachi's R&D, if we look at the investment, there has been 30% reduction compared to the pre-Lehman bankruptcy era. And there has been some reform made in terms of the transfer of the talent. What are the issues you think there are in the area of R&D? Where would you specifically like to reform and change? JPY 300 billion will be invested in health care sector and you also listed some investment still. And where do you think you would be able to win? If you could give specific example of where you would be able to become world's #1, I would like to know more specifics. That's all for my questions.

[Interpreted] Thank you for your question. In terms of enhancement of R&D, the issues that we feel that there are is, I mentioned about this in the morning time, but then we are now bigger in the mid to long-term R&D. I think that we are conducting R&D in terms of points, and for example, quantum computing and also regenerative medicine. So these are isolated and we want to have it in more of a comprehensive collection of R&D for the future. We would like to work together with academia, like universities or research institutions, start-ups. We need to have open innovation. We need to create ecosystem of research and development in order to create something if that would be conducive to generating new businesses for the future. That's the biggest challenge that we face according to my opinion. That's the area where we would like to focus on. I want to create an R&D which would be able to create a future pillar. Also, we want to conduct co-creation near our customers. We want to send our researchers there. And I think that the GlobalLogic has very similar business model. And R&D would be able to work hand-in-hand with each other. We want to focus on the basic research and generate something new and also conduct research together with companies like GlobalLogic and research closer to our customers. To your question about health care, what I believe is possible to do is in 4 fields. So the particle beam treatment, the efficacy is very high, but the equipment is quite large. We want to make it more compact. If we are able to make an accelerator which is smaller, then I think that we can become a game changer. This is where we would like to challenge ourselves to do. And if we can accomplish that, we can make a big announcement. Also, diagnostics, in vitro diagnostics, we are very strong in that in the biochemistry analysis. And also, and if we are able to make a diagnosis with just one drop of blood, that would be very beneficial. We want to create something that is useful in the clinical setting. And in order to create that, we need to work closer with the clinicians as well as patients. So those are the things that we would like to work on to grow the business. So those are the 2 specifics. That's all.

[Interpreted] It is time. So we will now close the Smart Life Sector session. We will start Automotive Systems Sector session at 3:50. [Break]

[Interpreted] Thank you for waiting. We would like to start the session for Automotive Systems business. Presenting is Mr. Brice Koch from Hitachi Astemo KK, President and CEO. We will be switching the screen, please wait for a moment. Koch-san, the floor is yours.

Thank you very much. Good afternoon, good morning, and thank you very much for taking the time and giving me the opportunity to explain Hitachi Astemo more in detail. I would like to go to the first slide, showing Hitachi Astemo as a global leader technology committed to deliver on a triple bottom line, starting with social contribution, improving safety, comfort and quality of life with autonomous driving systems and advanced chassis. The second bottom line is about environmental contribution, contributing to a greener world through efficient electrification technology and products that improve emissions reduction. And thirdly, the economical contribution, achieving in fiscal year 2025 JPY 2 trillion of sales and approximately 15% of EBITDA. To position Hitachi Astemo in the overall Hitachi Group on the Slide #3, you see that and you have heard from Kojima-san that we have been part of the Smart Life Sector. And we are now a sector like business which has been separated in order to simplify decisions, speed up in order to also accelerate our growth and going forward, our profitable growth of the business. On the Slide #4, again, the positioning of Hitachi Astemo in the overall group, we represented in last year in fiscal year 2020 roughly 10% to 15% of the overall group. And today, our business represented by 3 major divisions: one, Powertrain & Safety, which is roughly 50% of our sales; the second division, Chassis, which is representing roughly 40% of our sales; and then Motorcycle Business division was 8%. Please consider that the Motorcycle Business division's 8% is only present in 2020 for 1 quarter in our sales. What I would like to highlight here is also the geographical footprint or presence of Hitachi Astemo worldwide. You see that we are a little bit above 30% of our sales in Japan. And then we are very strongly represented in North America, China, but also growing extremely strongly in Asia and Europe. So a rather spread footprint leveraging the proximity to our customers worldwide, but I will come back on that. On the next slide, Slide #5, it is an overview of the 3 major divisions being Powertrain, where you see the growth engine behind electrification, AD/ADAS, which will grow at more than 30%, up to 40% in the case of AD/ADAS, so overgrow the market. We see the Chassis division where we are one of the rare Tier 1 companies having the 3 key products around chassis, which mean brakes, which mean steering and which mean suspension. With that, we have an advantage to be able to work on the 3 dimension of the chassis and to increase safety significantly. And last but not least, our Motorcycle Business division, in a very strong leadership position globally and leveraging the growth which we see in Asia, which is interestingly, at least for me, which is interestingly taking advantage of COVID because people want to go more on motorcycle than buses and cars. On the Slide #6, it is an overview about our key figures. And here, I would like to highlight 2 things. The first thing is 2020, as we know, has been probably the worst year in our whole industry since the industry exist, but Hitachi Astemo managed to deliver a reasonable result. And that is thanks to 3 things: first of all, extremely strong and dedicated people; secondly, a portfolio which has been very much focused and which is leveraging a strong market position; and thirdly, a lot of improvement on the operation, but I will come back on that later. The second thing I would like to highlight is for 2021, you see the growth which is partially inorganically because of the consolidation of the 4 companies, 3 Honda parts subsidiaries and HIAMS or Hitachi Automotive for the full year for 2021, but also organically leveraging the growth of the market and also our market share gain, which I will highlight later. One of the key focus for this year will be also business continuity plan and improvement because we have seen a lot of disruption in the market from a supply chain, from a disaster, natural disasters. And they probably will continue, so strengthening the company in that direction will be even further needed. On the Slide #7, we see the merger of the 4 companies. What I would like to highlight here, why is the company growing? Again, organically, we know. But there have been all in all the last 3 to 4 years, there have been 10 merger and acquisition or divestments. You'll remember the sales of Clarion. We sold also IPS business, the steering business for trucks. We sold also, now Keihin sold the former Keihin, the air conditioning business, so a number of divestments. But on the other side, strengthening, refocusing fundamentally the portfolio with the acquisition of CBI in brakes to gain a #2 position globally. The acquisition of seneos to reinforce our software business. But also the merger of the 4 company, Keihin, Showa, Nissin and Hitachi Automotive, strengthening again the portfolio. So very important in terms of the basis of the company and again leadership position for our new portfolio. The growth will come mostly from awarded business, which is coming, some close to be awarded. But the growth will also come from the regional growth we are leveraging our strong presence now in China, the growth in Asia and also over-proportionally growing in Europe. As we did in the last few years, we will continue with that path. We grew more than 20% in Europe the last 3 years where the market was shrinking, so gaining market share all over. On the Slide #9, how do we see the market? I think I don't need to tell anyone how the CASE technology become fundamental and are growing in terms of business, in terms of opportunities. I think that we all saw an acceleration of electrification happening because of, triggered by COVID, triggered by environmental policies, which governments are increasingly enforcing. So a growth which we see between 30%, 32% being in electrification and in AD/ADAS, whereof we will grow between 30% and 40% in the case of AD/ADAS, so outgrow the market again. The second aspect which we see is very strong investment in R&D from our customers because of all these new technologies. We talk about very expensive technology, very broad, very unconventional if we look at automotive historically. So a lot of bets to be taken where we see a completely different ecosystem being built up as we speak. In that respect, we believe, and we are focusing on some very key product for us, typically electrification. And when I mean electrification for Hitachi Astemo, it is basically 2 very key products, which is motors and inverters. Thanks to our increased market coverage, we will have better access to more customers. We will be also very close to them based on our footprint. And you might remember from my presentation in January 18 that we have approximately 140 factories worldwide, which allow us to be geographically very close to our customers. And that will be leveraged and an advantage going forward because our customers also focusing strongly on CO2 reduction, therefore, requiring their supply chain to be close to them. They don't want product to travel all over the world. They want to have the suppliers next to them. That will be more an advantage for us. The second point is, which will support our growth and our leadership position in the electrification, is our cost competitiveness. We have developed in the last few years modular products where we can get scale on one end, but still customize the product to the customer needs and to our OEM needs. That will create scale, as I said. It will improve our investment efficiency. And thanks to the very strong support of the Hitachi Group, we can also develop new materials, which will make our product even more efficient, more compact and more cost-efficient at the end. Last but not least, we see that software will be also a key differentiator by integrating, by making use of electrification, again, more efficient, more energy saving and where software will also allow functionalities which will be a differentiation for the end customers and indirectly therefore, for our own customers. So a lot of growth potentially here, which we can leverage going forward. On the Slide #12, I'm coming back to our triple bottom line. Again, social contribution, environmental contribution, economical contribution and value. We see social values because we will improve safety thanks to the stereo cameras we have, AD/ADAS system and the advanced chassis. I mentioned the 3 dimension of freedom, which we can enjoy thanks to having the 3 key products, again, brake, suspension and steering. That will improve also comfort and that will also therefore, as a consequence, quality of life. On the environmental value, our products get more and more efficient. And we don't talk only about electrification and very compact and efficient inverters, high power, low consumption, very high efficiency in motors, very compact, lighter weight, which again make the car consuming less energy. We talk also about the reduction of emission. And that is due to more efficient brakes. That is due also to more efficient software, which can optimize the consumption. That is also true for ICE product. And when I mean ICE product, I mean hybrids. And hybrids will stay for long. I mean, they will continue to grow all together, not pure ICE, but hybrids. We see it keeping growing until 2025, potentially later. So the efficiency of the engine will become very important. And again, the software is critical. Economical value, I mentioned 2025. You know our plan and forecast for 2021 was JPY 1.6 trillion of sales, 10% or more than 10% EBITDA, actually, which will then increase going forward. On the next slide, #13, more focus on environmental contribution. I think I don't need also here to tell you on 18th of January, we just heard in Japan Suga-san announcing the goal for Japan. That was very, very strong focus on environmental values. So I mentioned at that time that we will be, as Hitachi Astemo, having factories with carbon neutrality in production and we will reduce our footprint from our products by 50%, both of that by 2030. We will do it, especially on the factory side, we will do it by improving production efficiency. We will do it by retrofitted and renewing equipment by also using renewable energy for ourself. We have done that with many factories now with solar cells, for example, on the roof, and we'll do more. And finally, by using and buying renewable energy to make sure that we are green all over. On the product side, I don't need to highlight more the electrification side of it, the efficiency of the products and the light weight of the products, which will help to reduce energy consumption in general. On the Slide #14, we talk about the advantage of software and why it is so critical to have such a solution like Lumada, now lately to have GlobalLogic joining the family very shortly. Because with that, we can develop a more safe vehicle, more intelligent vehicle. We can also develop solutions, and I will mention that later on, where the vehicle look at where are the other cars, learn on the way, on time, just in time where are traffic, where are dangers. So the car become much more intelligent not only on itself, but leveraging the grid and leveraging the other cars, the other vehicles around it. That is also true for now efficiency in general, but also to develop new solutions, new offering together with GlobalLogic who has a very strong domain expertise and also very strong capability to propose new solutions together with our customers. On the technology side, on the Slide #15, I think it is important to realize that Hitachi Astemo is spending today roughly 6% of sales in R&D, but has a huge advantage of having access to software, to artificial intelligence, to material knowledge, which Hitachi Group is doing. I think you have heard today that Hitachi will spend JPY 1.5 trillion in R&D in the coming 3 years, and some of it will be beneficial for Hitachi Astemo. So these synergies are very important, how to improve our products going forward, which is not true for some of our competitors who have to do everything on their own. On the CapEx side, very important is how to make our balance sheet leaner, how to use our cash more intelligently, more efficient. And here, we talk about investing very strongly on our focus products, again, electrification, AD/ADAS, some very selective hybrid products. And then how to improve our footprint. Again, having roughly 140 factories worldwide is very important. Maybe we can consolidate that a little bit, maybe by roughly 10% to be more efficient. And further, it's very important on the supply chain management, not only for the production line, to make them also modularized, meaning we can reuse them, meaning focusing on the right value adding. We have been doing the last 2 years a lot, in 3 years, actually, we started, a lot of improvement on focusing on where we can add value, where do we differentiate with our technology. If that's a common product, if that's a common value adding, we don't need to do it ourselves, we can find partner who can do it and spend money for that. On the Slide 16, an overview about the program we went through to transform the company the last 3 years, and we will continue. LEAP was the name of the program for leadership, engagement, acceleration and performance, and this program was based on 4 pillars. One pillar was about cost competitiveness. How do we improve procurement? How do we optimize the operation in the plant? How do we get our SG&A leaner and more efficient? How do we sell better and sell value better to our customers over time? And of course, quality, how can we further improve our quality? The second pillar was about strengthening the portfolio. I mentioned that roughly 10 M&A, investment, divestment over the last 3 years. So that has resharpened the portfolio significantly. On the critical enablers, there are a lot of improvement which we could do, and we still need to do going forward is, for instance, much better visibility, digitalization of our processes and figures and values and production. So we get an early warning. We get leading indicators about what is going on in our factories, which help us also to improve quality and increase efficiency. Quality, I mentioned it already. Capability in software, I mentioned it several times. Operating model, global operating model, very important to optimize our product on a global basis, to benchmark each factory against each other, to learn from the best and to deploy that horizontally. And on the other side, to be very close to our customers globally and locally. And last but not least on the critical enabler, the people. I think we have been in a very lucky situation, and I mentioned that in January already. We have merged 4 companies together. We had the chance to take the best talent out of the 4 companies and to create the best management team one could wish for, so extremely strong talent, people. And last but not least, the fourth pillar, mitigating the risk. At the time we made that strategy 3 years ago, we said we have a market risk potentially. In the meantime, I think it's not a risk, it's a fact. And we had to react to that. But we also have to react on business continuity because I think this world of VUCA, where we are in volatility, uncertainty, complexity, ambiguity, that world is just today to stay and we better be more flexible, more nimble, more agile to get there. On the next slide, I mentioned that in January, the JPY 60 billion yen of synergies, which we are targeting and we will achieve by merging the 4 companies. Here I can disclose a little bit more on the -- where they come from. And I think the top 3 are coming from synergy buckets, if I may put it that way, are coming from supply chain, meaning procurement. We talk about G&A. We talk about the simplification of process. We talk about avoiding a lot of manual work and redundant work. Because we had 4 companies doing more or less the same. So we can use people to do different work, more value-added work. And then on the footprint, I mentioned that we are working on optimizing our footprint a little bit better. The good news today is, if we look at 2021, we have identified JPY 8 billion of saving, which is very fast, basically because the company just was born a few months ago, and I'm happy to report that this JPY 8 billion have been identified, and we are on a good way to deliver on that. So where do we see us basically succeeding going forward? I think the products and the solution are achieving the scale we need, thanks to differentiated technologies and also modernization. The footprint we have, global and local, is very important to be close to our customers, but to optimize our cost structure on a global base. We are prioritizing our investment on leading technologies we have to become global leader, and we have progress already a lot around that. As you might remember from January, strengthen profitability by leveraging the synergies and the operational improvement and obviously, paying a lot of attention on our balance sheet and cash because that is something which will give us the blood to keep investing going forward. On the growth side, the growth drivers, I think the market trend on decarbonization, I think the reregulation on CO2 emission, autonomous driving is something we leverage with our technologies. And of course, some risk factors like a prolonged economic slowdown, I mean we don't know if we will have, again, of course, a 6th wave of COVID some places or if we have a COVID '21 or '22. We have some geopolitical risk which we need to watch carefully and obviously, always competition, which we need to keep in our eye very sharp. So coming to my 2 last slides, on the Slide#21. I think, as I said, we delivered a 2020 year, which was okay, almost solid, considering the challenge in the market. I think we have set the base for 2021 by having created the new operating model on the first of April this year, having the 4 companies acting, working as 1 company with 1 operating model. And we see for 2025, the growth, which will help also contribution, the cost improvement and the balance sheet optimization, as you see on the ROIC. So last slide and last conclusion, the market leadership in 2025 will be contributing also to a greener world, leveraging our scale and our software capabilities. Slide 22, please. The safety will be very important, which we can provide, thanks to autonomous driving and 3-dimensional move of advanced chassis, again, integrated with software. And last but not least, the economical value, where if we compare our value some a few years ago, 2019, to the value today, we have multiplied the value or we will multiply the bio by 2025, between 5x and 6x. So the value of the company has increased significantly. With that, I would like to and my presentation and welcome your questions, please. Thank you very much.

[Operator Instructions] We will first take questions from the Japanese channel for the media, institutional investors and analysts. [Operator Instructions]. Question from [ Yasui-san ] He's on mute and ask your question in Japanese.

[Interpreted] I have 3 questions. First question regarding Astemo company establishment. So it is a measure of large companies so the PMI must have been challenging. I understand that you have the past experience on PMI. How did you -- what kind of efforts did you make to make PMI successful? Second question is the ratio of the gasoline cars, how -- what is the percentage of the gasoline cars, in your evaluation? I understand it is becoming smaller. But what would be more optimistic ratio of gasoline cars? Now there are uncertain management events that could take place. So I think it's important for organization to be agile. In that regard, Dr. Koch, in terms of -- I understand that you are emphasizing the stability of balance sheet. But what is the most important for you in managing this company?

Thank you very much for the good questions. On the first question on the PMI, as you know, we signed the agreement with the 3 companies and HIAMS to merge in October 2019. From October 2019 to the day we merged on day 1, which was January 1, we had a team of 145 people across the 4 companies working on 14 different work streams to prepare the merger. It was around finance, it was around tax, around sales, around technology. All of that people have been moved out of the business for compliance reasons. So they were so-called clean teams because they could not share any more information from the other companies internally, but they have worked for more than a year on preparing that merger. That was the first step. And obviously, these 145 people were from all the 4 companies. That has been put also under the leadership of 4 very high senior manager from each of the 4 companies. So very senior people, which were actually part of the Board of the company or executive team of the companies have been leading this effort to really pay the attention required and get also the support needed. Since the merger, we have reduced a little bit these teams because we handed the all synergies, a lot of work to the functions, so to the business divisions. So that they have now to deliver on that plan. Still, we have a so-called integration office, or PMI office with roughly 20 people full-time who are basically coordinating, advising, cross fertilizing, et cetera. To give you an example of one of the very good value of bringing the companies together, we have identified roughly 400 best practices across the 4 companies. Now out of this 400, we have started last month, actually, to implement 70 of them. One company doing something very good on the quality, which we can reply or disseminate in the other 3 companies. So this kind of work is now progressing, also creating a lot of communication with the people globally. So a lot of dedicated people, a lot of work streams and a lot of KPIs to be measured and to be followed. I'm heading a steering committee every month with a key executive of the company where we remove roadblocks for merging where we accelerate the whole merger. On the second thing, on the ratio of ICE business, other business, I mean, we don't really disclose these numbers. But what you can imagine is we are probably comparable to the market. Today, a lot of people talk about electrification, but that's probably around 10% of the overall market. And the rest is hybrid or pure combustion engine, where hybrid is growing a lot. So you could imagine us gaining market share in electrification. So this portion will become bigger. And then basically slowing down on the combustion engine. The beauty is having such a strong growth in electrification, we can absorb a lot of people to support us then. So it's a very good position where we have a balance between the 2. We leverage the growth and we can use the people now. On the balance sheet or on my priority, I mean if you ask me what is my highest priority in general, I would say, health and safety and people. But now if we talk about balance sheet, generating cash is basically the blood of the company. I've grown in an environment where the statement was always operating profit or EBIT is an opinion, cash is a fact. And that is what I'm looking as a way forward.

[ Sata-san ], please unmute yourself and ask your question. Please ask your question in Japanese.

[Interpreted] Thank you for accepting my question. I have 2 questions. The first question, in terms of electrification, motor inverter, you have the target towards 2025 of 5 million units. And there is e-axle which is a key technology, which you have pointed out in the presentation. And 2025, is considered to be a key point for e-axle, which is being developed. When do you think it would be rolled out in the market? And how much you will be manufacturing? That's my first question. My second question. Currently, in the automotive market, there would be horizontal role-playing and I think that the key point is connected. I think that within Hitachi Group, there is connected technology. And in having the horizontal rollout playing each role, what kind of things would you be taking as initiative at Hitachi?

Sure. Also a good question. On the electrification of electrical motor and inverter, yes, you are absolutely right. We plan to have roughly 5 million of each by 2025. We don't want to do -- I don't want to do e-axle myself. I think cutting gear and the optimization of the gearbox is something we don't know well, and we are working with partners so that we will do it with them. There is the second reason why I don't want to do the gearbox myself is because I think -- and we see in the market a lot of different opinions. Some customers want to buy the inverter and motor separately. Some customers want to buy the e-axle. So there is no clear way. Sometime 1 year, it's more in one direction, the other year, it's more the other direction. There is -- the jury's not out. So I want also to keep my flexibility to really provide the key components where we'll gain the scale because if we compare with some of our competitors, without naming them, they put in that number what they published, a lot of other inverter and motors. We talk about the car traction propulsion inverter in motors, which is very specific. And I want to be the best here, and I don't want to dilute my product quality by doing something where I'm not the best like a gear. And therefore, I have a very strong partner, which will help me to get there. On the horizontal rollout on the new business opportunities, which exist today in the market. I see we have 2 focus points. One is on Hitachi Astemo we focus on the car. We focus on what is in the car, and we focus on connecting the car to the outside world with the gateway. And then over the air, we connect together with Hitachi -- Hitachi Group, which is then providing the artificial intelligence, selling to the grid, the connection to car to car. You have one very good example of this extremely seamless cooperation, and I would even call it a one-stop shop for the customer. [ Honda ] bought for their new car launch now, a system where Hitachi Astemo is delivering the gateways, the part in the car. And where the Smart Life Division from Hitachi Group is developing the contact to the other vehicles and everything which goes over the network. And that is one solution which we provide to the customer. And that is what we will do more and more, leveraging the strength of both.

We have many hands up for the Japanese channel, but this juncture will turn to the English channel. From the English channel, there is a person that is indicated, I guess, there is no name. I'm sorry. Please state your name and affiliation before asking your question.

This is Damian Thong with Macquarie Securities. All right. I've got 3 questions. First one is when you look at your targets for the 2025 fiscal year, you have the unit targets for motor and for inverter. Are you able to give revenue goals for electrification or EV-related products in that time frame? And also, relative to that, do you see -- or do you assume declines in your ICE, internal combustion engine vehicle sales? The second question relates to your cost structure. Earlier, you mentioned that there's a possibility for a 10% reduction in perhaps your factories. Do you assume this in your current cost synergy or synergy assumptions? Or is that something that's additive to these numbers? Thirdly, and this is the last one. Clearly, Honda is a big customer of Hitachi Astemo, a very key one, and you mentioned them several times. To what extent is -- are your forecast here reliant or dependent on Honda? And does it give additional visibility into your forecast? Does that -- or do your forecast assume, for instance, greater sales to other OEMs?

Thank you very much. Also a good question. On the revenue growth, what we see in electrification, I mean, I mentioned the case business will, in general, will grow by 30% to 40%. We expect a certain commoditization effect on this case. And therefore, our growth will be on the lower end of that bracket in terms of sales. So still significant in terms of sales of dollars. ICE. I don't think that when I see ICE, I include hybrids. And I think that hybrids will keep growing, as I said before, so net, the ICE contribution will keep growing for that period of time. I don't know when we reach the peak on hybrid and pure ICE, will that be '25, will that be 2030, I'm not sure yet. But that will be in that range of time. So until '25, I do believe that both products will grow, in particular, on the electrification, as I said. Okay. On the factories, yes, the plan, you might remember on the slide where I show the synergies, we have also cost allocated to it, and that is basically including what we foresee and what I mentioned before. Finally, on the customer side, I think we are -- we have customers which are a little bit bigger than others in terms of sales. If I take 2020, we have 2 customers, which represent 20% -- around 20% of our sales. And then we have a number of customers, and you can guess who they are. And then we have a number of customers like Chinese customer, like GM, like Ford, like other Japanese customer, which represent each between 5% and 10%. So it's not that we have 1 gorilla and then a lot of small things. We are rather spread, even though there are some stronger customers in terms of sales, but we are rather well spread from a customer portfolio point of view. And all of them are extremely important because we learn also a lot from our customers.

So there is another one from the English channel. Bolor Enkhbaatar, please unmute and ask your questions in English, please.

I have 2 questions. Firstly, I believe you said revenue growth of 30% to 32% in electrification and 30% to 40% in ADAS. Sorry, if I misheard, but if correct, during what kind of time period are you thinking of from fiscal '21 to '25? And if possible, please share an image of revenue size or a portion of total revenue as of now, both in EV and AD/ADAS. My second question is regarding the overall automotive industry. How is it going to change in the long term? Should we be aware of threats from disruptive players like Tesla and new Chinese EV makers, potential newcomers like Apple or Sony, or [indiscernible] like standard motor manufacturers. I understand your current business is dependent on traditional OEMs and some retail businesses there. But what is your strategy for sustainable growth for the long term?

Thank you very much. Good question. Yes, the volume of electrification in terms of pieces will grow 30%, 32% in electrification or electrification, 30% and 32% in AD/ADAS related products. In terms of sales, we will grow around that number in both domains, knowing that in terms of pieces, we will outgrow the market. In terms of revenue share, we don't disclose it very much. But what I can tell you is that electrification products today represent already a double-digit number of our revenues. So it is meaningful. And with the growth pattern we are going on, it will become more meaningful over time. Concerning the auto industry and the future and the potential disruption, I think de facto Tesla is not anymore to take that customer. Tesla is not anymore potential distraction or distraction or changing. It is happening. I mean, Tesla has happened. A few years ago, there were a lot of doubts. I think now, I think we need to accept that this kind of disruption is happening. The same for some potentially Chinese competitors. The same for new model. How do we see other players? You mentioned one or the other. Based on all these new technologies, based on this new ecosystem, that is a market which will require and some of you said it before in a question, actually, we need to be extremely agile. We need to be extremely nimble. And if you look at some of our customers, how strong they embark on electrification, take Volkswagen, take General Motors, they are committing to go completely electric very fast, actually, which means a huge change. So I think also what we have seen in the last 18 months, we have seen a world which is accelerating like we never saw it before. Look at COVID impact 1 year ago, the whole market disappeared within a month, which has never been happening before. Look at the shortages on the supply chain with semiconductor or logistic availability or whatever, you name it. The world is completely different. So the only way we can survive, and we have demonstrated now for the last 12 months, is to be much more agile, much faster and much more having the decision closer to the customers and not a big organization centrally. So we need to speed up massively, and we are working on that.

We will now go back to the Japanese channel. But the time allocated has been expired, we have many hands up, but we can only take one more question. [ Oka-san ], please unmute and ask your question.

[Interpreted] I have 2 questions. First question is regarding Page 10. The motor and inverter outlook, 5 million each is the outlook that you have given. Carefully, how much is secured because it's quite -- it says it could be going beyond that. What is -- do you have anything incremental to these units? For major customers, other than -- do you think that you can have more customers other than your major customer, Honda, please clarify this. The second question is regarding semiconductor. In the Energy business segment, they said that semiconductors are supplying to Hitachi Astemo. By the fact that semiconductor is provided, Hitachi, is that an advantage for your business going forward?

Very good question again. Yes, the very simple answer to your question on the customers, on inverters and motors. As you see on one of the backup page, on the Page 28, you see the nationality of 29 better, actually, you see the nationality of our customers. And you see that we go extremely global. So we talk about Japanese customers historically. But we gained a lot in North America. We also gain now in Europe, having been extremely successful on the number of platforms and now also in China. So we are broadening our scope to really achieve a very broad customer base, as I was mentioning before. That is also very important for Hitachi Astemo as an independent supplier or Tier 1. We want to be close to many customers because that is also the way we can leverage our scale, modernization, but then scale of the components, very important for the future of the profitability and the investments. On the second question on semiconductors, I think semiconductor is in an extremely volatile market. And I think we have seen semiconductor markets sometimes being extremely attractive. And then a few years later, being extremely destructive. It is something we are not good enough. And again, I would like to focus on where we are good and to partner with strong partners where they are better than us. That is, for me, important also from a cash generation to really differentiate where we come. So we have a very strong partner we are working on. They are helping us, who you have seen, we have been somehow, like everyone is a little bit affected by it. But so far, we could help our customer to a vast extent, even though there are some impact on them, but strong support from our partners because we are close to these semiconductor partners going forward. Thank you very much.

Thank you. Sorry that we were not able to have all of the questions answered. That concludes the session for Automotive Systems. The next session is the last session, and it will start from 4:40. It will be a Q&A session by the CFO. Thank you very much for your participation. [Break]

[Foreign Language] And lastly, we will have the CFO, a Q&A session. The CFO is Mr. Yoshihiko Kawamura. By way of concluding, he will be taking questions for the finance policy overall. [Operator Instructions] We'll take questions from the Japanese channel first from the media analysts as well as institutional investors. Please use the right-hand button. [ Tanaka-san ], please.

[Interpreted] Thank you very much us. I have just one question. In the morning session, Kojima-san mentioned about R&D investment, JPY 1.5 trillion in 3 years -- for 3 years. And he said that it was -- is going to be what -- so JPY 360 billion per year. So JPY 1.5 trillion divided by 3 is JPY 800 billion. So does that mean that this is going to increase? Or out of the JPY 9 trillion, if it's going to increase by JPY 150 billion, I think that's very significant. So how is the funding going to be secured for this amount, for this JPY 1.5 trillion? Please elaborate further.

Regarding R&D investment, I understand Mr. Kojima has given explanation we are going to increase by 20% in the coming 3 years. So funding was the question posed. We have the 3 ways that is being considered. It depends on the operating cash flow. But in the coming 3 years or coming 4 years, we believe that it is going to be incremental. So we will use the operating cash flow for one. Second, legacy assets still exist. Therefore, divestiture could generate more cash. And thirdly, overall, debt to equity ratio will be very important. But the last decision is whether we want to leverage or not. With these 3 measures, we will fund R&D expenditures going forward.

I just have confirmation, you said 20% increase? So that JPY 360 billion for this year, that's not 20%. Please elaborate.

For 3 years, JPY 1 trillion or JPY 1 trillion plus investment has been made. And what we are talking about here is the so-called R&D in the corporate. So line investment will be different. So overall, 20% should suffice. We don't know what is going to happen in 3 years' time so we cannot give you specific numbers. It can be 20% or even 30%. But basic funding from the 3 sources that I mentioned earlier. Thank you.

Next, Mr. Yoshizumi, please unmute yourself and ask your question in Japanese.

[Interpreted] I have 2 questions. So this time, for fiscal year '25, ending March 26 we heard some information on -- for some segments. But on April 28, the adjusted operating income ratio, 10%, this will be achieved 1 year later. Is this maintained, this target? So that is my first question. Medium to long-term forecast is adjusted operating income ratio of 10%, close to 10%. So what you've been mentioning in the past and what you have now, I want you to put in perspective. And second question, this is also a year ending 6 -- March 26, Lumada op margin, JPY 500 billion. So that's a 17% improvement in profitability according to your plan, I think. So the cost, how much cost do you plan to spend? The way you plan to improve the profitability and the way you plan to do investments? If you could explain something at this point?

First, about the operating income ratio, our view of the ratio is in the 2021 medium-term plan. When we develop this current medium-term plan, we had 2 numbers. One is the operating income ratio of 10% and the other is the ROIC, 10%. We call this double 10 internally. In the cruise control, cruise speed, we -- our plan was to achieve this both in fiscal year 2021. But due to the pandemic, this achievement will be 1 year later. So what will happen in FY '22? According to the current plan, we think we can achieve both numbers. So this operating income ratio of 10% target achieving this next year is still true. We still uphold this in Lumada. This Lumada target is a challenging target. It may seem as challenging from external view. But this is the size that we have to reach to support our growth going forward. That's the underlying premise. So what to do with the investment? In addition to the business line investment, the corporate has the funding for the investment. And as mentioned this morning, Lumada related business will roll out. And with the ramp-up, we can invest in our business line. And so right now, the investment is corporate led, but we can change the proportion and have more business line investment going forward. And overall finance, fund the entire amount. The target for fiscal year '25, we don't have the number yet. So in the next medium-term plan, we will show you more numbers so I hope we can share more with you. Thank you very much.

In next spring, you will be announcing your next medium-term plan, that is until fiscal year '24? It's a 3-year medium-term plan?

Well, there are various views, discussions. The framework of the medium-term plan will not be changed significantly. So it will be a 3-year -- fiscal year '22, '23 and '24. Now fiscal year '25, this is a very clear-cut number. So we have to think of both. And the medium-term plan that we will develop will be the 3-year plan, plus our view on fiscal year '25. It will be a hybrid type of plan. We are discussing the details now but we talked about fiscal year '25 a lot today because it's a clear-cut number, we want to discuss more on fiscal year '25, and we touched on some numbers there. But it will be basically a 3-year framework so 3-year medium-term plan plus fiscal year '25. This is what we would like to share with you soon. Thank you.

Mr. [indiscernible]. Please unmute and ask your question in Japanese.

I have one question. For 2025, operating profit, JPY 1 trillion was mentioned. And what about the profit margin for Lumada is 17%; for other segments, it is prevailing around double digit. And that is a target. Then overall, 12% or 13%. This is a profit margin level that was never achieved before. It seems possible. So what is the outlook on the part of the management?

This morning, Kojima-san mentioned that for 2025 JPY 1 trillion operating income will be the target. But this number is based on the evaluations that we have made, there is from asset and cascading down. But with GlobalLogic, it would be JPY 11 trillion to JPY 12 trillion, and asset turnover is around 0.9x. So it was 11x, 0.9x in means in terms of revenues, it will be around JPY 10 trillion in terms of internal asset turnover. And added to that, the operating income 10% means JPY 1 trillion. So in terms of the size of our assets, this JPY 1 trillion is achievable with the normal level of effort. But what is going to be the content of the assets, there is a fine-tuning that is required, low profit assets are also included. So further fine tuning will be required. The recent development expenditures will also be required. And M&A could also be included. And based on that, JPY 1 trillion operating income is achievable for the time being. It isn't as if it's a far fish number. That's just -- that we just put out there. That is not the case in terms of basis for this number. Thank you.

So next question. We will now take questions from the English channel. If you have any questions, please use the raise hand button. We do not see any questions, so we will come back to the Japanese channel. So once again, from the Japanese channel. Mr. Damian Thong, please unmute yourself and ask your question in Japanese.

[Interpreted] I have one question. In listening to today's briefing, U.S. in Railway, in Power, you plan to expand the businesses. And you have the strategy to expand the businesses. Hitachi Americas function, will the function change going forward? I mean the resource and financing. So the matrix organization and the regional organization, will this change going forward?

There is a possibility. Right now, the business units are now having their own original North American strategy, but given the medium-term plan and the future of the company, we are now discussing what to do with the headquarter function, the North America and Europe, some are better having headquarter there. In R&D and global sourcing functions, regions have the distinctiveness and the HR is readily procurable so now the business units have the North American strategy on their own, but some headquarter function may have -- we may have the horizontal integration. So this kind of tuning or realignment may happen. But we have not thought that in concrete terms yet, but that is a possibility. Now if that's the case, the North American business, we will be procuring the material from North America. So not just human resource but funding. Rather than sending money from Japan, we may have local funding more and the local company's alliance may be reinforced as a natural course of, so beyond the business format, we may make same changes accordingly.

You mentioned that railway projects in the U.S., are there many projects that you had mentioned earlier, public-private -- public-private funding, the way you do funding, financing, is there a possibility for public-private funding? Maybe Japanese companies have de merits, disadvantage there?

In financing, funding, North American market is more sophisticated, by far the advanced. There are more funding variation than Japan. Of course, the capital market is much bigger than Tokyo, Japan or London. And there are a variety of financial institutions. And furthermore, there are private equity functions too. So the blending of capital, I think there is lots of opportunity in North America. And in Railway business, as mentioned earlier, President Biden's new initiative, the investment in Railway will start. So in addition to the private funding, the rich, thick funding in North America will be combined appropriately so that we can generate competitive funds. So we will take steps accordingly.

[indiscernible] and ask your question in Japanese.

I have 2 questions. My first question is regarding operating income, JPY 1 trillion. In 2025, JPY 1 trillion. What is going to be the breakdown by segment, by business line? There were some business lines that talked about this, but others did not. Is this a question that can be answered for IT segment? As a segment in '25, operating income outlook was not given. They talked about Lumada. But what about the IT segment, what is the plan forecast? The reason why I ask this is because Lumada is JPY 500 billion that was mentioned. And half of the profit of the company will be generated by Lumada. Is this not just the IT segment, but is it overarching to other sectors as well? And half of that is Lumada. Is that the case? So it is not IT segment, specifically. That's what I want to confirm. So that is a reason why I want to know the number for IT segment. Second question is regarding the Lumada's plan, JPY 3 trillion, that's 16.7% at the level of JPY 500 billion. And I was reflecting in the previous question, [indiscernible] said that Lumada is 20% during the previous meeting. So the target of 20% and 5 years down the road, 16% to 17%. What is the disconnect between the 2 numbers? Please elaborate.

Regarding your first question about the Lumada -- out of the JPY 1 trillion, what is going to be the contribution of IT and Lumada? This is a macro number of JPY 1 trillion. We have not yet segmented to the different sectors, yet. But from Lumada, as you have rightly mentioned, for the core business and related business, together will be at this size. Therefore, the -- it's not just the IT sector, that is going to generate this profit. To your second question, Lumada, JPY 3 trillion, JPY 500 billion, 17% to 18%, what is the difference between that and 20%? Now CEO target is 20%. And we are now doing a bottom-up exercise, trying to look at the size of each business. And according to that estimate, it would be around 17% to 18%. And so 20% is a very tough target. And bottom-up evaluation is 17% to 18%. We are going to have to fill the gap in the next midterm management plan. We are not withdrawing the 20% target. There will be a strategic target going forward.

Time is running out, so we will take one more question. Mr. [indiscernible], please unmute yourself and ask your question in Japanese.

I have 2 questions. First is multiple. So maybe this is not a question to you, Kawamura-san, but relatively speaking, the multiple is relatively low. So after you became a CFO, Mr. Kawamura, the share price is rising. So in order to raise Hitachi's multiple, what kind of effort or results do you think we need? What do you have in mind now? My second question is if multiple rises, then capital increase may become an option. So you said you will not make huge investments like you did in the past, but there is the business environment. So if there are opportunities, you aiming for the business model and so what are the necessary conditions of higher multiple and D/E ratio, 0.5x, maintain 0.5x D/E ratio, what are the necessary conditions for capital increase, maybe in 5 to 10 years' time, if there are possibilities, what are the factors?

So first of all, about the multiple. Share price is rising a little recently. That said, there is this view internally. Our EBIT for fiscal year 2021 is around JPY 800 billion. That's our plan. And multiple is 10x, and the market cap can be JPY 8 trillion, but the recent latest share price I just saw, market cap is JPY 6 trillion. So the gap is still there. So as a blue-chip company, multiple is 15x for blue-chip company in Japan. So we want to at least achieve 10x. That is the target and thinking of measures to achieve that. Market cap is JPY 5 trillion to JPY 6 trillion. So EBIT 10x, JPY 8 trillion is the level that we want to achieve. So that's what we are thinking, I've been thinking from my position. So what should we do? Two points. One is the equity story. We need to articulate the growth story and appeal this to the market. So large portfolios, GlobalLogic, we are acquiring this time. And Mr. Koch said Astemo and Rail and HAPG and high tech. These $1 trillion or so assets are in this portfolio. So we want to bring this to cruise speed as soon as possible. So that's the first priority. And second, the asset profitability improvement. So low profit asset or legacy assets, as we call it, the assets that have already completed its role are still there. So we need to divest them as soon as possible and streamline our balance sheet. So this will be the standard measure for -- to improve the multiple. So we will consider them. And capital increase. We cannot think further down the road. But in the next 1 or 2 years, we are not thinking of that because the operating cash flow can fund many things. So if we do capital increase, equity cost is high now. Debt is -- costs 0, but equity is 7% to 8%. So under the current environment, equity finance, the economic rationality is not high. And another reason is if we do capital increase, it means our business management will be that much more difficult. We have to pay dividend and we need to meet the requirements for shareholder return. And so the business management, company management will become difficult. So once profit becomes one step higher, we may think of capital increase. But in the next 1 or 2 years, we will not think of that option. And we will use mainly the operating cash flow, funding from operating cash flow and run the company.

The time has come to bring the Hitachi Investor Day in 2021 to a close. We would like to ask you to cooperate in filling in the survey. After exiting from Zoom, the Questionnaire will be displayed. This is a think back for our IR activities and public relations activities going forward. So please take the time to fill in the questions. Thank you very much for staying with us through the long hours for this event today. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]