2018 Medium-term Management Plan (Fiscal 2016 to 2018)...5 Overall Review of 2015 Medium-term Management Plan 3. Revenue and operating margin not yet achieved Internal factors Delay

© Hitachi Chemical Co., Ltd. 2016. All rights reserved.

2018 Medium-term Management Plan (Fiscal 2016 to 2018)

April 25, 2016


Contents 1. Review of 2015 Medium-term

Management Plan (Fiscal 2013 to 2015)

2. Long-term Strategy (10-year Strategy) 3. 2018 Medium-term Management Plan

(Fiscal 2016 to 2018)


1. Review of 2015 Medium-term Management Plan (Fiscal 2013 to 2015)

2. Long-term Strategy (10-year Strategy) 3. 2018Medium-term Management Plan

(Fiscal 2016 to 2018)

Contents


4

5,465

Operating margin (%)

Revenue (100 mil yen)

(Fiscal year)

Proportion of overseas sales (%)

50.6 53.6

58.3

5.6 5.5

9.7(Actual)

2015 Medium-term Management Results

2015

Medium-term Plan Actual

2014 Actual

2013 Actual*

Over 10% (Medium-term Plan)

6,000 5,267 70 4,938

Life Sciences, etc.

Energy storage devices

High functional materials

Automotive parts

73 96

3,156

1,211

827

2,950

1,165

727

3,068

1,269

1,058

*Fiscal 2013 Actual is Japan standard


5 Overall Review of 2015 Medium-term Management Plan

3. Revenue and operating margin not yet achieved

Internal factors Delay in development of new products due to duplication of research/development themes Lack of conceptual ability in commercialization of market needs Insufficient unearthing of new needs of customers

External factors

Delay in the launch of the storage battery market for new energy

Issues

Clarify the role of Research/Development Discover the true needs of clients Increase the accuracy of commercialization by strengthening the business design

1. Strengthen global business

2. Structural reforms of business (Implement policies for streamlining domestic personnel)

Expand overseas production and sales channels Benefit from overseas investments Undertake M&A

Increase the proportion of overseas sales and production


Review of 2015 Medium-term Management Plan (Business)

High

functional m

aterials

Automotive

parts Energy storage

devices

Issues

Built a global production structure and benefited from overseas demand

Established new factories, increased capacity (China, North America, etc.)

Improved productivity of powder metal products

Released differentiated new products

Expanded overseas sales network

- Turned CSB Battery Co into a consolidated subsidiary

Accelerated overseas development of batteries for automobiles

Demonstration tests of renewable energy applications overseas

Delay in developing new products

Delay in establishing mass production of touch panel-related materials

Delay in market release of next generation product

Insufficient response to stagnant demand for industrial-use batteries in Japan

Liquidation of Hitachi Storage Battery (Dongguan) Co., Ltd.

(Regulations on production of lead storage batteries)

Results Reflection

Further acceleration of global development

Discovering market needs

Selection of R&D themes

Accelerate commercialization of market needs

Further generation of new customers and new products

Further strengthen global development

Opened open laboratory Strengthened the platform for the adhesive

business - Turned Taiwan First Li-Bond Co., Ltd.

Into a consolidated subsidiary Increased competitiveness of restructured

offices - Molding compounds/ Nitto Denko - Copper-clad laminates for printed wiring

boards/ Mica-Ava

6





(Fiscal 2016 to 2018)


Hitachi Chemical Group Identity 8

Hitachi Chemical Vision

Mission

Values

Contribute to society through the development of superior technologies and products

Founding Spirit “Sincerity” “Harmony” “Pioneering

Spirit”

With a pioneering spirit to explore uncharted areas, we develop innovative solutions beyond the boundaries of chemistry, delivering “wonders” that exceed the expectations of customers and society.


Basic policy to realize the vision 9

Maximize corporate value through collaboration

with stakeholders

Deepen research in realms beyond chemicals and strengthen our group’s sophisticated and broad-based

technology platform such as ‘Material Technologies’, ‘Process Technologies’ and ‘Evaluation Technologies

Innovate in all value chains for diverse markets and provide society with new value

Achieve sustained business growth by generating

adequate profits


10 Forecast Macro Environment 1

Electronics Environment/ Energy Automobiles/ Aircraft

Improve capacity for data processing

Progress in virtual communication

Reduce operations requiring staff

(IOT/Industry-4.0/M2M)

(Substitute for sophisticated analysis)

Strengthen environment and safety regulations

Expand emerging country markets

Develop electronic/ communications technologies

Change in consumer needs Increase in new participants

Rising resource nationalism Population increase and limited

resources Global warming and increased

environmental awareness Technological development

Sensor developments Multi-faceted sensors

(communication, GPS functions, etc.)

3D memory, increased prominence of new memory Packaging reforms

Semi-conductor/display value chain reforms

Progress in realignment of players Diversification of needs, shorter

lifespan for consumer products WW defacto standardization of base

descriptor and localization of consumer parts

Change in automobile structures Electricity driven Environment compatible and

lower fuel consumption Change in way automobiles are built Create modules Expansion of supply chain in

developing countries Technology innovations in aircraft Environment compatibility and

lower fuel consumption Increased cost competition

due to increase in participating companies

Increased prominence of unconventional fossil resources Shale gas revolution Methane hydrate development Realization of non/low carbon emission society Progress in CCS Establishment of hydrogen

energy society Increased popularity of

alternatives to fossil resources (Biorefinery)

Effective use of resources/ energy Establishment of next generation

electricity system Establishment of new generation

water circulation system

Environmental

Changes

Industry Trends


11 Forecast Macro Environment

Social infrastructure (Construction) Life Science Farming

Aging of existing infrastructure Increased environmental

awareness IT/ Communications Technology

Reforms Improvement in developing

country infrastructure Progress in urbanization

Sustainable construction in developed countries Super long-life for existing

infrastructure Low energy consumption for

construction

Increased construction in developing countries Infrastructure construction in

developing countries Increased building construction in

urban areas of developing countries

Increase in population and increased demand for food

Interest in food safety Technology innovation Sustained progress in farming

through government and international institutions

Progress in biotechnologies Progress in IT Reduction in government medical

costs Increase in medical demand in

developing countries Expiration of block buster patents

Further pursuit of scale and efficiencies Expansion of GMO Expansion of precision agriculture

Environment and safety initiatives Expansion of plant factory IPM: Expansion of integrated

pest management

Expand medical frontiers Expansion of biopharmaceuticals Expansion of regenerative

medicines Develop individualized medicine

Improve the quality of medical care Expansion of minimally invasive

medical care Expansion of remote diagnostic

services and treatment Stronger preventative medical

care

Expand scale of medical care Expansion of generics

Environmental

Changes

Industry Trends


12 Forecast Macro Environment

Social infrastructure (Construction) Life Science Farming

Aging of existing infrastructure Increased environmental

awareness IT/ Communications Technology

Reforms Improvement in developing

country infrastructure Progress in urbanization

Sustainable construction in developed countries Super long-life for existing

infrastructure Low energy consumption for

construction

Increased construction in developing countries Infrastructure construction in

developing countries Increased building construction in

urban areas of developing countries

Increase in population and increased demand for food

Interest in food safety Technology innovation Sustained progress in farming

through government and international institutions

Progress in biotechnologies Progress in IT Reduction in government medical

costs Increase in medical demand in

developing countries Expiration of block buster patents

Further pursuit of scale and efficiencies Expansion of GMO Expansion of precision agriculture

Environment and safety initiatives Expansion of plant factory IPM: Expansion of integrated

pest management

Expand medical frontiers Expansion of biopharmaceuticals Expansion of regenerative

medicines Develop individualized medicine

Improve the quality of medical care Expansion of minimally invasive

medical care Expansion of remote diagnostic

services and treatment Stronger preventative medical

care

Expand scale of medical care Expansion of generics

Environmental

Changes

Industry Trends

Acceleration Lighter No waste

High efficiency

Individualization Diversification Connected

Smart

Improve Quality of Life (QOL)

Realize Sustainable Environment

Industry R

equired Functions R

ealized Value

・・・・・

・・・・・・・・・・

Social infrastructure

Electronics Automobiles/ Aircraft

Environment/ Energy

Life Science Farming


13

Metal Forming

Technology

Printing & Coating

Materials Technology

Adhesive Materials

Technology

Energy Management Technology

Conductive/ Insulating Materials

Technology

Heat Resistant Materials

Technology

Photosensitive Materials

Technology

Transparent Resin

Materials Technology

Thermal Management Technology

Sliding Material

Technology

Various Core Technological Strengths

Material Technology that bring forth function

Process technologies to shape products

Evaluation technologies to translate needs

Core Competence

Integration Technology

Inorganic-Organic Composite Technology

Film Forming Technology

Energy Storage DevicesTechnology


・・・・・・・・・・・・・・・

・・・・・

14 Key Areas

Materials Parts/Devices System/Service

Farming

Automobiles/Aircraft Environment/Energy

Diversity of Core Technologies +

Business Design

Packaging materials Defacto standardization by

providing total solution

Automotive products Access to European

and American manufacturers

Energy storage systems

Globalization

Propose systems

High Functional Resins

Expand business area (Europe and America)

Expand line-up of advanced functional resins

CMP Slurry Anode Materials Life Science

Industry

Business Form

Key

Businesses

Hitachi Chemical

Electronics

Life Science

Social Infrastructure


15 Milestones for long-term growth

Storage battery systems

Life Sciences

Short-term (1-3 yrs) Medium-term (4 to 6 yrs) Long-term (6yrs +)

Strengthen business base

Packaging materials/ High functional resins

Fast product cycles, but areas that can generate short to medium-term

cash

Area that can grow as a base business through

business expansion from global developments

Areas to target for long-term span contributing to growth beyond 10 years

Preparation

Strengthen electronics packaging materials

Strengthen top share products

Automotive products Areas with many new business opportunities for materials that will

support stable growth for the next 10 years

Accelerate global development Strengthen revenue base

Accelerate global development Strengthen revenue base

Preparation

High functional products for new electronic devices (Next generation packaging materials such as 3D)

Genetic diagnosis regenerative medicine

Preparation

Lighter weight materials Adhesives

Heat management materials IoT related materials

Lead/ LiB (Hybrid) storage battery systems Energy management systems

Materials for new energy (hydrogen/ wind power)


16 16 Change how we compete, reflecting changes in business climate

Distinctive materials

Business climate

Value

Business style

Core competence

Japanese companies are market driver

Present Future

Business becoming borderless

Key is close ties with winner customers

Material technology that give rise to functionality

Process technology for producing finished products

Evaluation technology for translating needs

Diverse core technologies

Business conceptualization ability

Material properties/ process differentiation

Best product appeal

Erecting higher barriers to entry

Business model appeal

A global, multifaceted approach is essential

Solution functions

Ability to discern true needs Ability to design business

Wide array of core technologies +


Growth Target - 10 Years Hence 17

A globally active innovator transcending the boundaries of chemistry, with advanced functional

materials as core and extending to devices, systems and services

A globally active innovator providing high value-added solutions unattainable by other companies,

demonstrating performance that will prevail in global competition

Growth Target

Operating margin 14%+

Where we want to be in ten years' time


18 Corporate Governance Initiatives

Declaring ‘Corporate Governance Guidelines’ as our initiative to put into practice a management that invests

in the interest of all stakeholders Basic principles

of corporate governance code

Details of initiative (Declared in the Corporate Governance Guidelines)

Securing shareholder rights and equality

Preparing an environment where shareholders can exercise their rights Effectively securing shareholder rights of minority shareholders and foreign shareholders,

with ample consideration given to securing equality and an environment for exercising rights

Appropriate collaboration with stakeholders

Undertake honest corporate management for all stakeholders Respect each and every employee’s character and individuality and promote a policy of

diversity

Secure appropriate disclosure and transparency

Appropriately disclose financial and non-financial information in accordance with legislation Voluntarily take initiatives to disseminate information, even if it is not mandated

Duties such as Board of Directors meeting

Adopt the structure of a ‘Company with Committees System such as Nominating Committee’ At least 2 or 1/3 of directors to be independent external directors

Dialog with shareholders Constructive dialog with shareholders


Progress in ESG Management 19

To date Level of importance for stakeholders Level of importance in business operations

Disclose information in a timely and appropriate manner while taking into account the UN ‘Sustainable Development Goals (SDGs)’ and further enhancing the initiatives

Carbon management (Reduce Co2 emissions) Reduce water usage Reduce waste Promote sustainable engineering

Environment (E) Society (S) Promote diversity Promote Occupational Health and Safety Respect human rights Promote activities that contribute to local community

Promoting corporate activity that also responds to ESG issues to boost long-term corporate value

In future

Initiatives for ESG from both perspectives





(Fiscal 2016 to 2018)


2013 2014 2015 2016 2017 2018

Smartphone Note PC Tablet PC

LCD-TV Automobiles

2013 2014 2015 2016 2017 2018

Semi-conductor (wafer area) Display (device area)

Touch Panel (Quantity: Number of Sheets) Lithium ion Battry (Market Price)

Lead Battery (Market Price)

Market Trends

170

160

150

140

130

120

110

100

90

170

160

150

140

130

120

110

100

90

Final Products Parts and Devices

(6.7%)

(-1.9%)

(2.6%)

(0.7%)

(0.6%)

( )=CAGR 15-18

( )=CAGR 15-18

(5.0%)

(3.3%)

(6.7%)

(2.4%)

Based on production

volume

(3.3%)

21

2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: Hitachi Chemical, based on research agency materials


Basic policies for 2018 Medium-term Management Plan

2022-2024Medium-term Management Plan

Cultivate top share business by changing method of competition

Accelerate commercialization through open innovation

Build global management infrastructure Establish cost structure as a global business leader

2019-2021 Medium-term Management Plan

22

where w

e want

to be in ten years' tim

e

2018 Medium-term Management Plan

Strengthen global business

Strengthen management base

A globally active innovator transcending the boundaries of chemistry, with high functional materials as core and extending to devices, systems and services


Key policy measures 1: Niche and Cluster Strategy 23

Expansion of global top share business through reforms to niche and cluster business structures

Business groups that can be implemented by sharing strategies for global success through grouping

Businesses that should be sustained even if small in scale due to high profitability and strategic intent

Cluster Niche

Consider withdrawing from non-core products and businesses for which a reinforcement strategies cannot be written

etc...

Business D

Cluster

Investment businesses Growth businesses

Mature businesses

Consider withdrawal from low profit business/ non-core business

Business for restructuring

Market grow

th potential (H

igh) (Low

)

Profitability (High) (Low)

Highly functional

PKG materials

Silver paste

Die attach film

Photosensitive material

Molding compounds

etc...

ACF

Package material cluster

Anode materials

CMP Slurry

etc...

adhesives

New polymers

hardeners

Varnish

High functional

resins cluster

Coating resin

Niche business

Business B

Business A

Business C

Cultivation/ Growth Structure

Grow

th/ expansion


Key policy measures 2: Accelerate commercialization through open innovation 24

Marketing Business Design

Solution realization Commercialization

Venture companies

Markets Customer Competitors

Use of outside resources (M&A, technology licenses, business tie-ups, etc.)

Business divisions

Hitachi

Chem

ical

Research divisions

(Open Laboratory) *Packaging materials field *Touch panel field

Packaging Solution Center Touch Panel Evaluation Center

Innovation Center (established in FY16)

New Marketing through Collaborative

Creation Solution provision

Accelerate commercialization by “Collaborative Creation” using of outside resources

Development divisions


25

Utilize venture capital Dispatch technological research team to the US Seek out external resources and execute collaborative agreements

Clarify role of R&D, strengthen function

Enhance opportunities for innovation

To date In future

R Function

D Function

Development of fundamental technologies necessary for dynamic growth

Development of new products supporting expansion of existing businesses

Core Technology

Innovation Center

R&D Headquarters

Key policy measures 3: Boost capacity to create new products and new businesses

Strengthen R&D function, strengthen use of external resources

Research Laboratory

R&D Function

R&D Function

Existing business function

D function

Business sector

development


Functional Materials Segment

Product Anisotropic Conductive Film (ACF) CMP Slurry Anode materials for

LiB

Strategy

Develop materials for new displays Utilize alliances, etc.

Advance and joint development with winning customers, and equipment manufacturers

Provide optimal solutions for artificial and natural graphite

Niche

Product Groups

Semiconductor packaging materials High functional resins

Strategy

Realize concepts through open laboratory Total solution plans and defacto standardization

Create development and production synergies through grouping Expand business globally through development of European and American customers

Cluster

In future (examples)

To date Targeted business expansion in respective areas for each product = All Product Niche Strategy

26

Basic policy: Strengthen key businesses through Niche & Cluster Strategies


Functional Materials Segment: Semiconductor packaging materials cluster

Past relationships (Suppliers)

Material manufacturer Foundry

Post-process specialist

Fabless Equipment

manufacturer

Proposal Hitachi

Chemical

Supplier Tier 2 Tier 0 Tier 1

Concept design

Targeted relationships (Partners)

Tier 2 Tier 1

Proposal

Tier 0

Material manufacturer

Equipment manufacturer

Proposal Proposal

External Research Institute

Hitachi Chemical

Platform Consortium

Open Laboratory

Expand the business at faster than market growth rate by becoming a reliable partner

27


Advanced Components and Systems Segment: Automotive Products

In future

To date

28

Basic policy: Strengthen base to become global top supplier

• Expanded overseas production structure in response to globalization of customers (Key regions are North America and China)

Expand overseas sales, development and manufacturing bases

• In addition to manufacturing plants, expand overseas development bases (Full-fledged entry into European markets)

• Accelerate the release of optimal products of local production for local consumption business

• Strengthen cost competitiveness through streamlining of production


29

Establish a world-class, differentiated product strategy

Sm

aller, lighter, low

fuel consumption,

electricity

Lighter Use resin for exterior panels, structural materials • Defacto standardization in global market

• Capture business

opportunities for next generation and the generation after that

Function to improve fuel consumption Parts for turbo, idling stop system, variable valve mechanism

Environmental regulations Copper free materials, electricity driven

Electricity driven Heat management materials

Product Name FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Resin exterior product

Turbo bushing

Copperless pad Copper free pad

Light weight

Environmentally friendly

Existing Product Mass production

Low fuel consumption

Development Newly deployed Complete development

Global development

Newly deployed

Release test product

Advanced Components and Systems Segment: Automotive Products


0

20

40

60

80

100

2015 2018 2025

Capture global demand by increasing offices ISS* ratio for new worldwide

car production Region Measures to increase share

To date In future

Japan Development of advanced function products

Build customer support structure and promote sales of ISS batteries for maintenance.

Acquire authorization for new light vehicles

Europe Market research Build new offices

ASEAN

Expand sales to customers receptive to Japanese companies

Enter into exclusive sales agreement with Malaysian company

Expand manufacturing bases

Promote sales for two-wheel vehicles

Automobile batteries

(Source: Hitachi Chemical)

(%)

Basic policy: Establish presence in global markets through increased scale

30

* Idling Stop System

Advanced Components and Systems Segment: Energy storage devices and systems


0

5,000

10,000

15,000

20,000

2015 2018 2025

Industrial batteries

Industrial batteriesの市場予測 (自社調べ)

(billion yen/year)

Renewable energy/ systems

UPS/ Communication Mobile

31

Use Type of storage battery

Key policies

To date In future

Renewable energy / systems

Lead LiB

Hybrid

Strengthen collaboration with system companies Provide solutions that combine four storage battery devices

Buildi up sales through demonstration test including demonstration in Europ Provide storage battery solutions

Mobile - Forklift - Harbor crane - Railway

Lead LiB

Build results for harbor crane and railway

(Expand domestic sales)

Build sales channels in ASEAN and Europe

UPS/ Communi-

cation Lead

Increase production and sales offices through consolidation of CSB

Strengthen synergy with CSB Battery

Forecast market for industrial batteries

(Source: Hitachi Chemical)

Bolster capturing of demand in growth areas

Advanced Components and Systems Segment: Energy storage devices and systems


Basic policy: Cultivate future foundation business based on materials technology and diagnostic medicine business

Strengthen foundation of diagnostic medicine business

New entry into genetic diagnosis and regenerative medicine

Enhance management resources through M&A (including product groups, sales channels)

Promote clinical trials of genetic diagnosis technology using liquid biopsy*

Advanced Components and Systems Segment: Life Sciences

Start cell culture subcontracting business for industrial-use mass culture

* Technology that diagnoses illness from body fluids such as blood instead of taking a patient’s tissue

32


Market size

Genetic diagnosis 2020: 1 trillion yen 2050: 15 trillion yen (Forecast market for global regenerative medicine related

industries) Compiled by the Ministry of Economy, Trade and Industry

Regenerative medicine

*1 The genetics that are the blueprint for the protein that makes up the human body *2 Circulating Tumor Cell

Use our company’s technology Use our company’s materials technology for cultivation materials

Strengths

-Wiring board technology (CTC examination equipment)

Hitachi Group companies already have presence in the field; synergy effects from collaborations

-R&D Technology (mRNA analysis)

Subcontracting manufacture of cell cultivation

mRNA*1 Diagnosis Forecast effectiveness of cancer

treatment in advance

Business

description

Circulating Tumor Cells (CTC*2) Diagnosis Monitor the effectiveness of treatment

Manufacture of cultivation materials (culture medium, reagents, vessels)

33

Little burden on patients, and a market that is expected to grow

The next 4 to 6 years is a period for preparation

2015: About 730 billion yen To 2018: CAGR 7％+

(Forecast market for genetic diagnosis) Source: Hitachi Chemical

Advanced Components and Systems Segment: Life Sciences


41%46%

42%

29%16%

21%

FY2013～2015 FY2016～2018

For industry: Strengthen production capacity such as UPS (ASEAN, Asia, Japan)

For automobiles: Increase production capacity for ISS

34 Investment Strategy

Basic policy: Proactive investment in M & A and growth areas

Life Sciences, etc.

Energy storage devices

Automotive products

High functional materials

Strengthen production capacity through increase in overseas demand

Expand open laboratory Increase and rationalize production of core

business Develop and mass-produce new large-scale

products

M&A: Also consider large transactions in the order of 100 billion yen to achieve dynamic growth Fixed business investment: Invest in growth areas as

much as 1.5 times the previous Medium-term Plan 4%

59%

54% 1%

Advanced components and systems


Accelerate the launch of new products and new businesses

Expand global business

Measures for low profit products and non-core businesses

Production through robotics, etc. (minimal staffing)

Reform ways of working Global standardization of indirect

operations Accelerate outsourcing of non-core

operations and shift towards IT

35

Build global management infrastructure

Establish a cost structure as a global leader

Utilize diverse human resources Design a global human resources policy Design an organizational structure for the development of a

global business

Strengthening of Management Base

Business structural improvement policies Operations structural improvement policies


2018 Medium-term Management Plan Goals

ROIC

ROE

FY2015

Operating margin

2015 FY2018

Advanced functional materials Automotive products Energy storage devices

CO2 emissions*1

Proportion of female managers*3

Sales revenue

36

*1 Per unit of net sales base. Companies in the calculation: Major domestic manufacturing plants (including group companies) *2 Calculated using FY2014 Results *3 Stand alone base

(c.f., FY2012) (c.f., FY2014)

(FY20122015) (FY20152018)

9.7% 11%

12% 10.9%

27%

10%

10%

29.0%

6.7%

8.4%

12% 10.4%

15% 12.7%

CAGR 5.6% CAGR 7～8%

96% 106%※2


75 75

104 ｘｘｘ

2013 2014 2015 2006[Planned]

36 36

50 50

Dividends 37

Total Dividend (100 million yen)

(Fiscal year)

Continue to pay out stable dividend targeting a dividend payout ratio of about 30%

104

Dividend (yen) per share


These materials contain projections based on information available at the time of formulation. Various factors may cause actual results in the future to differ. These materials may not be freely copied or redistributed without prior permission.

Documents

2018 Medium-term Management Plan (Fiscal 2016 to 2018)...5 Overall Review of 2015 Medium-term Management Plan 3. Revenue and operating margin not yet achieved Internal factors Delay