HITACHI, LTD. ANNUAL REPORT 200114

>> INFORMATION & TELECOMMUNICATION

SYSTEMS In fiscal 2000, ended March 31,

2001, investment in IT was brisk in Japan,against a backdrop of restructuring in financialservices industries, intensifying competition inlogistics, and expansion of e-Government andNet businesses. Overseas markets saw asignificant increase in demand for storagesolutions that facilitate the centralized man-agement and sharing of storage systemsand data dispersed throughout companies.

In this climate, Hitachi’s systems integration(SI) and solutions businesses turned in strongsales growth, due in particular to demandfrom the financial services industry in Japan.Overseas, sales of redundant array of indepen-dent disks (RAID) storage systems increased,supported by the introduction of new models

REVIEW OF OPERATIONS

Information Systems & Electronics

and growing demand. Sales of PCs and PCservers were also above year-ago levels.Mainframe sales decreased as the Companydecided to shift its focus from mainframes toRAID storage systems in overseas markets.Hard disk drives turned in increased sales,although they were affected by falling prices.In telecommunications systems, demand wasbrisk for Integrated Service Digital Network(ISDN) systems in Japan, and optical com-ponents posted higher sales, primarily inNorth America.

Reflecting the changes in the product mix,overall earnings increased, but were affectedby the write-off of goodwill in Hitachi DataSystems Corporation, a U.S. subsidiary.

In June 2000, the Company launched theworld’s highest capacity and fastest RAIDstorage system, an achievement that gener-ated a strong market response. At the sametime, Hitachi broadened its lineup of StorageArea Network (SAN) solutions built aroundthis system and enhanced support andservices. The Company also reached agree-ment with VERITAS Software Corporation ona global partnership to deliver storagesolutions with high availability.

Another focus was on Net businesses,which are growing rapidly. Hitachi moved toenhance its organizational framework for con-ducting these businesses. One action wasthe establishment of Hitachi netBusiness, Ltd.to provide a full range of the type of servicesrequired for business platforms, includingoperation of internet data centers, storageservices, proxy operations, collection of feesand charges, customer management andcertification and encryption. In addition,Hitachi unveiled a common brand name toencompass all Net businesses of the HitachiGroup—Cubium.

GlobalCenter Japan Corporation is delivering storage services rooted in the highperformance and reliability of Hitachi’s RAID storage systems.

HITACHI, LTD. ANNUAL REPORT 2001 15

To shorten the time to market and to driveefficiencies in server development andproduction, Hitachi inked a broad-basedstrategic alliance with International BusinessMachines Corporation. The alliance will seethe two parties jointly develop and manufac-ture mainstay server products, semiconductorchips and other components.

To drive expansion in its solutions business,Hitachi has entered into a number of strategicalliances. In October 2000, for example,Experio Solutions Corporation, a Hitachi sub-sidiary, acquired the e-Business ConsultingGroup of Grant Thornton LLP, an accountingand management-consulting firm. Hitachi alsoforged a comprehensive alliance with MicrosoftCorporation to develop and deliver Microsoft®

Windows® 2000-based enterprise solutions.In December 2000, the two parties establisheda joint venture corporation called NEXTIDE Inc.,a Hitachi subsidiary.

In the telecommunications field, Hitachi andClarity Group, a U.S.-based equity partner-ship, established OpNext, Inc. in the U.S., inSeptember 2000. This new subsidiary suppliesfiber optic components for data and tele-communications applications, a market that isexpanding rapidly in North America and otherareas. Hitachi also signed an agreement withNEC Corporation for the joint development ofnext-generation optical transport systems,which are in increasing demand overseas.

A compact, energy-efficient 10Gbit/s optic transceiver.

Hitachi Software Engineering Co., Ltd. sawits net sales increase 14% year on year to¥182,475 million (US$1,472 million) basedon strong sales of value-added systems.These systems included Net-based bankingsystems, and large-scale systems for financialservices and communications companies.Operating income rose to ¥12,814 million(US$103 million), up 16% year on year. In newbusinesses, Hitachi Software Engineeringdeveloped DNA chips and related manufac-turing equipment in its growing life sciencebusiness.

Hitachi Information Systems, Ltd. posted a4% increase in net sales to ¥113,342 million(US$914 million). Spurring this increasewere the launch of e-commerce and otherApplication Service Provider services, in addi-tion to strong demand for the company’s SIservices from local governments, logisticscompanies, manufacturers and other types ofusers. Operating income rose 22% to ¥6,238million (US$50 million). In February 2001,Hitachi Information Systems announced that itwill merge with Hitachi Information Network,Ltd., a Hitachi subsidiary, to integrate andenhance its solutions business.

Hitachi’s new brand name for its Net business.

Microsoft and Windows are registeredtrademarks of Microsoft Corporation.

HITACHI, LTD. ANNUAL REPORT 200116

>> SEMICONDUCTORS During fiscal

2000, the semiconductor market grew due tobrisk demand for PCs and peripherals, mobilephones and digital consumer products.

Hitachi’s semiconductor operations reflectedthese favorable market conditions. Salesgrew, particularly of system LSIs and general-purpose semiconductors. Semiconductoroperations also saw earnings improve sharply,year on year.

During the year, Hitachi invested a record¥220,000 million (US$1,774 million) in semi-conductor operations. The investments wereearmarked to ramp up production capacity forstrategic products, namely radio frequency(RF) high power amplifier modules for GSM-standard mobile phones and system LSIssuch as RF analog ICs for mobile phones andmicrocontrollers for IC cards.

In system LSIs, robust sales were postedby H8 series microcontrollers for IC cardsand SuperH™ family microcomputers in abroad range of fields, including informationand digital consumer applications. RF analogICs for mobile phones also performed well. Ingeneral-purpose semiconductors, sales of RFhigh power amplifier modules were brisk.

In DRAMs, the development and design ofnext-generation products was started duringthe period at Elpida Memory, Inc., a Hitachi

equity-method affiliate that is jointly ownedwith NEC Corporation. Hitachi transferred itsDRAM sales functions to Elpida Memory inthe first quarter of 2001. DRAM productionhas been concentrated in Hitachi NipponSteel Semiconductor Singapore Pte. Ltd.,which manufactures DRAMs for ElpidaMemory. In September 2000, Elpida Memoryannounced the development of the world’sfirst 256-megabit DRAM based on 0.13-micron process design rules. Elpida Memoryalso began construction of a 300mm waferfabrication plant in February 2001.

In system memories, sales of large-capacityAND-type flash memories for data storageapplications were slow owing to sluggishdemand. SRAMs, on the other hand, performedwell due to demand from mobile phonemanufacturers. Trecenti Technologies, Inc., aHitachi subsidiary owned jointly with UnitedMicroelectronics Corporation, began volumeproduction using 300mm wafers in March2001. This was a world first. In April 2001,Hitachi teamed up with STMicroelectronics toestablish SuperH, Inc. to develop and licensemicroprocessor cores of the SuperH™ family.

Hitachi’s semiconductor business strategycalls for an ongoing focus on system LSIs,and the allocation of resources for the earlydevelopment and commercialization of next-generation strategic products in areas inwhich Hitachi is highly competitive.

>> DISPLAYS In display products, ship-ments of thin-film transistor (TFT) LCDs fornotebook PCs and PC monitors grew.However, sales fell as prices plummeted. Colordisplay tube sales decreased as the desktopPC market softened. On the other hand,projection tube sales increased, reflectingsteady growth of the projection TV market.Overall, sales of display products decreased

A multi-chip module incorporating a SuperHTM micro-processor and synchronous DRAMs in a single package.

HITACHI, LTD. ANNUAL REPORT 2001 17

and earnings dropped sharply due to fallingTFT LCD prices.

In October 2000, Hitachi establishedHitachi Display Device (Suzhou) Co., Ltd. inChina to assemble LCD modules for PCsand mobile phones. This new subsidiary willexpand Hitachi’s production capacity, enhanceHitachi’s price competitiveness and help meetan expected surge in demand in the Chinesemarket. Plans call for production to commencein October 2001.

During the year, Hitachi invested ¥55,000million (US$444 million) in LCD operations,mainly for a new production line for TFTLCDs, which is scheduled to begin operationin July 2001.

Regarding the Company’s TFT LCDstrategy, Hitachi is working to improve itsproduct mix by expanding the ratio of non-notebook PC applications such as mobilephones, PC monitors and televisions. Hitachiplans to stabilize its LCD operations byconcentrating on these strategic areas.

During the year under review, Fujitsu HitachiPlasma Display Limited, a Hitachi equity-method affiliate that is jointly owned withFujitsu Limited, completed construction of itssecond plasma display panel productionplant. The plant began shipping in April 2001.

>> OTHER In the digital media field, sales of

display monitors sagged as price competitionintensified. Sales of optical storage devicesincreased as demand for DVD-ROM drivesfor PCs grew.

Sales of test and measurement equipmentincreased year on year due to strong demandfor scanning electron microscopes for semi-conductor inspection, lithography systemsand biotechnology systems. Sales of envi-ronmental systems and medical systems,however, decreased.

Hitachi Medical Corporation’s net salesincreased 3% year on year to ¥112,280million (US$905 million), and operatingincome rose 9% to ¥4,594 million (US$37million) on increased sales of ultrasounddiagnostic equipment. In fiscal 2000, the com-pany launched an optical topography system,the world’s first medical imaging system thatemploys near-infrared rays to make brainactivity visible. Looking ahead, Hitachi Medicalaims to strengthen its service businesses andspeed up development of strategic productsin an effort to improve earnings.

To reorganize the Hitachi Group’s test andmeasurement equipment and semiconductormanufacturing equipment operations, theInstruments Group and SemiconductorManufacturing Equipment Group will beseparated from the parent company andmerged with Nissei Sangyo Co., Ltd. inOctober 2001. In a related move, HitachiMedical’s sales operations for clinical testingsystems will be transferred to Nissei Sangyo.

This UHF-ECR plasmaetching system is used formanufacturing semi-conductor devices basedon 0.13-micron or finerprocess design rules.

A 19-inch Super-IPS TFTLCD module with 170-degree wide viewing angle.

HITACHI, LTD. ANNUAL REPORT 200118

>> POWER SYSTEMS The domestic power

systems market was extremely challengingduring the period under review as electricpower companies curbed capital expenditures.This situation was brought about by deregula-tion in Japan’s electric power market and lack-luster demand for electricity. However, powersystems managed to post year-on-year gainsin sales and earnings, thanks to large-scalethermal power plant projects and expansion ofthe maintenance business as well as demandfor turbines for the U.S. market.

To take advantage of domestic deregulation,in June 2000 Hitachi completed its first powerplant, which is the centerpiece of its drive tobecome an independent power producer.Hitachi also moved to reinforce operationsworldwide. In December 2000, as part of anexpansion of its thermal power plant mainte-nance operations overseas, Hitachi set up ajoint venture in Singapore with a local com-pany to provide maintenance and relatedservices. Furthermore, in July 2001 Hitachi

Power & Industrial Systems

will establish a company with Fuji ElectricCo., Ltd. and Meidensha Corporation for thedesign, development and manufacture ofelectric power transmission and distributionequipment.

>> INDUSTRIAL SYSTEMS A downturn in

domestic demand for rolling stock offsetgrowth of signal-related equipment for railwaycompanies. On the other hand, sales ofchemical and pharmaceutical plants grewsteadily during the year, supported by a slightrecovery in private-sector capital expendituresin Japan. Hitachi moved forward with restruc-turing by separating design and manufacturingdivisions from the parent company. As a result,industrial systems posted increases in salesand earnings.

To lift the pace of development and bolstercost competitiveness in high-voltage motorsand small- to medium-capacity generators,Hitachi established Japan Motor & GeneratorCo., Ltd., a joint venture with Fuji Electric andMeidensha, in July 2000. In October 2000,Hitachi and Mitsubishi Heavy Industries, Ltd.established MHI-HITACHI Metals Machinery,Inc. to engage in sales of metal rolling millsand engineering services.

Moreover, in April 2001 an alliance wasformed with Kawasaki Heavy Industries, Ltd. tocreate a powerful platform for marketing andsales of railway systems for overseas markets.

Hitachi technology is showcased in these sleek 885-series limited express railcars thatrun on the Nagasaki Line of Kyushu Railway Company.

HITACHI, LTD. ANNUAL REPORT 2001 19

>> BUILDING SYSTEMS In elevators and

escalators, the Japanese market for mainte-nance and services expanded, but the domes-tic equipment market contracted year-on-yeardue to fierce price competition. In this climate,Hitachi focused on comprehensive buildingmanagement systems and other high-value-added service operations. At the same time, itrolled out highly competitive new equipment.These moves drove growth in both equipmentand services, resulting in higher year-on-yearsales and earnings. In another development,in October 2000, Hitachi merged its homeelevator operations with those of MitsubishiElectric Corporation to form MitsubishiHitachi Home Elevator Corporation.

>> OTHER In automotive products, Hitachiis focusing on aggressively developing opera-tions in the Intelligent Transport System (ITS)field. As part of this drive, in December 2000,Hitachi purchased Nissan Motor Co., Ltd.’sholdings in Xanavi Informatics Corporation,making it a wholly owned Hitachi subsidiary.Also, Hitachi teamed up with Clarion Co., Ltd.and Xanavi Informatics to establish HCXCorporation, to develop and manufactureleading-edge Car Information Systems.

Net sales of Hitachi Construction MachineryCo., Ltd. increased 3% to ¥328,854 million

The Chugoku Electric Power Co., Inc.’s Osaki PowerStation took delivery from Hitachi of 250MW pressurizedfluidized bed combustion generators, the world’s largest.

(US$2,652 million). Operating income in-creased 63% year on year, to ¥9,892 million(US$80 million). In Japan, declining orders forpublic works projects made the market difficult,but Hitachi Construction Machinery focusedon expanding sales by launching new hydraulicexcavator models and other products. Over-seas, solid results in Europe offset the effectsof a slowdown in the U.S. economy. Thecompany decided to dissolve a joint venture,Fiat-Hitachi Excavators S.p.A., and will pursuean independent strategy in Europe, Africa andthe Middle East. Looking to the future, HitachiConstruction Machinery will push ahead withdecisive restructuring measures including theestablishment of a wheel loader joint venturewith Deere & Company.

Hitachi Plant Engineering & ConstructionCo., Ltd. posted net sales of ¥241,842 million(US$1,950 million), a 23% increase year onyear. Completion of large-scale electric powerfacilities and steel mills overseas contributedto the results. Operating income rose to¥6,657 million (US$54 million), up 20% yearon year. Hitachi Plant Engineering intends toexpand its technologically superior clean roomoperations and concentrate on developingsolutions businesses such as in the area ofwater supply and sewage treatment facilities.

Hitachi delivered this escalator to the Fukui PrefecturalDinosaur Museum, which opened in July 2000.

HITACHI, LTD. ANNUAL REPORT 200120

In Japan, a particularly hot summer stimulatedgrowth of the room air conditioner market,while the Olympic Games in Sydney and thestart of BS digital broadcasting fueled growthof the TV market. The consumer productsmarket also received a boost from consumersrushing to purchase new appliances beforeApril 2001, when a new Japanese law cameinto effect that requires consumers to payrecycling fees for four types of appliances.Throughout the period, the slow pace of eco-nomic recovery caused Japanese consumersto become more price-sensitive than ever.

>> HOME APPLIANCES Competitive forcesheld down prices across the sector duringfiscal 2000. Sales of room air conditionerswere sluggish due to severe price competition.In Japan, sales and earnings of energy-efficientpulse amplitude modulation (PAM) refrigera-tors increased year on year. Sales of washingmachines increased, however earnings wereimpacted by price competition. Microwaveovens featuring PAM technology posted sig-nificant sales growth, well above the industry

Consumer Products

Hitachi’s refrigerators in six colors.

average. In contrast, sales of home vacuumcleaners declined, as Hitachi lost marketshare in the high-end category. As a whole,sales of home appliances in Japan showed aslight increase year on year.

During the year, Hitachi started to shift itsresources to fast-growing businesses, such asproducts for home nursing care and servicesfor home renovations. These moves weremade to respond to increasing demands formore comfortable living environments, reflect-ing the aging of Japan’s population.

In overseas operations, in October 2000,Hitachi entered into a strategic alliance withGermany’s BSH Bosch und SiemensHausgeräte GmbH. This alliance will serve asthe bedrock for expanding home applianceoperations outside Japan, particularly in Asianmarkets. As the first step, a joint venture calledBHST Washing Appliances Ltd. was estab-lished in April 2001 to manufacture drum-type washing machines in Thailand. The twocompanies are looking to broaden the scopeof their cooperation to include room airconditioners and other home appliances.

The world’s first 32-inch HDTV-ready full-resolution plasma TV.

HITACHI, LTD. ANNUAL REPORT 2001 21

With sales prices trending downward in thehousehold appliance industry, companies arehaving to bolster their price competitiveness.Hitachi is responding in two ways. First, it islowering the cost of sales by reducing materialcosts and promoting the standardization ofparts. The other way is through joint purchas-ing by members of the Hitachi Group.

>> DIGITAL MEDIA In TVs, the operating

environment turned severe as price competi-tion gripped the market. Hitachi moved tomeet this challenge by reorganizing its pro-duction system on a global scale. In thesummer of 2000, all cathode-ray tube colortelevision production was transferred overseas.Looking ahead, resources will be funneledinto plasma TVs, projection TVs and otherareas where the Company has a competitiveedge. In Japan, Hitachi also intends to developproducts for digital BS/CS broadcasting fromthe 110-degree orbital slot.

The mobile phone sector continued toperform well. Hitachi focused on providinghandsets to KDDI CORPORATION and wasthe first to bring to market a cdmaOnehandset featuring a color LCD. Plans call forHitachi to open up markets overseas too. Asa first step, Hitachi signed a contract withChina’s Hisense Co., Ltd., in September2000, to provide design and manufacturingtechnologies for mobile phones.

The world’s first DVD-RAM camcorder.

Super DLTtapeTM, a computer tape capableof 110GB data storage.

Sales of LCD projectors also rose on theback of rapid market expansion. Optical pick-ups and surface acoustic wave (SAW) filtersperformed well in growing PC and mobilephone markets.

>> HITACHI MAXELL, LTD. Net sales

declined 3% to ¥209,524 million (US$1,690million) and operating income fell 21% to¥9,970 million (US$80 million). Sales ofcomputer tapes, a field where Hitachi Maxellis a leader, increased as demand continued togrow. However, sales of lithium ion recharge-able batteries declined as mobile phonemanufacturers adjusted production volumes.Sales of CD-Rs also fell due to a precipitousfall in prices caused by oversupply.

Super DLTtape is a trademark of Quantum Corporation.

HITACHI, LTD. ANNUAL REPORT 200122

>> HITACHI CHEMICAL CO., LTD. HitachiChemical posted an 8% year-on-year increasein sales to ¥586,314 million (US$4,728million). Turning in strong performances wereelectronics-related products and chemical-related products. Operating income rose31% to ¥45,814 million (US$369 million).

Sales of electronics-related products werehigher. Sales of anisotropic conductive filmsfor fine circuit connections for LCDs werestrong, reflecting robust demand for mobilephones and PCs. Also higher were sales ofdie-bonding materials for semiconductors andepoxy molding compounds for semiconductorencapsulation. Copper-clad laminates for high-density multilayer printed circuit boards usedin servers and routers, and multiwire boardsfor semiconductor testers also increased.

Sales of chemical-related products werealso higher. This reflected strong demand foralumina ceramics for semiconductor manu-facturing equipment and adhesive films forelectronics-related applications. Sales ofcarbon cathode materials for lithium ionrechargeable batteries used in mobile phonesrose. Sales of pads for disk brakes wereboosted by their use in a wider range of cars.

In housing equipment and environmentalfacilities, sales slipped year on year, reflecting

Materials

Carbon cathodes for use in re-chargeable lithium ion batteries.

sluggish demand for prefabricated bathroomunits for houses. This negative factor out-weighed steady sales of system kitchensand compact domestic wastewater treat-ment systems.

During the year, Hitachi Chemical restruc-tured subsidiaries to improve managementefficiency. This included selling a publiclytraded subsidiary.

>> HITACHI METALS, LTD. Net sales in-creased 3% to ¥479,480 million (US$3,867million). Operating income rose 20% to¥25,371 million (US$205 million).

In high-grade specialty steels, demand wassteady for electronics-related materials suchas lead frames for mobile phones and sputter-ing target materials. Exports of automobileengine parts and materials to North Americawere strong. Sales of specialty steels, diesteels and cutting tools were solid. Thesefactors resulted in higher year-on-year salesin high-grade specialty steels.

In automotive materials, sales of high-grade casting components, especiallyHERCUNITE™, in Europe and North America,were good. On the other hand, demand forductile and malleable iron castings was lower.Overall, sales were slightly above the previousyear’s levels.

In construction components, plant andequipment, sales of stainless steel andplastic piping components were steady, aswere sales of environment-related productsto the public sector. These positive factorshelped push up sales of construction com-ponents, plant and equipment.

In electronic and information system com-ponents, overall sales decreased year on year.Ferrite cores for use in communication anddigital equipment, mobile phone components

Sputtering target materials for semiconductors,LCDs and hard disk drives.

HITACHI, LTD. ANNUAL REPORT 2001 23

and other information system componentsenjoyed strong demand. However, sales ofelectronic components dropped sharply, re-flecting the transfer of giant magneto-resistivehead operations to the parent company.

In April 2001, Hitachi Metals merged twotrading company subsidiaries and wound upanother subsidiary to improve managementefficiency. Management reforms were imple-mented by enhancing the autonomy ofbusiness groups and adopting a new manage-ment system.

>> HITACHI CABLE, LTD. Hitachi Cable’snet sales increased 14% year on year to¥410,394 million (US$3,310 million).Operating income rose 75% to ¥27,177million (US$219 million).

Overall sales of wires and cables increasedyear on year. Sales of power cables werelackluster, while sales of submarine fiber-opticcables continued to be buoyed by increasingdemand for higher communications capacity.

Electronic wires also turned in a strongperformance.

In information systems and electroniccomponents, overall sales increased year onyear. Sales of semiconductor packagingmaterials were down. Compound semicon-ductors posted good sales growth due tostrong demand for their use in mobile phonesand lasers for CDs and DVDs. Optical com-ponents, mobile phone base station construc-tion and antennas also posted strong results.

Sales of copper products increased,supported by strong demand for copperstrips for semiconductors and submarinefiber-optic cables. Sales of copper tubes,however, were flat.

In electric equipment, construction andother, sales were slightly below the previousyear’s level due to a decline in large-scaletransmission cable construction projects.Also, there was only a modest gain in sales ofautomotive hoses as falling prices largelynegated an increase in demand.

Fiscal 2000 saw more progress in therestructuring of Hitachi Cable’s operations.Hitachi Cable reached an agreement withSumitomo Electric Industries, Ltd. to form anew company that would combine theirrespective high-voltage electric power cableoperations, with the exception of domesticsales operations. Plans call for the new entityto start operations in October 2001.

Gallium-arsenide single crystals and wafers.

HITACHI, LTD. ANNUAL REPORT 200124

>> NISSEI SANGYO CO., LTD. Net sales in-creased 17% to ¥848,700 million (US$6,844million). Operating income rose 77% to¥14,688 million (US$118 million). During theperiod under review, the semiconductormanufacturing equipment industry was buoyedby aggressive capital investment by semicon-ductor manufacturers worldwide. NisseiSangyo was well positioned to benefit fromthis trend. Strong sales of semiconductormanufacturing equipment spurred sales andearnings growth in scientific instruments andproduction systems.

One noteworthy event was Nissei Sangyo’sreceipt of its first order for stepper lithographysystems manufactured by ASML. Another wasthe start of sales of organic electro lumines-cence (EL) production systems made byTOKKI CORPORATION.

In information systems and electroniccomponents, sales of microcontrollers andmodules for mobile phones as well as opticalpickups increased. These gains were offsetby Nissei Sangyo’s withdrawal from themonitor business in the U.S. and general-usecomputers for Europe.

In advanced industrial products, sales offiber-optic communications components rosesharply. These materials are a vital part of wave-length division multiplexing (WDM) systems.

Services & Other

Organic EL production equipment made byTOKKI CORPORATION.

In October 2001, plans call for the parentcompany’s Instruments Group and Semicon-ductor Manufacturing Equipment Group tobe merged with Nissei Sangyo. The ultimateaim is to become one of the world’s leadingcompanies in the areas of semiconductormanufacturing equipment and biotechnology-related products.

>> HITACHI CAPITAL CORPORATION

Hitachi Capital Corporation was formed inOctober 2000 following the merger ofHitachi’s consolidated subsidiary, HitachiCredit Corporation, and Hitachi’s equity-method affiliate, Hitachi Leasing, Ltd. Themerger gave birth to a comprehensive finan-cial services company with a broad customerbase that encompasses multinational corpo-rations as well as individuals. As the nucleusof the Hitachi Group’s financial services busi-ness, the new company has a solid base forgrowth. Hitachi Capital is targeting five keybusinesses: leasing, retail, cards, securitizationand outsourcing.

In fiscal 2000, Hitachi Capital’s revenuesincreased 5% year on year to ¥125,570 million(US$1,013 million). Operating income rose8% to ¥30,149 million (US$243 million).Leasing revenues increased 6% year on year,mainly due to the higher volume of industrial

Hitachi Capital credit cards.

HITACHI, LTD. ANNUAL REPORT 2001 25

machinery business. In the retail business,mainstay automobile and housing loan volumesincreased, resulting in a 3% rise in revenues.Revenues from cards, securitization andoutsourcing businesses increased 37%.Note: The above figures were restated to reflect

the merger in fiscal 2000.

>> HITACHI TRANSPORT SYSTEM, LTD.

Net sales increased 6% to ¥281,697 million(US$2,272 million), and operating incomerose 11% to ¥10,424 million (US$84 million).

In fiscal 2000, the volume of freight in Japanwas on a par with the preceding year’s level.Solid demand in freight of manufacturingequipment and consumer products was offsetby lackluster volumes of construction-relatedfreight.

Sales by the company’s domestic distribu-tion business increased 7% due mainly toexpansion in the logistics solutions businessfrom new fields such as retail, medical servicesand pharmaceutical products.

A Hitachi Transport System logistics center in San Diego, which opened in April 2000.

In the overseas distribution business, salesincreased 3%. This reflected continuing soliddemand in air cargo transportation to handlehigher exports of computer components. Alloverseas bases concentrated on capturingnew customers. The company opened twologistics centers in Los Angeles and SanDiego. In China, a local subsidiary was estab-lished in Shanghai, expanding the company’ssales base in that market.

In passenger operations, sales increased 2%year on year due to a strong performance intravel agency operations, which offset theimpact of a fall in passenger numbers at TokyoMonorail Co., Ltd.

>> OTHER Overseas-based general tradingcompanies in Europe and Asia felt the effectsof a drop in semiconductor demand from thestart of 2001. Overall, however, trading trans-actions for semiconductors made a majorcontribution to higher sales. In the U.S., highersales of turbines helped to push up net sales.