In ever-expanding global infrastructure market, Hitachi Ltd. can have a competitive position. In terms of revenue, total of Hitachi’s infrastructure relevant divisions has about a half size of General Electrics’ similar divisions total.
- Hitachi: USD 32.64 billion, (FY2009 Electricity System + Social and Industrial System + Construction Machinery)
- GE: USD 63.59 billion, (FY2009 Energy Infrastructure + Technology Infrastructure – Healthcare)
Considering the fact that this market isn’t segmented by explicit boundary, revenue of Hitachi and GE doesn’t necessarily reflect market share. It just tells relative size of consolidated sub-market activities. So, in some area, Hitachi can be more powerful than GE. Actually, Hitachi sold more than 2,000 trains for high speed rail, but GE didn’t do anything in this area.
Resources to allocate
Hitachi is currently re-allocating its resources to sell more in global infrastructure market. Following are some examples. Hitachi has more than thirty five thousand employees (consolidated).
In 2010 May, the company revealed three year strategic and capital investment plan of about USD 19 billion. 70% of the investment was allocated into “Social Innovation Businesses” meaning infrastructure related businesses, however, it includes data center business.
Hitachi also inaugurated “Overseas Project Finance Group” in January this year. In winning long term infrastructure concession from foreign governments, especially of Public-private partnership scheme, financing for the large amount of capital investment is the key. This group reportedly consists of experienced staff of large infrastructure project partly from Japanese trading house.
In China, Hitachi’s strategic partnership with key stakeholders in Smart City arena is accelerating. According to press release of Sino-Singapore Tianjin Eco-City Investment and Development, Hitachi could win a better positioning than other manufacturers.
In November 2009, Hitachi signed a collaborative agreement with China’s National Development and Reform Commission (NDRC) to promote bilateral cooperation in environmental protection and energy conservation. Under this agreement, Hitachi co-organised “PRC National Development and Reform Commission – Hitachi Green Economy and Technology Forum” in March 2010 with the NDRC on various topics including “efficient power generation and smart grid”, “water”, “appliance recycling” and “urban transport (metro)”.
At Tianjin Eco-City, Hitachi already started test-bedding projects of Home Energy Management Systems, Electric Vehicle Charging solutions, Building Energy Management Systems, Community Energy Management Systems, Smart Grid, and Water Management Solutions.
Sources to grow
Recent disclosure of Hitachi’s financial performance of the quarter ended at 2010 December told growing profit came from emerging countries, namely China. Since domestic market of infrastructure and energy doesn’t seem to have spaces to grow, it is natural for the company to invest in other markets. Hitachi has been suffering long sluggishness of low profitability due to domestic economic status. Recent facts show sources to grow exactly exists in countries which are aggressive in infrastructure investing. As Hitachi has construction machinery subsidiary Hitachi Construction Machinery, booming infrastructure projects directly improve profitability of the subsidiary. The same will be the true with other infrastructure businesses.
Additionally, in Hitachi’s portfolio, subsidiaries of railway, water and electric power plant including nuclear can receive profits from global infrastructure expansion. As Japanese government is promoting “infrastructure export”, Hitachi’s can be more competitive than ever.
Originally posted on Infrastructure Investment Journal authored by Daisuke Imaizumi, CEO of InfraCommons.