It is time to start, so we are now going to start with Hitachi, Ltd's R&D and IP Strategy briefing. Thank you very much for participating in this briefing despite your busy schedule. The presentation materials that will be used today are posted on Hitachi, Ltd's IR site and news release site. Please access them whenever you need. Let me introduce to you the speakers. Dr. Norihiro Suzuki, Vice President and Executive Officer, CTO of Hitachi, Ltd Dr. Gerhard Salge, CTO of Hitachi Energy. Mr. Stephen Manetta, Chief Intellectual Property Officer of Hitachi, Ltd
We have these three speakers today. After Dr. Suzuki will introduce R&D strategy of Hitachi, Ltd, and then Dr. Salge will introduce the Hitachi Energy's R&D strategy. Last but not least, Mr. Manetta will introduce Hitachi, Ltd's IP strategy. Q&A will be accepted after all the presentations are over. Suzuki will be speaking Japanese, and Dr. Salge and Mr. Manetta will be speaking in English. There are simultaneous translation available, so please use the English channel or the Japanese channel. Without any further ado, I'd like to invite Dr. Suzuki to talk about Hitachi, Ltd's R&D strategy.
Suzuki-san,
Dr. Suzuki, please.
Thank you very much. This is the first in series to have this face-to-face R&D strategy and IP strategy briefing. Thank you very much for your attendance. I would like to explain the R&D strategy from my side at this moment. There are following three points that I would like to share with you today. The first is about expansion of R&D investment and establishing global research system. Accelerating research development to expand Lumada's business. Number three, driving innovation by backcasting from 2050. Number four, summary. Let me talk according to this.
First, the R&D group vision. Hitachi Group wants to protect the Earth and create through green, digital, and innovation, a society where every individual is comfortable and active, w ith data and technology, foster a sustainable society so that we can support people's happiness. In order to realize this at Hitachi, we are addressing issues to solve the problems of customers. Hitachi Energy, GlobalLogic, because we have these entities, OT x IT x product strength and delivery capability has been strengthened. Solution, cutting-edge technology, OT know-how are combined so that we can provide one-stop solutions to our customers on a global basis.
If we look back on the last decade, Hitachi Group has undergone major transformation within the group. R&D Group has been changing itself in line with this. In 2015+, we shifted to a Social Innovation Business, establishing foundations for growth in terms of R&D. In MMP 2018, we created social innovation hubs around the world to promote customer co-creation. In MMP 2021, for global development of Social Innovation Business, we created Kyōsō-no-Mori, a hub for co-creation. We have accelerated R&D for Lumada business. MMP 2024, we're going to further accelerate growth through green, digital, and innovation so that we can strengthen innovation, co-creation- w e will be expanding R&D so that we will be able to contribute to our business more.
This is about promotion structure for innovation. We created Innovation Growth Strategy Division. Under its strategy, we are going to generate digital service business, drive radical innovation, and strengthen global IP strategy. Within the R&D group, we're going to support customer value, and we will be addressing issues backcasting from 2050. The Global Intellectual Property Group is headed newly by Stephen Manetta and establish an intellectual property platform to provide value to global customers, w ith respect to Hitachi Group's R&D investment and R&D efficiency, as is shown here.
For Hitachi Group overall, R&D investment to revenue ratio in FY 2022 has been increased considerably. Profit divided by R&D expense, so R&D efficiency is shown on the right-hand side. Compared to global players, we are positioned quite favorably. MMP 2024 and MMP 2027, we're going to implement the possible positive cycle of R&D expense to revenue ratio to be increased. This shows Hitachi Group's R&D investment portfolio. The outer rim of the circle shows Hitachi Group's JPY 338 billion R&D expense in total. R&D Group is responsible for JPY 74 billion, the total of the green and the purple part.
What is shown in green, in each sector, there is existing business and future business that's going to contribute to the current and future business. What's shown in purple, a corporate so it's comprised of Hitachi Group Frontier/ Platform Research, 2050 project, and corporate venturing. We are particularly focusing on radical innovation, i n order to promote innovation, the technology platform, human resources, and customer platform are leveraged fully so that we can expand this globally. We have 2,400 researchers who are very diverse. Hitachi Energy, GlobalLogic, together with them in each region through ExgX, we're going to accelerate global growth. We have a message from GlobalLogic CTO Sunil Singh.
My name is Sunil Singh. I'm the Chief Technology Officer at GlobalLogic, a Hitachi company. We are a digital product engineering services company. We build products and platforms at the intersection of design, data, and complex engineering. I'm here to talk to you about how we are working closely with Hitachi R&D to see what types of innovative solutions and technologies we can bring that really increase value for our customers. I'm pleased to say that we are already seeing a lot of benefits through some very successful collaborations.
As an example, we recently delivered an automotive solution to one of our customers working with the R&D team. We employed some of the most cutting-edge machine learning technologies. We're also collaborating in areas like supply chain, bringing to our customers solutions that are tied to blockchain, smart contracts, and really some very fundamental areas like cross-chain transactions. There are many other areas. For example, in 5G, we are working with the team at R&D, to bring low latency solutions, in areas such as the smart factory. There are many other areas of collaboration that we are working on. Radio technologies is one of them.
Bringing out the infrastructure for quickly developing and deploying and maintaining machine learning models, and a few other examples. In summary, what I'd say is we see R&D as a great resource, to bring new technologies to our customers, to work on co-creation, and we look forward to accelerating the synergy to deliver these new solutions to our customers. Thank you.
As you saw, we're going to deepen our collaboration with GlobalLogic, as he said. These are the major external recognitions that we received. Water leakage detection system using highly sensitive MEMS vibrations sensors was awarded the Japan Industrial Technology Award and MAX Award. In designs and international competitions, we have received many awards, testimony to our level of technology, so that we can receive more awards, we will be promoting our R&D going forward. These are the contributions to Lumada business growth. The yearly evolution and R&D group's contribution is shown in comparison.
The ratio of our contribution is increasing year-by-year, toward our MMP, CX, DX, GX. By promoting this, Lumada business' revenue will be driven. Next, accelerating R&D to expand Lumada business. In recent times, there has been rapid changes in external environment. Society, and economy are changing. Digital innovation is happening. As carbon neutrality is promoted, visualization of carbon emission is being pursued. In the industrial structure with the pandemic and geopolitical risks, value chain is being restructured. A token economy is being created for electronic transactions.
In our lives, e-commerce is expanded, and metaverse is accelerating and is being penetrating into our lives. DX trends are captured as our business opportunities. We're going to promote Lumada so that we can contribute to your customers' next problems and growth, and so that we can drive our digital services. The financial public services, energy, railway, transport, manufacturing, logistics. I would like to show you some of the examples here. First in financial and public services area. Efficiency gain is the challenge right now. Next challenge is to create new demand.
For current solutions, by using AI, we will be providing operational excellence solutions. For the next step problems, IoT, metaverse, and web, these will be brought to bear so that new values can be created. Within this, I would like to talk about the sustainable finance platform, how it's established. We are accelerating investment for the environment. A green asset data is being shared as data with a range of stakeholders. Well, the reality is that there's insufficient investment funding for green energy development projects. The problems included efficient reporting and aggregation or lack thereof.
By using blockchain, a high level of decision-making efficiency and smooth operation can be facilitated by the, a platform that we created. A green bond, track bond is being applied for this, and we will be collaborating with a number of other financial instruments going forward, especially for power and transportation and rail. For asset management innovation, we are enhancing the level of maintenance. The next problem is carbon neutrality. We will work with the customer to draw up a scenario for this, demonstrate what works, and green as a service, green mobility as a service will be developed and provided. Today, green mobility as a service and metaverse, that's what I would like to talk about.
In green mobility as a service, this is developing technologies for digital ticketing EV fleets as solutions to both facilitate urban mobility and reduce environmental impact. In Genoa, Italy, for more than 7,000 sensors installed in subways, buses, and stations are connected to smartphones to capture the travel routes of users and automatically settle their bills. As a result, users can now use the city's public transportation more conveniently, and transportation operators can easily make operations, plans based on the data, and this is going to start in July.
Also, EV fleet long life operations provider, which uses EV operation data to remotely diagnose EV battery duration and control battery capacity recovery to extend the service life of EVs. We contribute to improvement of wellbeing and carbon neutrality. In the metaverse, OT knowledge from the workplace is stored in the metaverse space provide a new way of working that is difficult to achieve in the real world alone. For example, in the railroad industry, vehicle manufacturing operation and maintenance logs are stored in the metaverse and used to hand down technology. We are also developing other applications to develop the work style of essential workers.
Number three is the manufacturing logistics field, t he latest robotics digital technology will be used to innovate manufacturing processes. Towards circular economy, we will combine Hitachi's long-established material technology and digital technology so that we can upcycle resources and help our customers respond to the circular economy. Of these, today I will talk about IoT complex initiative and upcycling initiatives. First, the IoT project is a joint initiative with Suntory's manufacturing of the future using IoT.
For beverage manufacturers, ensuring safety and security throughout the entire supply chain is an important issue. Our technology is used to assign an ID to each product to pursue further safety and security through traceability, and also realize the factories that continuously evolve and optimize its overall operations through a dashboard displaying various information. This is an example of digital twin, where real world is visualized and optimized in a cyber world. Currently, we are also holding workshops like Insights into the Future Society of 2050, and working together to create a vision of next-generation factories.
Regarding upcycling, we will lead the realization of circular economy societies through product demonstrations and open innovation. By combining informatics, we are planning to expand the use of recycling materials, and this shows a stick cleaner, which won the Good Design Gold Award this year. By using different surface treatments for each rising type of recycled materials, this achieves luxurious texture and achieves a 40% recycled material utilization rate. To realize circular economy, we are working with AIST to build a role model for our circular economy by combining Hitachi's expertise.
The manufacturing and optimizing a circular economy, we continue to develop with digital solutions. I have introduced some examples. Towards the customer's next growth, Hitachi Digital and Global Environment Division, Global Marketing and Sales, and R&D Group will be working together to contribute to these efforts. Next is the drive innovation by backcasting from 2050. As you can see here, with these stakeholders, we are repeating discussions to explore future society issues. Based on these discussions, as you can see on radar chart, we have analyzed the social issues of our customers. Based on this framework, we will help maintain planetary boundary and raise wellbeing.
The themes written in bold were selected as our areas of focus. Let me introduce some of these initiatives. The first one is carbon neutrality. We will form an ecosystem to help solve the challenges of decarbonizing the circular economy and contribute to solving social issues. To this end, in July, we established a joint laboratory with Imperial College London and participate in the European ecosystem and develop natural climate solutions under the theme of decarbonization and biodiversity. In October, we established a joint laboratory with AIST. We will make a grand design to realize the circular economy and lead the rule formation and standardization from Japan.
Next is the efforts to overcome cancer and intractable diseases toward an active 100-year society. In 2017, Hitachi opened the Hitachi Kobe Laboratory with the Kobe Biomedical Innovation Cluster. We developed an automated iPS cell culture system to promote regenerative medicine, and we have contributed to application in clinical trials for Parkinson's disease. For next-generation cell therapy, we're developing design cells based on gene design and cell function measurement and evaluation technologies based on our experience in regenerative medicine.
In this way, we will continue to promote realization of treatments that are less burdensome for patients, improve QOL, and realize wellbeing through the latest biomedical technologies. Number three is the co-evolution of digital people and society or quantum computer initiative. Together with Hitachi Cambridge Labs, we have a track record of over 30 years. Now we are currently accelerating development of JST's Moonshot Research and Development toward the early realization of silicon quantum computers. In 2015, realized the world's first CMOS annealing pseudo quantum computer in the semiconductor integrated circuit. We have also achieved success in the non-life insurance portfolio optimization and are currently launching a cloud service.
For the development of quantum applications, we are participating in Q-I and Q-STAR to accelerate the social implementation. Through this, we are working on the development of quantum chemistry, quantum AI, and quantum finance, which are expected to have applications. Lastly is the summary. As I have explained today, digital services and initiatives based on the backcaster for 2050, this will be difficult to be done by Hitachi itself. We need cooperation with our stakeholders.As actual examples, we have an exhibition today, so please visit our exhibition today and directly talk with our researchers. Thank you very much for your kind attention.
Mr. Suzuki, thank you. Mr. Salge, the floor is yours. We will be switching the slides, so please bear with us for a moment.
Welcome to the session Hitachi Energy R&D Stratey. Next slide, please. The key messages of this session will be that in the future energy system, a sustainable energy system, electricity will be the backbone of the entire energy system. Hitachi, through Hitachi Energy and beyond as One Hitachi, is in a leadership position there enabled by technology and a global approach. As One Hitachi, we will be able to create synergies which will help to accelerate the energy transition in Japan, as well as to further strengthen the global technology and market leadership position for the future energy system.
Next slide, please. Let me start with a bit of a heritage where we come from. In the 19th century, ASEA and BBC were founded, and around 100 years later, ABB was formed by a merger out of those two companies. Now since two years, we as the former ABB Power Grids business are part of Hitachi, and we are bringing with us a heritage of world's first of innovation climate across the company. Next slide, please. You saw on the previous slide some of those from the history. Here are some recent record-breaking technologies of one of our areas, which is the high voltage direct current, the HVDC business.
You see a number of records on voltage level, on power level, on interconnection length, and so on. On the next slide, you can see more record-breaking technologies across our organization coming from switchgear, from substations, from transformers, from mission-critical communication, so really across our total scope of technology and businesses. Next slide, please. In the frame of the future energy system, the energy system 2050, where there is much more electrification needed, we will play a leading role.
How much more electrification is needed is shown here. We will need to transfer in the global power system of the future round about three times as much electricity as today. We are not just talking a little bit of add-on on infrastructure. We are talking to design a fundamentally new power system starting from a brownfield today, and the basic technology to manage this in the future is Digitalization. Based on that, we will build a system of systems in order to be able to satisfy those needs. Next slide, please.
Hitachi Energy is so well-positioned there because we are a leader in connecting renewable power generation to the grid. We are a leader in working with the various industries on their transformational electrification and connecting it to the grid. Of course, we are the leader in the assets, in the systems, in the services of the total power system. Next slide, please. How did we get to that leadership position? How do we want to further strengthen it? We are working since long with the customers around the world to learn and anticipate their future needs.
We are then complementing that with an own organization which has a diversity around the world with a diversity of thoughts. We are developing then core technologies, leading core technologies in the lead of ourselves, complemented by partnerships and collaboration for complementary cutting-edge technologies. Of course, we are strategically protecting our intellectual property. The three fundamental technology areas for the power system evolution are sustainable products and solutions, power electronics, and Digitalization.
You can see already with the sustainable energy system of the future, a green business based on much, much more Digitalization and innovation across the company is directly and naturally linked to the growth targets in Hitachi overall. Next slide, please. Our global R&D organization in Hitachi Energy is basically split into two parts. One is the D- part, the product development, which is strongly embedded into the business and the business-driven product development for the market needs. We have the R -part, the research part, which is then going across our business lines, than in the fundamental technology development.
We are round about 2,000 R&D experts around the world in 20 countries, more than 20 countries, and we are investing more than 4% of our yearly revenues into R&D, then of course, with a high variation on the technology areas. Next slide, please. We are having around 200 researchers in seven countries in five research centers working then on the core technologies. Next slide, please. What are those core technologies for us as Hitachi Energy? Let me start with the area of the sustainable products and solutions. Here it's the high voltage interruption technology, from the physics to the simulations to the understanding of the total interruption.
I will come back to that with one of the highlights. It's insulation coordination and thermal design for switchgear and for transformers, and it's power semiconductors and their packaging, for example, for towards the HVDC application. That leads me to the power electronics. HVDC systems towards meshed grids in HVDC technology with interoperability, also asking for an HVDC breaker in the future. It's about grid forming converter control and topologies which can be used for HVDC, but also for STATCOM power quality applications. Here we are combining also then the power quality devices with various types of energy storage in the future. You hear already control is important here.
That leads me to the Digitalization, where we are working with the technologies around numerical methods, machine learning, software expertise, really, from the embedded software to the enterprise, to the IoT and high-performance computing, and then mission-critical communication and also automation across the energy system design. Next slide, please. Some recent technology leadership ship examples which we shared with our customers in the world. The world's first eco-efficient 420 kV circuit breaker without SF₆. This is so great because it's not only without SF₆, but it's also in practically the same footprint as before SF₆. Nobody else in the world is able to do that as per today, except us.
Next slide, please. Game-changing floating technologies. Transformers, reactors, but also switchgear for the offshore wind floating applications with severe environmental requirements for the application. Next slide, please. An example from the HVDC voltage source converters, which have much, much lower losses than a few years ago. We were able to reduce the losses, which is the dominating factor for a life cycle assessment by two-thirds. That has a significant impact on the environmental performance. Next slide, please.
The fourth example here from One Hitachi synergy highlight. The Lumada Inspection Insights, where we are combining the strengths of Hitachi Digital, Hitachi Vantara, together with Hitachi Energy on video-based, image-based, and satellite-based insights for substation monitoring, transmission line inspections, and Vegetation Management. Next slide, please. Around the Lumada platform, we are circling and working with the customers from the planning to the building to the operations and maintenance. It's our strength to have from the product to the system to the service, really everything what the power system of the future needs.
On the next slide, I want to share with you one concrete example how we work with the Lumada growth model with our customers. Here the example of a digitally-enabled service for system lifecycle management. It usually starts in a collaboration with the customer on a consulting, on a collaboration. It goes into a common planning, for example, a twin-based planning. Then the operations and the maintenance processes start. In collaborative operation centers, we are supporting our customers, and we are offering flexible partnerships, for example, with our reliability care offering.
Usually this is starting then on one substation or on a selected number of devices. The customers understand we learn from each other, and we are creating win-win situations. We are circling through this Lumada growth circle to more and more substations, to more and more devices, and building a win-win partnership with more and more business together. Next slide, please. The One Hitachi gives us fantastic future opportunities. Our businesses are working together like you have seen in the Lumada Inspection Insights.
We are doing the same on various other applications which are listed here. I want to also underline that on the R&D side, we are now really putting our teams together, working across the One Hitachi with a complementary competencies across the organization, and by that, creating enormous additional value for our customers into the green, digital, and innovation framework. As One Hitachi, we will be able to accelerate the energy transition in Japan and to further strengthen Hitachi's global technology and market leadership position towards a future sustainable energy system. Thank you very much.
Thank you very much, Dr. Salge. Last but not least, I'd like to invite Mr. Manetta. Mr. Manetta, please.
Thank you. Thank you. Ladies and gentlemen, good afternoon. I would first like to say that it is an honor to have been asked to speak to you today on the important topic of intellectual property, and I thank you for the opportunity and for your attention. As you may know, the new Chief Intellectual Property Office was established in 2022 with the mission of transforming the IP function commensurate with the continuing global growth of the Hitachi Group business. I am the Chief IP Officer of the Hitachi Group.
Our principal objective is to develop the IP function into a world-class global partner to the businesses of the Hitachi Group and strategically support them in their short and long-term business objectives. I only recently joined Hitachi as the CIPO, and it has been an incredible experience, and it's a very exciting one. The technologies and offerings of Hitachi, as you've seen a little bit from the presentation of Suzuki-san and Salge-san, are truly impressive. There's such a vast breadth of and sophistication in the technologies that it really is incredible.
As detailed in the brief bio at the end of the materials, I joined Hitachi from Schneider Electric earlier this year. At Schneider, I led the global IP function there since 2011, prior to which I was head of IP for the oil and gas business at General Electric. Prior to that, I was a partner in a New York City IP firm. I'm also an electrical engineer by training, and prior to entering the IP field, I worked as a senior systems and lead software engineer at Sikorsky Aircraft in design, development, and flight test of digital flight control systems. I will look to draw from these various perspectives in my role as CIPO.
Enough about me. What I really would like to discuss is IP at Hitachi and our strategic plan going forward. Next slide. The CIPO office is to lead developing a world-class global IP function, strengthening IP activities which will promote and accelerate Hitachi innovation, and bring a harmonized, consistent global IP function to help and support group business objectives. Next slide. A brief history of Hitachi shows its evolution and growth over the past 10 years or so. IP has supported that growth along the way.
In view of the 2024 Mid-term Management Plan, the CIPO office was created to further develop the IP function to support and advance Hitachi innovation and Digitalization. We seek to contribute to growth through an IP strategy which aims to accelerate innovation and provide risk mitigation. Next slide. Hitachi innovation and IP is internationally recognized. To highlight a few recent activities and achievements, Hitachi has been awarded the 2022 National Commendation for Invention Prime Minister's Award in Japan for its novel inverter power module.
Hitachi has been recognized as a Clarivate Top 100 Global Innovator for 11 consecutive years, as being among the Asia IP Elite for 2020, selected from the IAM Strategy 300. Hitachi is also a key member of WIPO GREEN. WIPO GREEN origins stem from WIPO discussions with the Japan Intellectual Property Association and other industry partners in 2012, has developed into a sustainability marketplace to provide visibility and advancement of green technologies. Hitachi serves on the advisory board as well as the core committee of WIPO GREEN.
Next slide. IP has traditionally been viewed as patent and technology-centric, dealing with things such as asset procurement, patents and trademarks, and legal and technical issues. Business interests, on the other hand, are much more complex and varied, as you've seen examples of in the two previous presentations. There is often a perceived gap between what traditional IP provides and what the business needs. The goal of the Global IP function at Hitachi is to close that gap.
Next slide. In a value-driven IP strategy, the mission of the new Global IP function is to protect, leverage, and power the next consumer benefit through our innovation, solution, and offering. Next slide. While the focus of this presentation will be on technology and protecting the R&D investment through IP strategy and vehicles such as patents and trade secrets, there are other important topics such as software, which are particularly relevant in the digitization age, but which are not specifically addressed here. We're giving a more overall presentation of the topic.
It should also be noted that branding and trademarks are also similarly treated in terms of determining a relevant IP strategy to protect and enforce the Hitachi brand. The transition will be made from an invention-driven approach to a value-driven one. In a value-driven approach, we will bring together technology areas, IP function, and value drivers to develop an integrated IP strategy for accelerating innovation to drive customer benefit by providing guidance for strategic BU and R&D investment and IP portfolio development. The company roadmap is considered in terms of short, mid, and long-term horizons, and applicable aspects of IP are brought to bear in the analysis, as are value drivers in terms of benefit to the market. Next slide.
An example of IP contribution to innovation can be seen in the environmental field, where IP is used to provide competitive information for different technology themes in the environmental field, including themes such as smart grids, railway power regeneration, combined renewable energy and storage, and IT infrastructure resilience. The first graph shows an example of growth potential derived from the patenting activity for different technology themes in the environmental field.
From a sampling over a period of several years, it is illustrated as the growth rate and density over that specified period. The second graph illustrates technology positioning in those same technology themes. Hitachi's share, measured by patent activity, is shown against the total technology share of the top 10 companies in these areas. That information is then mapped to a strategy matrix, identifying areas of higher growth potential based on the identified trends. Next slide. Hitachi's patent portfolio, excuse me, is quantitatively competitive compared to our competitors. We rank among the top global patent holders.
Hitachi currently holds over 55,000 patents worldwide. Through application of our value-driven IP strategy, we will continue to develop our strategic portfolio in relevant areas to increase enterprise value. An example of this is Lumada solutions invention area, where we have developed a leading portfolio among competitors in the important Social Innovation Business. Next slide. IP strategy contributes to the Lumada growth model by defining relevant, protectable, reusable IP and facilitating use of group IP for Lumada offerings. Next slide.
One such example of IP contribution to Lumada growth is the Lumada Inspection Insight Hitachi Vegetation Manager, which Salge-san had mentioned earlier. The Vegetation Manager brings together IT and OT expertise in combining four core applications in an infrastructure grid management solution. Next slide. The Hitachi Vegetation Manager brings together reusable IP from several R&D areas in development of this novel solution. The individual components of the Hitachi Vegetation Manager are from technology areas ranging from fields including defense, agriculture, disaster prevention, insurance, common-based technologies, and other fields.
These components are as varied as satellite imaging and AI technologies. The technology components are protected in their own right by a number of patents and patents pending and brought together in a unique platform, which is itself the subject of a patent pending. Next slide. From an organizational standpoint, the CIP office will drive a comprehensive and consistent global function across the groups, group companies as a strategic global business partner. Next slide. The impact of a well-defined strategic IP function is creation, preservation, and growth of enterprise value through Hitachi innovations.
A strategic IP function will do two important things. It will enable company-driven investments and become a valuable business asset. First, it will enable company-driven investments in consideration of value through creation of reusable IP, whether from internal development or external collaboration, through establishing strategy, product portfolio, and purpose-driven IP protection, ensuring current and future freedom to operate in the company's key strategic areas, enforceable and defendable technology preservation, and intelligent portfolio management enabling highly dynamic analyses for company-based status and gap evaluations.
Second, it will evolve from a traditional perception to a valuable business asset to provide comprehensive visibility and usability of the IP portfolio within the Hitachi Group, roadmap-focused IP development as business enablers, full transparency and multidimensional linkage among and between BUs, companies, R&D, and other functions, portfolio development with an eye towards strategic leveraging opportunities, and potential return on investment through facilitated commercialization of innovation, and proactive risk management and mitigation. Next slide. In closing, I would just like to say that I hope the foregoing overview and illustrative information has been helpful in conveying some details of the mission of the Hitachi Group IP function to contribute to Hitachi business growth and society for a sustainable future. Thank you for your attention.
Thank you. At this moment, we would like to move on to Q&A. At this moment, there are those of you at the venue and those of you who are participating online. We would like to take questions and comments from those of you at the venue and then take questions from those of you online. When we take questions from people participating online, we will give you a guidance interactions as to how to do so. Let's take questions first from the people at the venue.
We will bring a microphone to you if you raise your hand. Please state your name and affiliation before asking questions in Japanese. Any members of the press or analysts, you're welcome to ask questions. Any questions, please, raise your hand if you have any. I see a hand on the right. We don't have any restrictions as to the number of questions.
My name is Ryakawa. I have three questions. I have a question of Mr. Manetta. Since you joined Hitachi while you were with Schneider, compared to the IP strategy that they had, now that you've joined Hitachi, what do you think is better in Hitachi's strategy? Do you see any room for improvement for Hitachi's strategy compared to what you saw at Schneider? That's my first question.
Good question. I get that question a lot about Schneider Electric, as you can imagine. When I first joined Schneider, it was in 2011, so that's when the Digitalization effort kind of started. From the very beginning, we applied kind of a similar approach as I outlined here, right? It all comes down to the defined strategy. There's basics in IP strategy which are applicable regardless of the company, right? Whether it's a, you know, a Siemens, a General Electric, where I had experience with, or other companies like Amazon or, you know, Microsoft. It really doesn't matter what their specialization is.
The key is really to come up with the appropriate IP strategy to drive that. One of the things I mentioned in my presentation, and this is something similar to what we did at Schneider, is that we went from kind of an invention-driven strategy to a more value-driven strategy. By that, I mean invention-driven is kind of the historical. When companies, you know, do one thing for a very long time, they're very familiar with the market, and they focus on the technologies and the products, and the portfolio is developed in that way, right? It's more driven by the inventions because the inventors and the heads of R&D and the various business people kind of know the direction that they're going.
There's kind of an implied value there, but it's really driven by the inventions. What is really more valuable is where the strategy is value-driven. When you have a customer or, you know, whoever you're trying to sell your products or services, customers don't buy the product because of the product, right? They buy it because of the benefit that they enjoy from having your product instead of a product by your competitor. That's where the value-driven aspect comes in. To do that, you really need to integrate all the various topics that I mentioned, right?
There's obviously the business plan, the company roadmap, short-term, long-term, midterm. There's all different types of IP aspects that you need to put into that. What's the market like? The jurisdictions are all different, the way you approach patent protection will be different. How you draft claims will be different depending on where you will sell your products, what your services are like, what's involved. This is very interesting in terms of Lumada, right?
Because Lumada brings together, in the example I gave, Vegetation Management system. It brings together a number of technologies that weren't necessarily designed for that application. Right? Excuse me. As part of a strategy, you have to build an IP portfolio that allows that reusability. Even if something was developed for the defense industry or for agriculture specifically, you have to make sure that the IP is captured in a way that it is still protected, even if it's used outside that initial, that initial sector where it was designed.
In answer to your question, I think, you know, I think it's the positioning from an invention-driven perspective, I think of Hitachi as good. I think as you see, we have a very, very large portfolio. It covers a lot of activity. The business has changed, right? Or is changing, I should say, over the years by this globalization, by incorporating businesses such as the power grids business from Sague San. The opportunities are just all different.
The stage is all different. That's where the approach comes in of setting the appropriate strategy to really give guidance to Suzuki-san and Sague San's efforts. You know, when they look at, "Oh, we're thinking of doing this," we can provide them IP intelligence and highlight hopefully some of the potential risks so that we can avoid them and give them possibly suggestions as to where they could steer their development.
Thank you very much. My second question, maybe my question should be directed to Dr. Suzuki. In the video presentation today, you introduced GlobalLogic and Hitachi Synergy through machine learning, 5G, and many other areas. What we are focusing right now is at GlobalLogic, how can they expand business in Japan? In doing so, in terms of Hitachi's R&D, what are the support and contributions from Hitachi's R&D? By through that contribution support, how would that contribute in developing business in Japan? That's my second question. Thank you for your question.
As I mentioned in the comment earlier. By working together with them, we found out that to be agile, to be speedy in interacting with our customers, we could feel the speed in their style. The U.S. or Europe, that is customers outside Japan, in co-creating projects with customers outside Japan, we could learn the speed or agility. By that, I think that we can accumulate that experience as our asset. Then, how should GlobalLogic be promoted in Japan?
The strength of GlobalLogic is this, they have a method of cooperation with our customers, which is just like our R&D experience. With the customers, by talking with our customers and work together in the customer's digital journey and do digital engineering with agility. In Japan as well, something similar, like to enhance the experience value of the end users. I believe that kind of business, by working in Japan together with GlobalLogic, I think it is possible to lead to new businesses in Japan. As R&D, as was mentioned, cases like AI, 5G, various know-how technologies could be used to expand business.
A follow-up question. As your business expands, and where and how much is part of the question, but for that goal, where do you think you stand right now?
Well, we have shown the MMP numbers this time in terms of hiring and others. I think, we are moving quite successfully in terms of R&D. We are seeing increasing number of projects where we are co-creating and collaborating. We are generating synergies. Last month, as Sunil was here, whenever I go to the U.S., I always visit GlobalLogic's office and have meetings. I think, synergies are being increasingly generated. We have a framework in place for that. We are trying and attempting new projects utilizing that. That's the phase that we're in.
My last question. This is a question for Dr. Salge. On page four, HVDC advanced technology you talked about. There are three specifically top right. Dogger Bank Wind Farm. Power loss reduction that you talked about later, I think that is the advantage that is offered in Dogger Bank Wind Farm. Electricity loss reduction, how is it enabled? By what technology? If you could once again elaborate. Secondly, advanced technology you talked about. If it's offshore wind, Siemens also provides technology.
What is your point of differentiation in terms of technology, for instance, compared to Siemens and other competition? Of course, your technology is excellent, I do understand that, but such excellent technology, is it translating into Hitachi's pricing power? In other words, hardware technology, is it possible to reflect the level of your technology in your pricing? Three questions with respect to HVDC technology, please. Thank you.
Thank you very much for the question. Let me start with the Dogger Bank project. The Dogger Bank integration is based on the so-called Voltage Source Converter technology, which is the most modern technology. It provides, as you have seen later in the presentation, and you also said, with a significantly lower losses now. That has been in the past always a concern to introduce these Voltage Source Converters versus the line commutated because the converter losses were higher.
With this new generation of technology enabled by our advanced semiconductor technologies in combination with the integration into the converter, we were able to basically reduce the losses of such a converter valve to more or less the same level as before only the former generation could do. That is, of course, a significant step forward and a fantastic value for our customers. It's not only that one, it's also that the VSC technology can then provide support services, grid services, to the customer, which the old technology, the older technology could not do.
There is a fantastic value. In that respect, we are having a leadership position, yeah. That links to your second question, how do we, how we differentiate also against the competition. Now we are in a situation, where of course we need to have the differentiation. We have those elements of the largest installed base in the world, where we are proving also a very high reliability and availability of our systems, then the low losses, as mentioned.
Also, I want to make clear that when we are going forward now into the future of HVDC, like we are doing in Europe, for example, in the North Sea, we will also collaborate with our competitors, because once we are moving then towards an HVDC meshed system, we need interoperability in between the systems. That is something where, for example, Siemens and Hitachi Energy have also promoted during the CIGRE conference and beyond, that we want to work together to enable this customer value for the customer. On the one end, we need to differentiate.
On the other hand, we want to collaborate also to make this energy transition happen, because no supplier in the world will be able to do that just alone. We are talking here about connecting countries, connecting total regions, and that is always a work together in collaboration with clear interfaces. That, of course, brings us and that leads to your, to your third question, how can we position us in the market? Of course, to a very good and strong positioning in the market with our customers.
Here, we are then really going together in a partnership development, because each of those systems is really then something which needs to be discussed. Also, our customers are aware that we need to ramp up now in a significant way the number of HVDC installations we have, so that we are here really putting also on the engineering side, really our best experts together in order to to walk into this future of the HVDC mesh grid.
Thank you. Are there any other questions? If so, could you please raise your hand. The person over there, please.
Thank you. I'm Ishina from Tokai Tokyo Research Center. I have one question for each of you. First question is to Dr. Salge. Hitachi Energy is receiving a lot of orders, and it seems that business is quite successful. In terms of profitability, profit margin, compared to the start, it seems that's not yet sufficient. We thought, we believe the pace of improvement of profitability should be further raised. From a CTO's perspective, what are your efforts in improving profitability or profit margin?
Mr. Manetta talked about from invention-driven to value-driven. I think that's a very good stance, which did not exist in Hitachi in the past, to be value-driven. Hitachi Energy, which is now value-driven, what is still lacking? As CTO, what are you trying to improve? Dr. Salge.
Thank you very much for the question. Now we are, of course, supporting from an R&D perspective the growth in orders which we have, and as you say, the profitability in various aspects. First, what we are always doing permanently is the cost reduction activity, where also we are looking into standardization of parts, into standardization also of platforms and interfaces, and leveraging our economy of scale. Of course, that is something which you will see then in the future also with the order increase.
Now, let's take this example where we have the steepest rate of increase in the HVDC business, where we will see that we are standardizing more and more than, of course, the engineering and also the offerings we will do, and then of course, by that, also increasing our competitiveness. Of course, what you need to consider in that one is that there is a time difference in between the orders and then the execution, which can be quite significant. It depends then really on the products, on the solutions which we are talking about.
Of course, that will come then together with the increase in the revenues. That's how we support. Of course, what we also do, and that was already connecting then to the previous question, is that we are creating differentiators in the market, which help us in the pricing, of course, with the customer on a value based pricing strategy. The differentiation creation through technology differences.
Then, if I understood correctly on the IP, and how we work here, we, as I also mentioned in my presentation, have really an integrated also, purpose-driven IP strategy in our organization. Here we are working closely together, now with Stephen Manetta's organization. We are discussing while we speak here how we can really leverage now as the One Hitachi also here our competencies and our way forward to an integrated and fully purpose-driven IP strategy. That's highly welcome also from our side and will give us a very strong protection into the future.
Thank you very much. HVDC in India, the Indian market is expected to grow exponentially going forward. Given that, why in India, HVDC is growing? What is the size of the market and what is Hitachi's market share? Well, we have a little opportunity to visit India these days. To the extent that you can, please, share that please.
I will try to answer your question as good as possible because I don't have all the figures of the market share and so on now in my mind. I can explain you definitely why HVDC is so important for the Indian development. You see, we have significant installations of HVDC and projects from the past, also recently in India. We have with the North-East Agra route, we had the first multi-terminal with high voltage project connecting really the renewable power to the load centers. With the Raigarh-Pugalur project, we also had recently a very prominent project over a long distance in India.
That contains already part of the answer why HVDC is so important in India, because India is big. India is growing in a fast way. Here the HVDC technology can play its key strengths. It can transport a lot of energy over long distances, but in a flexible way also across mid distances and short distances if needed, especially if you do a multi-terminal installation, then you create flexibility.
The HVDC also creates grid support functionalities in the most modern generation, and that helps of course if you have a big growth rate in your electricity needs, which India has. You have different regions of power generation and of load centers, and then you need to balance across those different regions. India has really a large synchronized grid in one country. Here the grid support functionalities of the HVDC are of very, very significant value.
That is the reason why India is so much building on the growth of HVDC. I can tell you also India is not the only region where this is growing in a big way. It's growing also in other regions, and a very prominent example is Europe, where HVDC is growing in a big way, but also in China and we are talking in many other regions of the world also. HVDC is really a technology which is extremely important in a scaled way for the energy, the power system of the future.
Thank you. My next question is to Dr. Suzuki about cancer treatment. Hitachi, Ltd has a top share in the treatment. I think you were emphasizing this a lot as the heavy particle treatment. You didn't refer to that today, but what are your thoughts about it? I think that is a very prominent technology. What are your views about it?
Yes. We have a display here today, please visit our exhibition later. For PBT, w e want to further strengthen this in the future. We want to try to level up the accelerator. In the 2050 project, we are engaged in to, for instance, increase by 5 times the level of the dosage, the dose. It is important to make footprints in the PBT business. We want to make the footprint and also provide maintenance, and by doing so we can prove the profitability of this business. That is a differentiator which we want to develop through R&D. In the 2050 project, we'll make investments in this sector and further promote R&D in this sector.
Last question to Manetta-san. Quantum computing, quantum computers inclusive of GlobalLogic and Hitachi Evo, what kind of impact is quantum computing having on the group and Hitachi Energy? Value driven is a great phrase, but how is it specifically raising the value for Hitachi Group as a whole? Well, quantum computing is a watershed technology. How do you see that, and how can value be increased for your group with value-driven approach?
Excuse me. Thank you for your question. Quantum computing is a very, very interesting technology, and there's many, many challenges in realizing the final solution. There's different approaches that various companies are taking in how they're actually advancing the technology of quantum computing. There's two aspects to where the IP in that can be useful. There's in the actual the quantum computer itself, the technology, the hardware, the processing, you know. The architecture, the way that the machine is built, then there's the various applications of it. The value is twofold. It's one, to protect the actual development of the machine itself, but it's also how it can be used in various applications.
There'll be dedicated uses for it, where it'll be used in one specific manner to support certain activities. It may be used in parallel with other machines. It'll depend on kind of the, I guess the roadmap where we want to take the technology once it's developed. The IP should protect both. It should be directed to the device itself and also the intended roadmap for the product or the technology.
Thank you. Next, we'd like to receive questions from those participating online. If you have any questions, please use the Raise Hand function on the screen. From the hands raised, we will call your name. Please unmute yourself after you are called, and mention your name and affiliation before stating your question. If you don't need to ask a question, please cancel the Raise Hand function by yourselves. The video of our questioners will not be shown today.
First, people participating from Japanese channel, and next, we'll receive questions from those participating from the English channel. Anyone from the press, institutional investors, and analysts can raise questions. Are there any questions? If you have any questions, please use the Raise Hand function. There is no one raising their hand, so next, those participating from the English channel, are there any questions? If you have any questions, please press the Raise Hand button. I would like to continue to receive questions from those in the audience. If you have any questions, please raise your hand. The person on the third row to the right.
I'm Hiroe from Nikkei newspaper. I have two points. One is about your concept of creation and cooperation with other companies, and amongst those, you're making things more open about IP. How do you plan to make the IPs open? Could you tell me that strategy? My question is to Mr. Manetta. My second question, we now are facing a tension between U.S. and China. Global economy is separating to blocks. Under such a situation, how will the international global R&D structure change? What measures should you take, and how do you plan to protect your IP? This is a question to Dr. Suzuki and Mr. Manetta, to both of you.
Thank you for the question. Going to an open IP policy is something that is. It's very helpful, and it's also very risky, right? I think you have to be very intentional in the approach as to what you make open and what you reserve as proprietary IP. In co-collaboration, the way we do with, for example, University College, Imperial College London and other partners that we work with, Suntory, whoever, there's. The reason you go to kind of a shared and open IP model is to promote adoption and development of that particular solution.
The areas that become technology differentiators, right? Those are the ones you have to be a little bit more careful in terms of whether you just make them open or keep them proprietary. It's similar to the approach of standardization when you deal with any type of standard that's out there, whether it's an industrial standard for PLCs or a communications protocol like 5G or whatever.
There's kind of a balance between enabling and promoting a technology so that it does get widespread use, and reserving your differentiating technology, so that becomes available in a different way, either exclusively through your offering or by license or things like that. I think it's a very good approach to bring Hitachi technology to the marketplace, and it just needs to be very intentionally approached, and that's what we take into account when we define our IP strategy for the various efforts.
How would global R&D look like going forward? We're trying to promote global co-creation globally. We will have to have researchers around the world in R&D centers, so that they can engage in customer co-creation, co-creation with their customers. We engage in talks with the global sales force. In which domains, with which kind of customers are we going to promote co-creation? We need to keep a close eye on that as we decide on resource allocation.
That's one point. On the other hand, from technology or innovation point of view, which region is most advanced? I think we need to be careful in assessing that. When we talk about innovation, Singapore, Sweden, Switzerland, those countries who rank high in the innovation ranking lists. Regulation, community, startups, well, how much of that is concentrated in that particular country or region, the so-called hotspot, if you will? We need to carefully watch that.
Before we determine in which region to develop the technology, we need careful assessment as we pursue that thinking, given the agreements that we have with colleges and universities, I think we need to think along those lines at a higher level. Our cost, labor cost in particular, must be watched carefully as we make the best allocation of resources. At any rate, our mission is to create innovation in R&D. Innovation that we generate together with the customer and innovation in technology, we're going to have both. In our effort to optimize resource allocation in each region.
Any other questions? If so, please raise your hand. Could you please raise your hand? The person at the front seat.
Yes, thank you. I have a question to Dr. Suzuki. I have two questions. One is about human resources, and another question is about Web3. My first question about human resources. As was mentioned in your previous question, in promoting innovation, there must be digital manpower developed for that purpose.
In case of Hitachi, on the 28th of April in the MMP, you said increase of 98,000 digital human resources. Under such a situation, the digital manpower development for Digitalization, how much are you going to invest on manpower going forward? In addition, the reskilling of employees. The Japanese government is also active in providing support. In reskilling the employees, what is the approach of Hitachi? Could you tell me that?
Well, digital manpower, of course, going forward to grow with DX, digital manpower is essential. In our case, we have Hitachi Academy to provide digital education. Also to level up, we have a professional committee, and best practice is shared among the members. Business model technology is taught to raise the overall level. We are conducting such activities as well. On the other hand, within R&D, the development of AI top personnel is now being promoted. We have about 400 right now. We have certain criteria for that.
Experiencing project leader or with doctor's degree, or is evaluated at the OSS community, has programming capability. We have some criteria set, and some people are appointed as top manpower for training and development. Through these efforts, we plan to develop digital manpower in the future. Another difficult point is hiring. How can we hire talented personnel? In each region, of course, there's a market price in each region. One precondition is to provide a market price in that region.
In joining Hitachi, this must be a place that is exciting for them, they can be engaged in exciting projects. In many ways, we want to communicate the projects that we can provide so that we can invite other personnel into Hitachi. About reskilling, one is Hitachi completely changing its portfolio. Another point, maybe my generation is all right, but now it's no longer possible to continue working forever only based on what you have studied at university.
After a certain time, people may have to go back to university to study again to be able to catch up with the latest technology. By doing so, we must be able to provide opportunities for reskilling. We are introducing new systems. One is Hitachi Academy. Through that, a real value driven, that is provide knowledge. People must be able to have the knowledge that so that they can work in the domains that Hitachi is planning to grow in the future.
Another point. In the last IR meeting, there was mention about Web3, and I think, something more was mentioned today. Industrial metaverse- t oken economy, where metaverse is involved, how much R&D investment are you planning to make in those areas for the time being? On the other hand, when it comes to Web3, there is still room for rule making. It's uncertain, untransparent at this moment. What is the expected size of the market that you see, that you estimate? What is the level of affinity with Hitachi's business, whether it's rail and transportation and so forth, but what is the level of affinity that you're seeing with respect to metaverse and Web3?
For metaverse and Web3, I think B2C market is the first to grow. Entertainment, content business, that's where this technology will start to be utilized. As we introduced that to you today, industry metaverse, we talked about rail and plant maintenance as some of the examples. Maintenance, education, transmission of technique, skills and technology. We need to create demand in those areas. In terms of Web3, unlike in the past, you manage your own information by yourself. In the case of Web2, someone else will manage your data, your information for you, but in Web3, you manage your own data. A self-managed ID, that's what you need to create.
From our customers' point of view, banks and insurance companies, financial instruments, insurance and banking products utilizing metaverse, we can create new products with those financial institutions' customers. OT knowledge that we talked about today, it can be shared, and I think a marketplace for that will be created and will be grown, where there will be business opportunities for us. How much investment are we going to make?
I can't give you the details at this moment, but as far as our investment in start-ups in this area, we're looking to increase our investment considerably going forward. Institutionally, business models have yet to be established, so start-up and partnerships through investment in those, we would like to explore the technologies that are going to be viable. That's what we would like to strengthen in MMP 2024. Thank you.
We are soon approaching the time to conclude, so we would like to receive a final question either from the floor or those participating online. Please raise your hand if you have any questions. The person over there, please.
Thank you. Eiza wa from Citigroup Securities. I have a question to Dr. Suzuki. A question is about the concept. Recently in Japan, engineers, their treatment seems to be finally being improving. As a major R&D company in Japan, the R&D of Japanese companies basically seems to be shrinking from a long-term perspective, and training of engineers by the companies and by the government as well, seems to be not working very well recently. Looking at that situation, what are your views? What is your impression? Have you also experienced the same? By globalizing your business, are you experiencing any changes? What are your future prospects?
Well, yes. The manufacturing industry, how should the manufacturing industry grow in the future when you think about it, that is related to our future view about our growth. As I mentioned today, in our MMP, we will now shift towards growth. Unless our customers grow, we cannot grow. Co-creation towards the growth of our customers should be promoted, so that our customers will grow, we will also grow, and together we can also increase employment. By doing so, people can be more active, and their compensations and treatment will also improve.
I think it's very important to develop such a cycle. For that purpose, we call it KDX. The growth of our customers should be firmly promoted, and I think that will lead to the growth of Japan itself. About the treatment of our employees, in our case, for digital manpower, including the new grads and mid-career hires, we have a system which we can hire with very good compensation through a job type-based employment system. We want to create a spiral which will also improve the treatment of employees as R&D want to promote such a scheme. Thank you.
It's now time to close. With that, we would like to conclude Hitachi's R&D-