The entire program, from CEO remarks to the independent director session, is scheduled to end at 5:40 P.M. The presentation materials are posted on Hitachi, Ltd. IR site and the news release site, so please check them accordingly. On the Japanese channel, you can also listen to the English voice of the interpreter by using the language selection function. Please select the audio you wish to listen to by clicking the interpretation button at the bottom of the Zoom screen. The location of the button may vary depending on the device you are using. The interpretation button is located at the bottom of the Zoom screen on your PCs. We will now switch the screen to the presenter. Keiji Kojima, President and CEO, will give a CEO remarks presentation to start Hitachi Investor Day 2022. We will present the slides, so please wait for a moment.
Kojima-san, please.
I'm Kojima, President and CEO of Hitachi, Ltd. On today's Investor Day, I will first share with you the positioning of the Mid-Term Management Plan 2024, the developing process, and feedback from capital markets following the announcement. After that, I will briefly explain today's agenda, and then we will move on to the presentations. Thank you for your cooperation. In the wake of the management crisis following the global financial crisis, Hitachi decided to make a major shift to the social innovation business, which leverages data and technology to solve social issues together with our customers. To this end, we have been on a journey of structural reform to create a governance and business portfolio, a true transformation journey with the CEOs of each era, Kawamura, Nakanishi, and Higashihara, passing the baton to the next generation.
The divestiture of all 22 listed subsidiaries we had in 2006 was truly symbolic for me, and I feel that we have reached a true milestone in our reforms. I, too, will pass on the baton based on my unwavering belief that we will continue to evolve the social innovation business together with our customers, and that we will not hesitate to make changes to achieve this goal. I believe that it's my role to make full use of the foundation laid by the past reforms, and finally change the mode of management to global growth. In formulating the midterm management plan, or MTMP, we held internal and external discussions to envision what the next Hitachi should look like. Our internal project team thoroughly discussed what changes we need to make to achieve global growth in green, digital, and innovation.
We set the structure and the management targets of the sectors through a series of discussions on whether we had a clear target to benchmark against and how to outperform the market. Now, on the board of directors' side, we repeatedly reviewed the draft of the MTMP prepared by the internal project team from an early stage. Although we received strong support for the concept and management goals of the MTMP, we were harshly criticized for our ideas on how to achieve them, saying that our ideas on accountability were too lenient compared to the European and U.S. companies. In response, we are working to clarify the accountability by, for example, fully linking the degree of achievement against key KPIs of the MTMP, such as cash flow and CO2 reduction, to the performance evaluation of executive officers.
In addition, effective April 1, we established a new organization and responsibility structure to mitigate global risks that could become obstacles to achieving the MTMP. This also reflects our discussion at the board of directors meetings. In our dialogue with investors, we sorted out how to ensure that they understand Hitachi's goals in the MTMP 2024 in a form that is easy to analyze and monitor with transparency. We also gained important input on what KPIs and capital allocation policies are expected to enhance shareholder value. About a month and a half has passed since the announcement of the MTMP 2024, during which time I have had many opportunities to discuss the new management policies with our stakeholders.
What I found gratifying and rewarding was the number of comments I received from investors that the framework of the MTMP 2024 reflects the discussions we have had so far. While some investors call for an even higher level of targets for the MTMP, others said that the plan was too aggressive given the increasingly severe macroeconomic environment. The common voice was that Hitachi should do exactly what the MTMP calls for, acquire earnings power, adjusted EBITDA. That will be the source of EPS growth. Link this to core free cash flow and allocate it to growth and shareholder returns in a well-balanced manner. We also received many requests to communicate carefully and continuously with the market by explaining how we will achieve the high goals we have set, the paths and specific strategies, and to disclose our progress in each phase of the plan.
Today's investor day is part of such communication, and we would like to help you understand Hitachi's mode change for growth through four sessions. First, I will introduce our corporate strategy for growth through green and innovation. We will explain the measures in the MTMP 2024, taking into account major technological trends by backcasting what steps we should take now as we look to 2050. Next, we will explain our growth strategies for sectors, three sectors: D igital Systems and Services, Green Energy and Mobility, and Connective industries. In particular, the CEOs of the two major acquisitions, GlobalLogic and the Power Grids business, will explain the status of their businesses directly. In the last session of the day, we will hear from two independent directors on the theme of Hitachi from the independent director's perspective.
I hope we could share with you the process of the MTMP discussion at the board of directors, which I mentioned earlier, and how the executive officers and directors maintain a balance in how Hitachi's reform continue. As CEO, I will strive to achieve the goals of the MTMP 2024 so that investors will have even greater confidence in Hitachi's ability to transform and grow. I would like to ask you for your continuous guidance and support. That concludes the CEO remarks.
Th ank you very much, Mr. Kojima. Green innovation. Now, we will be proceeding into the green and innovation strategy. It will be presented by linking with the Kyōsō-no-Mori, the Hitachi's research and development base in Kokubunji. We'll be resuming shortly. Green innovation.
Out of the green innovation strategy, in the first part, green strategy will be presented by Lorena Dellagiovanna, Vice President and Executive Officer and Chief Sustainability Officer. For the second part, innovation strategy will be presented by Norihiro Suzuki, Vice President and Executive Officer and Chief Technology Officer. Now, we will be switching over to the green strategy screen shortly. Lorena-san, please start your presentation.
Good afternoon. I'm Lorena Dellagiovanna, recently appointed Chief Sustainability Officer, the new position integrating responsibility both on sustainability and diversity and inclusion. Today, I'm here to present the new green strategy. As part of my mandate, I have the goal to accelerate the achievement of Hitachi long-term environmental targets. If we look at the world macro trends, many countries have declared their carbon neutral targets as well as allocated investments. Everyone globally has recognized the importance of protecting planetary boundaries. That's why we in Hitachi are indeed committing to solving the environmental challenges faced by our customers and the society. In this scenario today, I would like to share with you three key stances Hitachi would take. First, we aim at becoming the climate change innovator by setting two challenging targets.
Enable our customers to reduce their CO2 emissions by 100 million tons within 2024 through the usage of our products, while for Hitachi operations and products, the aim is to reach net zero emissions in 2030 for Scope 1 and 2 and 60% reduction through the whole value chain by the same year. Secondly, we believe that the new green strategy, which enables to decarbonize the society and to decarbonize Hitachi's own footprint, will unlock a new value in Hitachi. Finally, we are setting up the Global Environmental Division as corporate function. This is to guarantee the successful execution of cross-sector projects, offering tailored end-to-end green solutions to a wide range of customers.
In line with Hitachi overall vision, which aims to achieve a sustainable society and a protected Earth, three pillars to drive our growth strategy are green, digital, and innovation. Now we are going to focus on the green strategy. Our green strategy is embedded in all Hitachi business segments, mobility, energy, connected industries, and digital. In all these segments, we are working on various green technologies, which are contributing to the acceleration of green transition. That included the launch of our first pilot in Glasgow. We are also active in many global public forums, focusing on global sustainability challenges. We have been principal partner in COP26, and just recently we have participated in the World Economic Forum Alliance of CEO Climate Leaders. To achieve the net zero target in 2050, all the companies are taking commitments towards two direction.
The net zero of their own driven emission, scope 1, 2, and 3, and the reduction of customer footprints by enabling the low emission solution, which we call the Scope 4. We aim to achieve the leading position, leveraging our global footprint, our superior green products, and our digital technologies. To become the climate change innovator, we define two key priorities. The green transformation for the core, which aims to strengthen our commitment in decarbonization our own operation by achieving net zero emission of Scope 1 and 2 by 2030, and 50% emission reduction through the whole value chain by the same year. Green transformation for the growth, which aims to enable our clients to reduce their emission through more efficient products, greener products, through new service and solution, and through investment in the green technology in the future.
For each key priority, we will set a tangible milestone, and we are cascading measurable targets at each BU. Furthermore, we have also identified a series of enabling activities to ensure the rollout of our value initiatives. We are preparing the green bond framework. We aim to improve Hitachi ESG rating, including new SBTi certification for net zero. We are setting up a partnership and ecosystem to develop and commercialize the new products and services. In Hitachi, we believe that our strong effort in sustainability is not the cost, but it represent a value driver. Through our GX for Core initiative, we aim to create value through efficiency gain by less energy consume and energy produced by renewable sources. Here, for example, we are deploying multi-site energy optimization in wide area and facility management.
Also we aim to create value, avoiding extra cost for purchase of carbon credits to offset our emission. Finally, by the issuance of dedicated green financial products. Moving to GX for Growth, we aim to create a new value through the launch of new services. Here I would like to refer to the new end-to-end service solution for mobility and energy as a service. For example, in respect of e-mobility, we are developing turnkey solution to drive the transition for bus fleet, light commercial vehicles, and private vehicles. We aim to create value by new positioning of Hitachi as decarbonization leader with a greener product offering. Finally, by selecting inorganic growth opportunities to develop new technology.
Within my responsibility as head of Global Environmental Division, we design and implement the global environmental strategies to accelerate activities aimed at achieving environmental targets of Hitachi, and at the same time in maintaining comprehensive attention to sustainability. I would like to explain to you how we can execute our green strategy and orchestrate across the whole Hitachi group. First of all, we integrated under my responsibility both internal initiative as a GX for Core and business growth as a GX for Growth, to ensure one unique vision across the whole Hitachi group and to achieve our sustainability targets. The internal initiative is led by Masai-san, who is former executive of Railway BU and current head of Monozukuri, leveraging his global experience and manufacturing expertise.
The business growth is led by Morita-san, who is former head of our Center for Technology Innovation in Research & Development Group, leveraging his great deal of R&D experience in the energy field. Secondly, we are building a global team. A global team involving global talents from multiple BUs and corporate function in order to avoid any overlapping, and most importantly, to approach the market as one Hitachi. We have regional divisions in EMEA, North America, Japan, China, and APAC, and we have appointed global talents as general manager of each regional division to lead opportunity findings and new business incubation by value-driven approaches. In terms of GX for CORE, our targets and initiative are for carbon neutrality and circular economy. For Scope 1 and 2, we intended to abate the emission through four levels. Energy saving and renewable generation, renewable energy purchase, renewable certificate, and carbon credits.
For energy saving and renewable generation, we are planning to invest JPY 37 billion over three years to achieve a 60% reduction by 2024. Moving over to Scope 3, we plan to establish a monitoring scheme and set measurable KPIs, both for upstream and downstream emission. Focusing on the downstream, we are working on two main direction. Promote the transparency on where CO2 is generating, and developing energy saving products. On top of these decarbonization targets, we have also set a list of circular economy KPI, because we indeed believe that recycling is a key dimension to achieve environmental protection. In particular, we have set a KPI with the target values to be achieved by business unit.
We will focus on waste management and recycling, and we think that the attention on circular economy will not only realize the preservation of natural resources, but also acceleration of the decarbonization. Focusing now on the second pillar, the green transformation for growth. Our short-term goal is to contribute 100 million tons of CO2 per year by 2024 through our product portfolio. Indeed, we believe that our technologies are key enablers to boost energy transition, electrification, and energy saving. This slide shows the environmental business growth model. Our social innovation business increase customer value through a cycle. This cycle begins with understanding customer issues, followed by the design of solution with operational technology, information technology, and products. Followed by the implementation, and then operation and maintenance.
Lumada business is defined as a growth model that expands the profit throughout the life cycle, utilizing digital technology. For the green business, what we aim is to develop end-to-end services applying this growth cycle model. This page shows our differentiation point. To make our growth model more concrete, as an example of how we want to achieve our target to contribute to a decarbonized society, Hitachi is offering a wide range of solutions for multiple customer segments. By leveraging our digital capability, we can provide the different services and through the integration of our digital technology and solutions, to be able to respond to multiple customer needs. As I mentioned in the previous slide, our global green team will lead the acceleration of green transformation of our business, thinking globally while playing locally.
Our green transformation is fully aligned with all business unit strategy and will be executing in a joint cross effort with all the BU. While sectors is focusing on its own business portfolio as a front line, the Digital Systems & Services sector will also play an important role as the enabler for digital platform. Together, the Global Environmental Division will focus on cross-sector business to deliver end-to-end solution. The cross-sector initiative we are at the moment driving are focusing on three segments. EV value chain as a service, energy as a service, and decarbonization services. Through our first pilots in 2024, we expect to generate revenues for JPY 30 billion.
As part of our global expansion, in addition to the technologies we are currently developing, we are also investing in the next generation of technologies that will play a very important role over the medium long term. In the next presentation, Dr. Suzuki will provide you the additional insights on these technology and the technology we are currently investing in. As a conclusion, with the strategy described so far and all the activities described so far, what we are aiming is really to become the innovator in the technology and solution to mitigate climate change. We have developed a new green strategy, and this green strategy is focusing on value creation. Finally, we are setting up the Global Environmental Division in order to guarantee the successful execution of cross-sector projects.
By that, I would like to end my presentation, and thank you so much for your attention.
Thank you very much, Lorena-san. We will prepare the screen, so please wait for a moment. Next, on innovation strategy by Suzuki-san, please.
Yes, I am Norihiro Suzuki. Today, I will explain Hitachi's innovation strategy. These are the three key messages for today. Generating digital service business with the Lumada growth model, backcasting from 2050 to create radical innovation, and accelerating outside-in innovation through startup investment. I will explain them using the table of contents here. First is early investment in innovation supporting Hitachi's growth. In the MTMP 2024, we will focus on digital technology to generate innovation for global business growth. During MTMP 2021, we opened Kyōsō-no-Mori to expand customer collaborative creation, as well as updated our technological platform and acquired business models through startup investment and collaboration. In the MTMP 2024, we will further accelerate these efforts. The newly established Innovation Growth Strategy Division will formulate an innovation investment strategy to inspire the next growth of our customers.
Under this investment strategy, we will promote the creation of digital service businesses and disruptive innovation. To implement these initiatives, we will revamp our promotion structure. Innovation Growth Strategy Division will develop and execute innovation investment strategies. While R&D Group has 2,300 diverse talents and will promote innovation creation through digital and technology. The Global Intellectual Property Group brought Stephen Manetta on board, who has extensive experience in global intellectual property management and will promote the establishment of an IT platform to provide value to our global customers. These three organizations will accelerate global business growth through DX and GX. We will increase the innovation investment of the entire Hitachi group in MTMP 2024. We will invest JPY 100 billion in advanced research cumulatively over three years in MTMP 2024 and expand the group's overall R&D investment to JPY 1.1 trillion.
In addition, we will add JPY 50 billion to our new corporate venturing investment in order to create radical innovation that can solve future social challenges. First is on creation of digital service businesses. In MTMP 2021, we promoted value offering by combining IT, OT, and product. Through this activity, we were able to significantly strengthen digital talents and top-class AI talents. As digital talents played an important role, Lumada solution through customer co-creation shown here were created. Particularly in the area of AI, biometric authentication platform, and security, we showcase our capability in international competitions and awards. In product, we established the world's number one technology and IP in high-speed rail and vehicle inverters. We will evolve and develop Lumada growth model further, and we'll co-create innovations together with our customers and promote digitalization of services for their next management challenge.
Specifically, in order to spiral up the Lumada growth cycle, we understand kizashi or signs of change in the society and customers, envision the customer's new growth together, and provide innovations to realize that growth. We believe that Lumada growth models can be categorized according to customer segments and business characteristics, and we will strengthen marketing activities with the global frontline operations to crystallize and scale them through collaborative creation. Let me share with you some examples of our efforts. This is our initiative in the financial and public services area. The current challenge is to improve retail operational efficiency, but we see the next step as creating new value by creating new demand. To address this challenge, we are providing solutions for operational excellence by utilizing the AI technology we have developed through international competitions.
For the next challenge, we believe that an information distribution system that cuts across industries will become important, and we will apply the OT know-how and have accumulated through collaborative creation and IoT blockchain technology, as well as aim to realize new value distribution services utilizing the Metaverse and Web 3.0. As for the energy and railway and transport area, for asset management transformation, which is our current challenge, we will leverage digital and AI technologies to advance equipment maintenance, as in previous slide. To support the transition to carbon neutrality, we have drawn carbon neutrality scenarios and are working with Hitachi Energy on grid edge implementation, as well as aiming to offer multi-energy optimization service. Through these spiral up activities of the Lumada growth model, we will continue to create innovations that will support the next growth of our customers.
Next is on the creation of radical innovation. We discussed with stakeholders and explored future challenges as we developed our MTMP 2024, specifically expert panel session in COP26 and World Economic Forum C4IR with universities, Hitachi-UTokyo Laboratory, Hitachi Kyoto University Laboratory, Tsinghua University, Imperial College London, and customers and startups. We then analyze challenges Hitachi should solve with customers on this radial chart. Hitachi and customers are at the center, and highest impact challenges at the top. Lower impact challenges in the back, right and left. The further you are from the center, the further out into the future. Left side is challenges in the society and market. Right side is the technology. Ones in the bold letters are important challenges in the long run. This is the diagram of the roadmap from the analysis.
We see the social issues in 2050 as precisely environmentally neutral society with 100-year active life, and digital technologies, people and society evolved together. We will take on challenge for radical innovation to solve future customer issues by backcasting. Let me introduce some of the initiatives in the field of environment, safety, security, healthcare, and resilience. For carbon negative, we are working on energy storage and supply and direct air capture. In energy storage and supply, we combine Hitachi Energy's world-leading power system, high voltage technologies with our electrochemical insulation and control technologies to create large-scale, low-cost hydrogen project production system. In direct air capture, we will take on challenge of improving the efficiency of artificial photosynthesis to produce fuel directly from CO2, which is CO2 fuel cycle that goes beyond plants. We plan to verify the system by 2024.
Through these efforts, we aim to realize a carbon negative society. Next, to overcome cancer and intractable diseases. For minimally invasive cancer treatment, we aim to realize minimally invasive, accurate, and high throughput treatment by developing automated positioning and small high-dose accelerators, in addition to the dynamic tracking function to achieve the world's number one share in high accuracy particle beam radiotherapy equipment. For designed cells, we will promote the development of designed cells based on genetic modification and cell measurement technologies based on our track record of iPS cell, large scale automated culture systems, and other technologies. This is a photo of Hitachi's proprietary designer cells, CAR T-cells attacking target cells. Through these efforts, we will take on the challenge of eradicating cancer and intractable diseases. Third, we are working toward the co-evolution of digital technologies, people, and society.
Here, we are working on ultra big data management and silicon quantum computers. In the area of ultra big data management, we will further evolve the ultra-high speed database engine that we commercialized in collaboration with The University of Tokyo, aiming for data extraction performance that is 100 times faster than that of conventional systems. For silicon quantum computers, we are developing a quantum computer in silicon based on deep science at Hitachi's Cambridge Laboratory, which has been in operation for 30 years. This is the prototype wafer of the quantum device. Since the device is realized in silicon, we think it will be easier to scale up compared to superconductors. Along with the development of hardware, we are developing quantum applications and algorithms and will accelerate the development towards quantum transformation QX, which will follow DX and GX. Finally, acceleration of outside-in innovation.
Through startup investment and collaborations, we will acquire disruptive technologies and innovative business models to help expand Lumada's business. In 2019, we established Hitachi Ventures GmbH and set up Fund One. Fund Two is also set up and has invested in 15 companies in total. In fiscal year 2022, CEO Gabriel was named one of the global top 19 by Global Corporate Venturing. Currently, the company is promoting collaboration with startups for growth in each of the 4 quadrants of the Lumada growth model. In the MT MP 2024, we will expand the innovation ecosystem with customers, startups, academia, and government in order to further accelerate the creation of radical innovation. In particular, we will accelerate the construction of innovation ecosystems, as well as expand startup investment and collaboration in the themes shown here for 3 areas backcasting from 2050. Finally, summary.
We will steadily implement the measures I mentioned today through global growth in the area of digital, green, and innovation. That is all from me. Thank you very much for your attention.
Thank you very much, Dr. Suzuki. We will be switching over the screen. Now, here onward, the two speakers, Lorena Dellagiovanna and Norihiro Suzuki, will be responding to questions that you may have. Those of you with questions, please press the Raise Hand button on the Zoom screen. When your name is called, unmute, state your name and affiliation, and ask your question. We will be calling you by the name shown on the screen. If you no longer need to ask a question, please release the button. We will not be showing video of the person posing the question. The green and innovation strategies are different in substance. Please indicate to whom the question is addressed.
We will limit the number of questions to be received for two per person. We will be taking questions from the Japanese channel first, followed by the English channel. We will now take questions on the Japanese language channel. If you have questions, please press the Raise Hand button. Hirakawa-san, please. Please unmute and ask your question in Japanese language.
Thank yo u very much. Lorena, I have a question for you and one question for Suzuki-san as well. First of all, for Lorena-san. Thank you very much for the presentation. On page 6, you talked about the green strategy to becoming a climate change innovation. You talked about GX for growth. By 100 million tons of CO2 reduction is the objective.
For GX for Growth, in terms of product, have you already started to provide products to enable this process? What kind of products is that? In fiscal year 2024, what is the size of sales for that product? If you have any idea, please share that with us. That's my first question to Lorena. Lorena-san, please respond to the question.
Thank you so much for the question, Hirakawa-san. First of all, the 100 million tons estimation of reduction per year from FY in FY 2024 are based on the current Hitachi portfolio. We have done an estimation looking at the impact of Hitachi products in the markets where Hitachi is present. The biggest, let's say, contribution comes from Hitachi Energy. The electrical distribution products of Hitachi Energy are enabling the deployment of a larger scale of renewable. As well as based on the market share of Hitachi Energy, we are estimating those savings. In addition to that, the estimation has come from the rail business and the industry.
As far as for them, we have calculated a saving based on the avoided CO2 emissions, thanks to the new installation of technology and the new deployment of more eco-friendly technology compared to the conventional one. In terms of sales growth, let me say that most of our business, especially in the Green Energy and Mobility, are related to the Scope because they are, of course, distributing products that are very important to reduce the CO2 emission for our customers' footprint. Thank you so much.
Thank you very much. My next question is to Dr. Suzuki. In innovation, page 6. R&D investment. Hitachi R&D investment until now had been, in terms of contribution to R&D, you always focused on the contribution and efficiency in return. In MTMP 2021 R&D investment impact, how do you see the impact from the investment? The R&D investment to sales ratio is 3%, so it's rather low. Maybe not to you, but a question to the entire company. By raising this R&D investment to sales ratio, what will change in MTMP 2024? What will be different from the previous three years? If you could elaborate, I appreciate it. Thank you.
Thank you very much. As you rightly mentioned, the innovation investment are two KPIs exist. One is the R&D cost to sales ratio and the three-year average R&D investment against operating profit. As you mentioned, regarding the development efficiency, we are more advantageous or stronger compared to our peers. In the MTMP 2024, we need to pursue further growth. To achieve growth, the R&D efficiency advantage need to be maintained. The R&D cost to sales ratio will be raised. With that, we think we can achieve further growth. In 2022 plan, 3.6% is our projection. We will look at our peers, benchmark against them, and increase our R&D investment going forward. In MTMP 2021, customer co-creation was pursued. Our Lumada solution contribution was realized through customer co-creation. We want to spiral up through Lumada growth strategy model.
Aim for higher sales and higher operating profit. The Innovation Growth Strategy Division will use green and digital, and with the corporate strategies, corporate divisions, and with marketing divisions, we will work together to achieve global growth. The synergy within the corporate organization will also be pursued. Thank you very much.
Thank you very much. We will take another question from the Japanese channel. Yoshizumi-san, please. Please unmute and ask your question in Japanese language. Question.
Thank you very much for the explanation today. I have two questions. First question is for Lorena. Now, in terms of a carbon neutral objective of Hitachi, was explained for the customer CO2 reduction by 100 million tons. Is there a risk of achieving this objective? What is the risk? Energy costs is increasing, and there is also geopolitical risk coming to the fore increasingly today. It isn't as if there is a complete alignment globally in promoting carbon neutrality, so the environment is changing. What can you do on your own at Hitachi, and what are areas where you should be cooperating globally?
As an ecosystem, what is the risk you recognize today? Against these risks, what are the measures you will be implementing to overcome this risk?
Lorena-san, please respond to the question.
Thank you so much for your question, Yoshizumi-san. That's a very important question because, of course, in front of this climate change and in front of all the geopolitical risk, many people are thinking that this deal might delay. First of all, maybe in the short term, yes, but there is a strong urgency due to the price increase and a strong urgency to be less dependent, for example, from Russian gas that will push the world to accelerate. The second point is that we are very confident to achieve these targets because it is based on our current portfolio. We think that we should set it and keep evolving as circumstances and technology will change. We have also for 2050, as Dr.
Suzuki explained, we are investing in a new technology, and we know that the current technology will not be enough to achieve the energy transition. We have in place a number of countermeasures. One thing where Hitachi cannot control is, for example, on the customers or supplier side because, whatever we do in terms of investing in our new technology, we need to make sure that from the customer side, they will use green power to power our products. Or from the supplier side, they will implement green processes, and they will develop the green products in order to achieve targets across the whole value chain. We are going to do a strong lobby with our suppliers and our customers. We would like to engage them for the SBTi certification as well, because that's absolutely important in achieving those.
You talk about ecosystem. The ecosystem is absolutely important. In Hitachi, our differentiation is that we are operating in many industries. We have many different technologies. By integrating all these technologies as one structure, that will help to deliver and meet the customer and the society requirements. However, there is another point, which is the lobbying with the policymaker, and that's where Hitachi, with many other players, should be part of in order to facilitate a discussion with the policymaker, in order to make sure that all the countries will put in place a regulation that will accelerate this transition. Thank you so much.
Thank you very much. My second question is to Dr. Suzuki. Page ten of your material, about the financial and public sector services, Lumada, Metaverse and Web 3 were mentioned. In infrastructure, the physical place is what I think of, but Web 3, in a space like Web 3, what kind of service specifically do you see as a business opportunity, and what kind of inquiries and movements, trends are you seeing, if you could share with us something?
Thank you for the question. Metaverse, as you mentioned, from E to C, market is now starting. The cyberspace and physical space, and the link between the two is where we see the business opportunity. NFT, Web3, DFFT, these technologies will advance and at the same time, the systems and rules need to be established. Society 5.0. From Society 5.0 perspective, one is Metaverse for industry. That's one. Under such circumstances, essential workers work from home is one application. New way of working can be realized with Metaverse. One more is the new value exchange platform. In the environment, sustainable finance. First, monitoring, reporting and verification of the CO2 accounting. The platform that shares that will be established in carbon credit and security token. These value exchange platform will be another new business opportunity.
In the distribution and supply chain, digital settlement, digital payment will also be another business opportunity for us. This new Metaverse and Web 3.0 growth opportunity will be captured so that we can do POC with global customers and establish the models. Thank you very much. Thank you. That's all for me.
Thank you very much. We are running out of time, so now we would like to take questions from the English language channel. Any questions on the English channel? There seem not. Therefore, with this, we would like to bring this session on green and innovation strategy to a close. Thank you very much. At 2:00 P.M., we will resume with the Digital Systems & Services sector session. Thank you.
It's now 2:00 P.M. Next, Executive Vice President and Executive Officer Toshiaki Tokunaga will make presentations on Digital Systems & Services sector. I will switch the screen, so please hold on for a minute or so. Thank you. Over to you, Tokunaga-san.
I'm Tokunaga. Thank you very much for your time, taking time out of your very busy schedule. I will explain the growth strategy of Digital Systems & Services sector, or DSS sector for short. First, I would like to summarize what I would like to share with you today. The first is the basic policy of the Mid-Term Management Plan 2024. By fiscal 2021, the DSS sector has evolved into highly profitable entity and have prepared for growth. Based on the strategy in the Mid-Term Management Plan 2024, we aim to achieve revenue expansions and improve profitability. We will continue to provide value and achieve sustainable growth of Lumada as a partner to solve the problem of our customers in Japan and overseas. Second is a sustainable growth of GlobalLogic.
GlobalLogic, which we acquired last July, continues to grow steadily and exceeded our plan in fiscal year 2021. In MTMP 2024, we will further expand synergies with Hitachi Group to achieve continuous business growth and enhance corporate value. Mr. Shashank Samant, CEO of GlobalLogic, will explain more about GlobalLogic later. Third, Hitachi Digital will accelerate the Lumada business. Established in April, Hitachi Digital will lead the formulations and executions of digital strategy across the Hitachi Group under the leadership of CEO Taniguchi, serving as a central center. This will maximize the value of Hitachi's strengths, combining OT, IT, and product, and accelerate the expansions of the Lumada business across the global Hitachi Group. Fourth, we will invest in growth through cash generation.
In MTMP 2024, we will strengthen our ability to generate cash and invest the resources and capabilities needed to expand Lumada business through growth investment, including M&A. Here is what I will explain today. I will begin with the overview of the DSS sector. Sorry, could you go back a bit? The DSS sector will combine the digital power of its three business groups, front business, IT services, and services and platform, and collaborate with Green Energy and Mobility, Connective Industries sector, and Hitachi Astemo to contribute to the realization of a sustainable society by promoting DX for customers' business operations and social infrastructures. This is the business structure. The DSS sector has a total of 100,000 employees operating in 50 countries and regions.
We established Hitachi Digital in North America this year to strengthen the structure of, for formulating and executing global company-wide digital strategy. CEO Taniguchi, who's up on the stage today, leads the formulations and executions of digital strategy across Hitachi, our group from Silicon Valley as a control center of Lumada business. In addition, from this year, we have established three business group system by adding IT services centered on Hitachi Systems and Hitachi Solutions to the existing front office business and services and platforms. In MTMP 2024, under the business structure that I have just explained, we will disclose the business result and operations of DSS more transparently in an easy-to-understand way. This slide shows an overview of the business unit and major group companies in the DSS sector. Due to the time constraints, I omit the explanations and hope you will take a look at it later.
This slide shows the positions of the DSS sector in the Hitachi Group's corporate results for fiscal 2021, as well as the compositions of revenues and adjusted operating income within the sector. The DSS sector accounts for 20% of Hitachi Group's total revenue and 36% of adjusted operating income. In addition, three business groups account for almost one-third each of the revenue and profit compositions within the sector. Next, I will explain the policies and performance targets of MTMP 2024. First, let me discuss the business environment surrounding DSS sector. Customers continue to intensify the use of digital services to address increasingly complex business challenges. They are also accelerating the move against the environmental issues and SDGs.
As a result, as shown in the graph on the right, the global DX market targeted by Lumada business is expected to continue to grow by double-digit in all the regions. We recognize that the business opportunity in the DSS sector is very large. Next is the basic policy of the MTMP 2024. The DSS sector has been strengthening its earnings power and solidifying its foundations for growth through the two mid-term plan of 2018 and 2021. In the MTMP 2018, we achieved a double-digit operating income margin by improving the adjusted operating income margin by 4.2% compared to fiscal 2015, by reforming our business portfolio, reducing loss cost, and thoroughly making an improvement. In MTMP 2021, we strengthened the foundations of Lumada's growth by acquiring GlobalLogic, launching the new Hitachi Vantara, and launching the Lumada Alliance Program.
In MTMP 2024, we aim to reap the fruits of our efforts to date and achieve dramatic growth of the Lumada business in the global DX market. This is the performance target of the DSS sector in MTMP 2024. First, the revenue, the important indicator for growth. Regarding Lumada business, which is being focused by the entire Hitachi, we plan to outperform the growth of DX market and to achieve revenue of JPY 2.6 trillion in DSS sector in fiscal 2024. We recognize that adjusted EBITDA ratio, a profitability indicator, is already one of the highest in Japan as of the end of fiscal 2021, and we aim to further improve it to reach 15% by FY 2024, which is on par with the global players.
In addition, we will thoroughly implement cash-oriented management, generate EBITDA of over JPY 1 trillion over the next 3 years, and continue to invest in growth. Next, I will discuss growth strategy to achieve MTMP 2024 targets. Here is the overall picture of the DSS sector growth strategy in MTMP 2024. We will implement the four growth strategies shown here to achieve rapid growth of Lumada business in the global DX market. In order to ensure the execution of these strategies, we plan to improve a total of JPY 500 billion in M&A and other business expansions investment, as well as JPY 200 billion in Lumada development investment and for growth within MTMP 2024 period. I will now provide the overview of each strategy. First, strategy one.
In the growth model of the social innovations business by Lumada shown this figure, the DSS sector is the core business unit driving digital engineering system integrations and managed service. In MTMP 2024, digital engineering capability of the GlobalLogic, which newly joined Hitachi Group and combined Hitachi's OT, IT, and product to promote solutions to customer and social issues. We will also enhance our engagement with customers through this effort, continuously create value for customers as a DX partner, and achieve sustainable growth for Lumada business. In other words, we will be rolling out the recurring business. Next, strategy two. One of the important feature of the Lumada business, it's scale of business. DSS sector will accelerate the scale of Lumada business through three approaches. The first is the customer DX type.
This approach is to increase engagement with individual customer through co-creations and to obtain repeat orders. This is an approach that the financial institutions and business unit and social infrastructure system business unit excels at. Next is the domains DX type. This approach is to develop new customers by horizontally deploying original solutions developed through co-creations with customers and solutions that have already been proven in the market. This is an area where the strengths of Hitachi Systems and Hitachi Solutions, which have a proven track record in the development of solutions and services, can be utilized. The last is the social infrastructure DX type. This is an approach that builds a new ecosystem with many stakeholders to solve complex issues that cannot be solved by customers and Hitachi alone.
This is a business that only Hitachi, which with its strength in OT, IT, and product, can offer, and one that we'll actively pursue in the future. Let me now introduce some specific examples of Lumada business based on the market approach I have just described to explain to you about the growth and evolutions. First, customer DX type. On the left is an example where the financial institutions business unit provided CMOS annealing quasi- quantum computer to Sompo Japan and contributed to the reductions of the business risk in the insurance underwriting operations. We are also working with Sompo Japan on the development of various new services through co-creations, such as influenza and other infectious disease forecasting and corporate and SX support. On the right-hand side is an example of co-creations with BMW Group.
Hitachi Vantara provides various data analysis, and GlobalLogic provides design and engineering support for connected cars and contributing to BMW Group's innovation. Next is a domain DX type example. Hitachi Systems' ADWORLD, shown on the left, has been adopted by more than 700 municipalities, contributing to municipalities' DX by improving resident services and administrative efficiency. In addition, Shibuya Ward has been promoting 100% electronic approval through a complete renewal of its ICT infrastructure to reform the work style of its employees. This has resulted in a 40% reduction in paper use. Hitachi Solutions' PointInfinity, shown on the right, has been adopted by customers in a wide range of industries that build a points system, including convenience stores such as FamilyMart. The total number of members in Japan and overseas has already exceeded 300 million users, boasting wonderful track record.
Next is an example of social infrastructure DX/DX. Let me first introduce a case here in Japan. As shown on the left, Social Infrastructure System Business Unit provides solutions to the social issues of aging social infrastructure facilities and decrease in the numbers of experienced maintenance workers by upgrading maintenance through remote inspections and image diagnosis using drones. Through open innovations with infrastructure operations, facility maintenance companies, and universities, the BU will realize more efficient infrastructure management and cost optimizations. On the right is an example of sustainable finance platform being promoted by Financial Institutions Business Unit to promote the collections and use of ESG data. By creating a new ecosystem connecting financial institutions and operating companies, we are working to enhance the sophistications of corporate ESG management and improve transparency toward the capital market. Here are some examples from overseas.
On the left is an example of Optimise Prime, a consortium supporting the expansion of EVs in the U.K. as a measure against climate change. Hitachi Vantara led the consortium activities together with U.K. Power Networks, the U.K.'s electricity distribution company, to promote large-scale demonstration projects that included the optimal placement of charging facilities and demand peak control. To the right is the Lumada Inspection Insights, which was announced late last month. Lumada Inspection Insights uses a proprietary AI image analysis technology to analyze data from satellite images and lidar to detect incidents at an early stage and reduce the risk of large-scale forest fires. Next is strategy three. This, Hitachi Digital, which was established in April, is to lead the development and execution of digital strategy across the Hitachi Group as a central command of Lumada business.
Specifically, Taniguchi, CEO of Hitachi Digital, will lead the company at Silicon Valley, the leading edge of digital, and will work closely with Hitachi Vantara and GlobalLogic, as well as OT sector, including Hitachi Energy, Hitachi Rail, and JR Automation, to strongly drive formations and executions of Lumada strategy. Toward the growth of Lumada business, Hitachi Digital will also play an important role in identifying necessary growth investment and lead their executions. In MTMP 2024, we plan to concentrate our investment in the areas shown here. Finally, strategy four. The key to expanding the Lumada business is to strengthen and expand digital talents. GlobalLogic has an excellent scheme in this area. In addition to continuously evolving the scheme, we will roll it out here in Japan as well.
By expanding the mutual exchange of talents between DSS sector and GlobalLogic, we will strongly promote strengthening and expansions of the digital talents. The progress of these growth strategies I have just outlined will be continuously followed by four KPIs. The first is the revenues of GlobalLogic, which represent the growth of Lumada business. The second is the ratio of Lumada service business, which indicates the customer engagement and business continuity. The third is overseas revenues, which indicates the globalization of Lumada business. The fourth is the revenue of whole Lumada business driven by DSS sector. We will closely monitor these four KPIs in order to achieve MTMP 2024. From this point onward, Shashank Samant, CEO of GlobalLogic, will now discuss GlobalLogic's overview as well as its growth strategy.
Thank you very much, Tokunaga-san.
Shashank Samant, the President and CEO of GlobalLogic, and I'm very happy to be here with you today. GlobalLogic is the digital engineering services wing of Hitachi. We partner with the world's leading brands, Fortune 1000 companies, to help them see their digital world the way it should be, and not the way it is today. As such, we build amazing products, connected platforms, and engaging and intuitive experiences, and digitally transforming our clients' business. How we do that, we bring design creativity, engineering depth and experience, and data science together to make it happen. Next slide, please. We are engineers, and we love to quantify everything, especially the success, and here are the numbers of our business in that quantification. We serve over 500 clients globally, of which 60% of the business is with Fortune 1000.
In fiscal 2021, we clocked $1.28 billion revenue at 38% year-on-year growth. The growth is at a very healthy margin, 23% EBITDA. As we make our clients successful in their digital quest, it is also benefiting GlobalLogic. GlobalLogic is the magnet for the best talent around the world. We deliver the scale of digital transformation with nine design studios, 38 engineering labs, and two data science hubs, totaling to 25,000+ employees in 14 countries. With our growth, these numbers are just getting outdated as we speak. Next slide, please. Digital transformation magic happens when the physical and the virtual world come together. Physical being the operating technologies, and virtual being the digital technologies. To make it happen, you need design, engineering, and data prowess to come together.
Design challenges the status quo and gives us the art of possible, which means envisioning the more and intuitive and engaging customer experiences as a service business and services models, and redrawing the supply chains for our clients. Further, deep and complex engineering makes it feasible. It brings the experiences and solutions to life, and then data makes it more intuitive and actionable, making business viable through the insights. Bringing these very different disciplines together and hum like a music symphony is the GlobalLogic's secret sauce. Next slide, please. Marrying with Hitachi to create the digital synergy is all about accelerating Hitachi's Lumada flight. GlobalLogic serves the key industries that are both disruptive and getting disrupted. Disruptive are the blue, balloons over there, which are the high digital engineering services demand industries, which are listed over there.
Disruptive are the one which are asset-heavy industries like Hitachi Energy, Rail, and Industrial Products, who want to disrupt the business model as a service way, and those are the red balloons. These sectors have a high demand for digital solutions and create tremendous headroom for growth for all of us. The life cycle for digital transformation start with ideation, followed by the engineering and build, then the integration, and then the runoffs, which are running the businesses on ongoing operations. At the heart of this digital life cycle is Lumada. To capture the enabling digital assets to power that life cycle, making the life cycle faster, drive the cost of build and TCO, total cost of ownership for the clients lower, and also to build and nurture cross-industry and cross-technology use cases.
Which means that capturing, cataloging, and cultivating the tools, methodologies, and use cases leading to the solutions, repeatable solutions. As you can see, GlobalLogic fits in perfectly well in the broader Hitachi Lumada ecosystem. Next slide, please. A tangible example is the recent solution we reimagine and develop in partnering with Hitachi Energy. APM, Asset Performance Management, is the solution. As you can see here in the chart, GlobalLogic utilized our own design studios to reimagine the asset performance management, APM business case, and then our deep engineering and data practice to deliver the Hitachi Energy's portion. Such is being commissioned and managed by Hitachi Vantara in the field as we speak. Next slide, please. How are we managing growth? Traditionally, GlobalLogic is always strong with American clientele. Almost 60% of our revenue is accounted in Americas.
We have high ambitions supported by our Europe growth, which is 30% of our business. Europe is getting further accelerated by Hitachi's units like energy and rail, which have a sizable presence over there. In less than a year since our acquisition, we have also established our presence in Japan, and are seeing great traction on early engagements with Hitachi clients in Japan. To support all these growth aspirations, we are aggressively expanding our delivery footprint in Europe, in Americas, and APAC. APAC is largely driven by India and Japan. In closing, I would say, as you have gathered by now, GlobalLogic is on an aggressive growth trajectory, largely driven by global digital demand, geographic expansion, and fueled by Hitachi partnership.
Being part of the Hitachi family has enabled us not only to accelerate our own standalone growth strategy, but also find significant new opportunities in transforming Hitachi and Hitachi's clients. Thank you for your time. At this point, I will turn it back to Tokunaga-san.
Thank you very much, Shashank-san. We will now proceed to Tokunaga-san once again. Tokunaga-san, over to you.
This is the summary for today. DX sector will dramatically expand our Lumada business in the high growth DX market and aim to become a world-leading company in growth and profitability by 2024. Our goal is to become a global leader in social infrastructure DX and realize sustainable growth. Thank you very much for your kind attention.
Thank you, Tokunaga-san. We now will entertain the questions from the floor. I will switch the screen. Please hold on. Joining Tokunaga-sama to answer to the questions is Vice President and Executive Officer, CEO of Hitachi Digital, Jun Taniguchi, and CFO Digital Systems & Services Division, Masashi Hatakeyama. Those of you who have questions, please utilize raise hand functions, utilizing the Zoom functions. Of those raised a hand, I will call upon you, and please unmute and identify yourself with name and affiliations, and state your questions. I will call upon the name which is shown on the screen. If no longer needs to raise a questions, then please cancel your question. Your video won't be shown. We will first entertain the questions from those in the Japanese channel, followed by those in the English channel.
Well, I will now entertain the questions from those joining us in the Japanese channel. Yasui-san, please unmute the microphone and raise your questions in Japanese, please.
Thank you. UBS Securities, Yasui is my name. I have two questions. My first question, it's been a while after integrating GlobalLogic, post-merger integration to retain the talent in that front. There might be some turnover, some people leaving the company, so inclusive of the fusions and integrations of the business, Shashank-san and Tokunaga-san, please comment on the changes to the personnel, the talents. Second, CEO Kojima has talked about the GlobalLogic, which is good at recruitment. They do have a wonderful know-how in acquiring the talent, which shall be applied out here in Japan more. Now, digital engineering seems to be a very interesting business. I hope that you will firmly establish the positions here in Japan.
From Japan, from the viewpoint of Shashank and Mr. Tokunaga, what are the opportunities both in Japan as well as in the overseas market? Those are my two questions.
Yasui-san, thank you very much for your question. Both of the questions, first of all, let me comment first, and then invite Shashank to provide some supplementary comments. First of all, the first point, now that we have integrated with GlobalLogic, what is the status of PMI? In a nutshell, before what we assumed in acquisitions, it's going well, very well. That's what I honestly feel. Let me give a specific example. Level one leadership. Within the leadership team after integration, there was no one leaving GlobalLogic. So same leadership remains compared to the pre-integrations. They are extremely happy now that they can work for Hitachi. We are now working together. Now, how about the lower level talent as well as the status of integrations? We are showing a good progress. From Japan to GlobalLogic office, we are sending a lot of talent.
Shashank Samant, another leadership team, at this moment, they are working together. That's my response to your first questions. Now moving on to the second questions. Recruitment functions of GlobalLogic, as well as positioning here in the Japanese market, as you have rightly pointed out, GlobalLogic, when it comes to global recruitment, as well as providing training and education, is one of the strengths that GlobalLogic has. I believe at the end of March, when we announced integration in March of the previous year, there's about 20,000 personnel working for GlobalLogic, and it's now reached 25,000. In that sense, hiring has been progressing smoothly, as well as we are fostering highly capable talent. This approach will be rolled out here in Japan.
At that same time, GlobalLogic Japan shall be the basis for us to do the digital engineering, as well as to provide to the Japanese customers. Shashank, please provide us with a supplementary comment.
Thank you, Tokunaga-san. I think you answered it very well. Since the time we actually merged the companies, July second week, we do not have any attrition on the executive management or the senior management of the company. To the extent, our overall attrition of the company is running almost 700-800 basis points lower than our competition. Our attrition actually also came down. Our engagement, employee engagement score, the surveys which we run internally, are actually running at higher, 180+, for the overall company. I give a lot of this credit to the even Hitachi senior management who are actively engaged in explaining the employees the rationale, and also showing that collectively what we can do together and our future success already happening on that particular front.
Both actually our inside surveys as well as the surveys on the Glassdoor and others all point out in the one direction, that is this, merger is highly successful, not just for our clients, but also for our employees. Thank you.
Thank you very much. We will take another question from the Japanese channel. Hiroi-san, please. Hiroi-san? Question.
I have a question for Tokunaga-san. I have two questions. The first question is a confirmation. Regarding KPI, you said the Lumada service ratio is presented. What does this mean? Please elaborate further. In the presentation, you talked about the recurring. I believe it is these two are related. Please confirm this. Second question is regarding JPY 500 billion, the investment that you are making. What is the substance of this? GlobalLogic has been acquired. This was a major acquisition. And, as promoting Lumada, are you going to supplement what is required? So what kind of areas are you intending to invest in? So that's all in terms of our question.
Answer. Thank you for your question.
Those two points you mentioned are both very important. To your first point, regarding the service business ratio in KPI, as you have rightly pointed out, recurring ratio is what we mean by this. To elaborate further, for in the Lumada growth model, we want to make sure that Hitachi can create business from all areas. That is our strength. In this context, one KPI is GlobalLogic sales profitability. This is a growth KPI for us. It is because customer challenges are understood. By GlobalLogic creating business, which will mean that SI, system engineering and services, will also benefit from this growth. This is a KPI. This is the first one the KPI for growth. The second one is Lumada service ratio. This is more recurring basis.
What is the continuation of the business to their customers is reflected in this KPI. Therefore, the Lumada's benefit to be evaluated by the customer so that they will continue to engage with Hitachi. That is important KPI for this service. Now to your second question. JPY 500 billion the investment for growth has been included. As I have mentioned, as Hiroi-san also you have mentioned, that there's not just one investment that we are considering. It is going to be utilized for multiple investments in order to promote Lumada further. Strategy three is Hitachi Digital. A strategy I mentioned here is that at the very bottom of this slide, the various domains where we are considering investment has been outlined.
As Hiroi-san, you have mentioned, GlobalLogic capability enhancement is one area that we'll focus on. Geographical footprint as well as expansion into a new domain in order to support GlobalLogic bolt-on investment is being considered. The second KPI is the service enhancement for the cloud and managed services. Enhancement will be the focus for M&A inorganic growth in order to enhance our capabilities. That is what we are contemplating today. These are the two areas of investment for us. To the tune of JPY 500 billion investment for growth is being considered. That is all.
Thank you. Thank you.
I see more hands, some from the Japanese channel, so let me continue. Harada-san, please raise your question.
This is Harada. Do you hear my voice? Thank you. I have two questions. One, page 20. As is shown on page 20, moving forward, your OT area, as well as the product, as well as how to liaise these two areas will become very important. At this point in time, my impression is that synergy can be generated from the field of energy. I would like to confirm of the domain as well as the timing. Also, at this point in time, there will be sensors attached to various products to collect information. What will be the percentage of products that have the sensor, and how ready are you to start the business? That's my first question.
My next questions have to do about KPI. The KPI of Hitachi is shown. On the other hand, as a GlobalLogic, what are the KPIs do you have? That's my second questions. On page 25, net retention ratio, EBITDA, are maybe the KPIs you have. Once again, please talk about the GlobalLogic's KPI.
Harada-san, thank you very much for your question. Now, on the first point, let me make some comment, and then Taniguchi will provide you with some supplementary comment. Then regarding the second questions, Shashank will talk about the specifics of the KPI of the GlobalLogic. Now, about liaising with OT, as you have rightly pointed out, energy, in the field of energy, Hitachi Vantara, GlobalLogic, collaborations is going fairly smoothly. Specific asset performance and management development of solutions is already underway.
Geographically speaking, DX market is rapidly expanding in North America, so North America is a very important market for us. In that sense, in North America, Rail, which have high presence, or the Connective Industries, partly, the collaboration is underway. Take, for example, of the Connective Industries. Compressor comes with sensors, so sensing leading into diagnosis or to monitor the utilization is now made available. How many sensors? What shall be the coverage of the sensors? That is very difficult to respond because I don't have any information at hand, so I'm not in the position to respond right away. However, moving forward, and to strengthen the product through digital, from that perspective, in almost all the product, in one way or the other, we would like to have the sensor being attached.
How we collect the data, sometimes on a real-time basis, sometimes on a bulk basis, there may be some different approaches, but we would like to utilize this to also as to provide enhanced value to the customers. I believe that will be the very important point. Now over to Taniguchi-san about the collaborations with OT.
This is Taniguchi speaking. Can you hear me?
Yes, we can hear you.
Thank you. Now, about the first point, as you have rightly pointed out, in the field of energy, as Tokunaga has mentioned, there are already multiple projects underway, Asset Performance Management. On top of that, energy, take for example, stability of the grid is another project that is already underway. Let me further specify. The renewable energy use is spreading, then the balancing of energy is becoming more difficult. Digital can make the adjustment and coordinations for the stable supply of energy. It has very high affinity with GlobalLogic or with, Hitachi Vantara, these OT sector players. We have already started addressing that. That's one point. Similarly, as Tokunaga has mentioned earlier, rail industry. Similar projects have already commenced. Let me cite some examples. Take, for example, industrial sectors products.
Prior to my current position, I was in the air conditioning as well as the home appliance business. For the future product that we will be launching, it will become more connected. This is related to your second question. Take, for example, elevators and escalators that have more sophisticated and efficient maintenance. It's been highly connected. On the other hand, industrial products for the future product to be launched comes with the connected functionality. It's still in the transitional phase. In this area, performance will be enhanced over the air, for one thing, and also service subscription is a key. We will see further spread of service and subscription service, particularly in North America. Hitachi Digital shall serve as a control tower to give a positive influence within the Hitachi group. That's what we are working on.
This concludes my response.
Shashank, can you talk about the KPI too?
Thank you, Tokunaga-san. GlobalLogic is a hypergrowth company, but we are not measuring GlobalLogic by standalone growth, but how we are actually working together with Hitachi to give that benefit to digitally transform the frontiers. We are measuring GlobalLogic on GlobalLogic revenue growth. We are standalone revenue growth. We are measuring on the synergy business which we can create along with Hitachi frontiers along with their clients. We are, at the same time, looking at net dollar retention rate that indicates essentially how many customers we have repeat business and how, as we are growing, can the growth sustain in terms of the commitment, multi-year commitment over the next few years. On the margin side, as earlier said, if we are doing so good with our clients, that should also rub their success on our margins.
We are looking at EBITDA margin growth and EBITDA margin. Last but not least, we are also checking out on attrition, how we are competing against the industry. If you see across all these five parameters, we perform in fiscal 2021 better than fiscal 2020. Our quest is actually how to continue as we are hypergrowing, how that growth could be very circular with the clientele which we have, how we can grow with them standalone, as well as with Hitachi. Most importantly, our people are happy while doing so, and that is net creating actually the great EBITDA margin. These are the five KPIs we follow very religiously. Thank you .
Thank you very much. That's very clear. Thank you.
Thank you very much. Yeah, there is also a question from Japanese channel, but we will take a question from the English channel at this time. Are there any questions on the English channel? Please press the raise hand button if you have any questions on the English channel. Fukuhara-san. Fukuhara-san, over to you. Please ask your question.
Okay, thank you very much for the opportunity. I am Sho Fukuhara from Jefferies. I have two questions. My first question is to Mr. Tokunaga. Could you please share with us some examples of how the role of Hitachi's domestic IT business will change within the new medium-term plan, versus the previous one? I'm assuming its role should expand in terms of collaborating with other business sectors and shift away from pure system integrator business model. Could you please share with us any action plans or operational changes you want to make to domestic DSS business? Thank you.
Hi, Sho Fukuhara,
Thank you very much for your question. As I explained earlier, up until the 2021 plan, DSS business has undergone a significant transformation. First point is that profitability is higher in terms of the business we pursue. With the acquisition of GlobalLogic, we have made the preparations poised for growth going forward. As you have rightly mentioned, as you have asked, domestic business will also undergo change, and it shows the direction for change in the domestic business. There are two points to be mentioned here. The conventional SI business will maintain profitability and further enhance the profitability. We must continue this objective going forward. There are many customers who have been engaging with Hitachi over the years.
Mission-critical system integration ability of Hitachi has been highly evaluated by our customers over the years. We want to enhance this capability further going forward. The second point is the DX business in Japan. We want to expand this further. GlobalLogic Japan has now been established. With this, the engineers in charge of Japanese business in the past have been given stimulus.
They are feeling very much encouraged, and more than ever, we believe we can provide additional value to our customers in Japan as well. There is a significant excitement for our business in Japan as well. The DX business expansion in the domestic market will be an important focus going forward. That's it for my response.
Thank you very much. My second question is to Mr. Shashank and Mr. Taniguchi. So to Mr. Shashank, it has been almost one year since GlobalLogic has been integrated into Hitachi Group. What are some of the new market opportunities and technological capabilities GlobalLogic has obtained to capture further growth just because of being part of Hitachi Group? From your presentation, I understand you mentioned energy and rail verticals. There are some synergies and also APAC market is an opportunity. Any other synergies or technological capabilities? In the same way to Mr. Taniguchi, what are the new business opportunities or technological capabilities, some examples or changes happening at Hitachi Vantara now that GlobalLogic has joined?
Thank you for the question. After actually GlobalLogic merged with Hitachi, across three different vectors, we are getting benefited in terms of expanding our business. The first one is aligning our service lines with the firms which Hitachi has, which is Hitachi Vantara. GlobalLogic traditionally is an ideation and engineering and trying to create the products and platforms and services, but we never operationalize that or try to run those systems in the market. Hitachi Vantara's capabilities in the cloud and running the systems is actually helping us to complete the value chain. We won several deals. We bid on several deals. We won several deals for the marquee brands, and that is actually achieved in the first six months after we actually closed the transaction.
Number one is actually helping us to complete our service line, which is very important both to compete against the larger IT players, but also to offer the single point shop solution to our clients. On the second part of the lever or the second axis, is the geographical expansion which GlobalLogic is doing. GlobalLogic operating in 14 countries. Hitachi, we are actually added almost close to 40-plus countries, and most important of that in Japan. It's a very large market for many of our core sectors like automotive, like communications and media, like banking and finance and retail and many other areas, and I'm very excited about it. Within 6 months after the acquisition happened, around month of March, we announced GlobalLogic Japan. We actually received an entity from both Hitachi and GlobalLogic.
As we speak, you might have seen the announcement. We already announced actually our first contract within nine and a half weeks since the time actually we announced it with Nojima, which is one of the very famous brand in Japan. We feel that both in the countries like Japan and some of the other countries in Western Europe, we are expanding our presence and offering our service to those areas. Last but not the least, which is most profound, is actually working with Hitachi Energy, Hitachi Rail, Hitachi Industrial Products, and Taniguchi-san himself is sitting over there. He is helping me in that particular line. These are the areas which are not the industry traditionally GlobalLogic dealt with, or if we dealt with, we dealt with on a very small scale.
We believe that both our design engineering and data, combining with Hitachi Vantara, we can offer the end-to-end solution to these industries. Last but not the least, all this comes together using Lumada. Lumada has over 1,000-plus business cases, and we just started exploring those business cases, trying to take those both horizontal and vertical, trying to take those to our clients and also enrich those business cases as we move forward. You can see from my actually voice that I'm very excited. It's like a kid in a candy shop to a large extent in terms of what we can do. If 38% growth of GlobalLogic last year was one indicator, I think this is only the way it's supposed to go upward. Thank you.
Taniguchi-san, please add supplement.
Well, from Taniguchi, let me also respond to your question. Conventional Hitachi's OT or Hitachi Vantara. Let me comment from the perspective the newly acquired opportunity is what I would like to talk, as Shashank has mentioned. This is similar to what Shashank has mentioned. Now, from the OT sector perspective, there are two things that we have acquired. One is the user experience, UX, or user interface, UI, based upon which the digital engineering. New customers, business growth, as well as the opportunities toward that and the utilizing the domain knowledge of OT, we can take up the challenge. In other words, to the customers, the new business opportunity can be now acquired. That is one thing that we have acquired.
Now, as a result, the way we conduct the business is now in the field of service. Thank you for the question. After actually GlobalLogic merged with Hitachi, across three different vectors, we are getting benefited in terms of expanding our business. The first one is aligning our service lines with the firms which Hitachi has, which is Hitachi Vantara. GlobalLogic traditionally is an ideation and engineering and trying to create the products and platforms and services, but we never operationalize that or try to run those systems in the market. Hitachi Vantara's capabilities in the cloud and running the systems is actually helping us to complete the value chain. We won several deals. We bid on several deals.
We won several deals for the marquee brands, and that is actually achieved in the first 6 months after we actually closed the transaction. Number one is actually helping us to complete our service line, which is very important both to compete against the larger IT players, but also to offer the single point shop solution to our clients. On the second part of the lever or the second axis, is the geographical expansion which GlobalLogic is doing. GlobalLogic operating in 14 countries. Hitachi, we are actually added almost close to 40+ countries, and most important of that in Japan. It's a very large market for many of our core sectors like automotive, like communications and media, like banking and finance and retail and many other areas, and I'm very excited about it. Within 6 months after the acquisition happened, around month of March, we announced GlobalLogic Japan.
We actually received an inquiry from both Hitachi and GlobalLogic. As we speak, you might have seen the announcement, we already announced actually our first contract within nine and a half weeks since the time actually we announced it with Nojima, which is one of the very famous brand in Japan. We feel that both in the countries like Japan and some of the other countries in Western Europe, we are expanding our presence and offering our service to those areas. Last but not the least, which is most profound, is actually working with Hitachi Energy, Hitachi Rail, Hitachi Industrial, and Taniguchi-san himself is sitting over there. He is helping me in that particular line.
These are the areas which are not the industry traditionally GlobalLogic dealt with, or if we dealt with, we dealt with on a very small scale. We believe that both our design engineering and data, combining with Hitachi Vantara, we can offer the end-to-end solution to these industries. Last but not the least, all this comes together using Lumada. Lumada has over 1,000-plus business cases, and we just started exploring those business cases, trying to take those both horizontal and vertical, trying to take those to our clients and also enrich those business cases as we move forward. You can see from my actual voice that I'm very excited. It's like a kid in a candy shop to a large extent in terms of what we can do.
If 38% growth of GlobalLogic last year was one indicator, I think this is only the way supposed to go upward. Thank you. Taniguchi-san, please add supplement.
Well, from Taniguchi, let me also respond to your question. Conventional Hitachi's OT or Hitachi Vantara. Let me comment from the perspective the newly acquired opportunity is what I would like to talk, as Shashank has mentioned. This is similar to what Shashank has mentioned. Now, from the OT sector perspective, there are two things that we have acquired. One is the user experience, UX, or user interface, UI, based upon which the digital engineering. New customers, business growth, as well as the opportunities toward that and the utilizing the domain knowledge of OT, we can take up the challenge. In other words, to the customers, the new business opportunity can be now acquired. That is one thing that we have acquired. Now, as a result, the way we conduct the business is now in the field of service.
We've been making
In the journey of DX, take for example, with the new digital engineering of the digital logic, by concluding a contract, and then his or her journey starts. After that, in the business of the customers, it has to be steadily implemented, and it have to continue the operation. That is also necessary element in the service operations on the cloud. This is the area where Hitachi Vantara have a strength. From the eyes of the customers, the end-to-end capability can be offered as a one-stop service. This is the value for the customers as well as the newly acquired opportunity for us. Those are the two things that we have acquired compared to conventional Hitachi business. Now that we are working with Shashank and the GlobalLogic colleagues, those are the opportunities that we have acquired. This concludes my response.
Thank you very much.
Sorry, can I just confirm one additional question with Mr. Shashank Samant, please?
Please.
Thank you. You mentioned 1,000-plus business cases of Lumada solutions. Have you started actually offering some of them to your existing customers? And do you see enormous opportunities from this with minimal additional costs because they are already existing solutions?
Yes. Lumada business cases come across both horizontal, which is around data, as well as the industries like automotive in which you operate. At this point, actually, as we are looking at this, as we are collaborating together, and with Taniguchi-san, we are trying to figure out how to enrich these cases as well as how to take these cases and try to get solutions out of it. Oftentimes, business cases or use cases trying to solve a point problem. You need to get the multiple cases together and apply that to the service model in order to actually change, in order to make something digital to happen. Those are the areas. It is this two-way solution.
One is actually working on the engineering front to create a use case, but at the same time, it's a design problem, how to apply that in trying to change or modify how the customer is selling or transacting, how to remove the friction in the digital side. Those are the areas. I mean, just to remind you, actually, we are just nine months since the time we closed the transaction, or ten months. We just actually started that. Our early signs in terms of talking to the clients, creating the common clients, and creating revenue out of that is very promising.
Okay, thank you very much.
Thank you very much. The time has been completed for the Digital Systems & Services sector. We would now like to bring this session to a close. Thank you. The next session is Green Energy & Mobility sector. We will start at 3:00. Thank you.
It is now 3:00 P.M., so we will start the presentation on the green energy and mobility sector. The speakers are Keiji Kojima, President and CEO, and General Manager of Green Energy and Mobility Strategy Planning Division. Claudio Facchin, Senior Vice President and Executive Officer, CEO of Power Grids Business Unit, and CEO of Hitachi Energy Ltd. Andrew Barr, Vice President and Executive Officer, CEO of Railway Systems Business Unit, and Director of Hitachi Rail. In addition to the three individuals, Akihide Hirao, CFO of Green Energy and Mobility Strategy Planning Division. A total of four will answer the questions from the audience after the presentations. Please wait a moment while we switch the screen. Kojima-san, please start.
I will now explain the green energy and mobility sector.
I, Kojima, will give the sector overview, and CEOs of Hitachi Energy and the railway systems business unit will explain their respective business. These are my four key messages. I will explain them in order on the following slides. When we announced our MTMP in April, I mentioned that we will use data and technology to create a sustainable society where each and every one of us can play an active role while protecting the Earth. The green energy and mobility sector is a newly organized sector to realize Hitachi's goal. This is a diagram of the sector's structure. There are two major challenges in this sector. The first is to improve profitability by increasing the ratio of service business using digital technology.
The second is to proceed with the integration of large assets from a company-wide perspective, such as Hitachi Energy, which we have already acquired, and Thales Ground Transportation Systems, which we are in process of acquiring in the railway sector. With the objective of getting this off the ground, I decided to lead the sector directly along with four other CEOs. This sector generated sales of approximately JPY 2 trillion in fiscal year 2021, accounting for about 18% of Hitachi's consolidated sales. As shown on the right, energy-related businesses, including Hitachi Energy, account for 70% and the rail systems 30%. The business is expanding globally with overseas revenue accounting for 80% of total sales. It is very high.
In fiscal year 2022, we expect to post year-on-year increase in both revenue and profit due to steady business growth and profitability improvement, despite the peaking of one-time expense from the integration of Hitachi Energy and the continuing impact of rising material prices. In fiscal year 2024, the final year of the MTMP, we will continue to grow and aim to achieve JPY 2.6 trillion in revenue, 10% adjusted EBITDA, and 8% ROIC. Next is market. On the macroeconomic level, investment in energy transformation and electrification is in fact increasing due to factors such as climate change and the Ukrainian crisis. In addition to high growth areas such as EV infrastructure and microgrids, new business opportunities are emerging, such as services for achieving decarbonization.
We feel that this is a strong tailwind for us as we have a wide variety of products and solutions to offer to those markets. Many of the projects in this sector are long-term in nature, and we have a large number of customers and installed base around the world. As I mentioned at the outset, the key to high profitability is to expand the service business for this installed base by leveraging digital technology. Using the Lumada framework, we will develop a variety of products and services combining IT, OT, and products as one Hitachi. Hitachi aims to contribute to the reduction of 100 million tons of CO₂ emissions in fiscal year 2024 by providing products and services, and more than 80% of this contribution will come from this sector.
We will invest in R&D expenditures in themes such as energy conversion, energy transition, electrification, and energy conservation to expand our business and contribute to society at the same time. To achieve global growth, it is essential to improve the efficiency of the management infrastructure through digital technology. Hitachi Energy is already operating a global operation that utilizes digital technology, and we are now working on a project to expand this operation to the entire Hitachi Group. This is the major benefit of our acquisition of ABB Power Grids. This concludes my explanation. After this, Mr. Facchin and Mr. Barr will explain the business strategies of our two main businesses, Hitachi Energy and Railway Systems, respectively.
Thank you, Kojima-san. Over to you, Facchin-san, to present on Hitachi Energy.
Good to be here to share Hitachi Energy, where we come from and the prospects, the ground that we have covered, and also where we're heading, together with Hitachi Group. Certainly, sharing with you how we see that we're well-positioned to drive sustainable and profitable growth. I wanted to start with sharing a slide that has been already shared with this team in the past, just to recap why we see we're well-positioned across the markets, the sectors, geography and portfolio. Also, how the market is growing, how we're tapping into high-growth market segments, and how the transformation program that we have launched is yielding results.
Driving the growth, but also driving the shift in the portfolio, as well as driving continuous improvement initiatives across the business to improve operation and execution. All of that leading then to the ambition level that we have to grow profitably, sustainably, shifting the portfolio, doing more digital, doing more services, and by that strengthening our number one position. If we then look at the content of Hitachi Energy's essentially four businesses, they all form a synergistic portfolio across the transmission and distribution technology. Starting with grid automation, it's really at the center of digitizing the grid. We're leading in that space, both software as well as systems and services.
Grid integration, which is key core technologies such as HVDC, power quality, where we are the number one in those specific technologies that are needed to do the transition on the electrical energy system. High-voltage products as well as transformers uniquely positioned, clearly number one on both areas, leveraging technology, innovation, footprint, and also an unparalleled installed base. An installed base is a very important part of also how we're gonna drive growth, differentiating and leveraging the tremendous opportunities that we have by tapping into the Lumada ecosystem that Hitachi is bringing forward. Where we come from and what we have achieved since we are together with Hitachi, starting with the growth path. Roughly 10% on during the period as we started the closing in July 2020.
You all know there was a tough 2020, but we have seen a stronger recovery in 2021. That has led for us to also drive revenue growth and retain a profitability of 7% and building also very strong backlog, not only driven by volume, but also driven by the shift, leveraging business models, leveraging the portfolio that we have, and for instance, delivering roughly $2 billion worth of HVDC orders with a de-risked business model in partnership with other leading players, for instance, on the offshore wind. Last but not least, very important also, we deliver roughly $500,000,000 worth of cost savings, driving supply chain, footprint, productivity initiatives that helped us mitigating the impact on the headwinds that we heard Kojima-san mentioning also earlier.
All of this gives us a very strong starting point of a backlog, which is record high, of $14 billion that will help us in taking the right first step for the midterm plan. Before I go into that midterm plan, just to position that we are leveraging the scale that we bring as Hitachi Energy on the energy technology platform side, but also leveraging the scale that we bring from a Hitachi standpoint with Hitachi Vantara, with GlobalLogic now to deliver both a combination of IT, OT, which is needed to deliver IoT at scale and at speed.
I'm convinced also seeing the first outcome of the synergies that this is a very strong point for us to deliver the growth in order to deliver the extra value to our customers for the energy transition. You all know essentially energy transition means decarbonizing the entire energy system, which means in turn that the current share, roughly 20% of fossil free energy supply, needs to go by 2050 to 80%. Which means in turn that the current power system from an electricity standpoint will have to be able to handle three times the amount of energy, and that with a much more complex system because of the complexity on the renewable side, but also the additional complexity on consumption patterns that are coming from electrification across the sectors.
Three key areas from a technology standpoint that we're driving in order to make sure that we maintain the leadership in innovation. Number one, design and produce and deliver sustainable products to decarbonize the assets, the infrastructure. Number two, power electronics, really central to this part of the journey. As I mentioned, no doubt digital will be a must in order to manage the higher complexity. All those areas have good synergies also with Hitachi, as we heard also today with the presentation on innovation. Therefore, our Hitachi Energy 2030 plan is a commitment to drive growth and to drive growth aligned with our purpose. Three areas. Number one, we continue to strengthen our power grid core. Number two, we wanna double up our efforts in digital and service, but also expanding at the edge of the energy system.
How do we do this? Driving innovation. That's why we're leading in this space. Also leveraging more the synergies. The synergies obviously with Hitachi, and creating partnerships, and leveraging M&A to accelerate. This will be done to help the customers across the entire value chain plan, build, operate and maintain. This will translate into the first key milestone of our 2030 plan, which is essentially the 2024 commitment to deliver on the midterm plan. We have seen, because of the starting point, as I mentioned before, a stronger growth opportunity for us in terms of revenues.
Therefore, we have upgraded the range between 4%-6% revenue growth in that midterm plan, which in turn will help us delivering the commitment to stay at the upper end of the margin corridor, 8%-12% by 2024. Which means, in terms of adjusted EBITDA by 2024 being on the 10%. Important also, we said we wanna grow sustainably on earnings and cash, and therefore our ROIC ambition level moving from 10% to 18% by 2024. Few examples, concrete examples on how we are already implementing the strategy. Number one, on strengthening our core, continue to invest in HVDC. HVDC is a technology that also helps making the whole transmission system more efficient, lower losses, therefore lower carbon footprint.
EconiQ, we have invested a lot across the portfolio to present to the market, a highly eco-efficient portfolio that once again will help decarbonizing the infrastructure on the energy side. Lumada at the center of our efforts, for digital and service, growth. Then of course expanding at the edge, whether it's battery storage, microgrids, but also connecting new sectors, as for instance, e-mobility. On the other side, when we look at how we do this, investing in innovation, as I mentioned before, but also investing in partnership. We have great examples in the past 18 months, for instance, partnering with ABB and their pioneering subsea power technology. We provide subsea technology for transformers.
We also have recently announced a partnership with Schneider Electric that will help us in positioning with our customers a stronger portfolio and a stronger value proposition across the transmission and distribution asset base, which is essential, as I mentioned, for the energy transition. Also collaborate in terms of innovation with partners, with our customers to drive, for instance, interoperability, which is necessary for parts of the portfolio such as HVDC, and also investing in a Pioneer Solution, which is a bolt-on that help us being closer to our customers when it comes to their planning, their operation and maintenance optimization.
When it comes to Lumada, you already seen the cycle, and this fits really nice with the strategy that we had before joining the Hitachi family by increasing our digitalization of the portfolio and increasing the services that we drive with that. This Lumada cycle is right at the center of that journey. We have just announced our DistribuTECH in the U.S., a very positive feedback from the customers on our Lumada Inspection Insights portfolio, and you heard some of that also in the previous session. To conclude, we're well-positioned. We're here to accelerate the clean energy transition, join the efforts with Hitachi, with our partners, and we're here to drive profitable and sustainable growth on the three building blocks that I mentioned before.
We of course will continue to do more and put more efforts on the digital, on the energy creating services, and we're committed to deliver that growth with accretion on the earnings, as I mentioned before, to maintain the leadership on the 2024 plan. With that, thank you for your time and hand over back to the team.
Thank you very much, Mr. Facchin. Next, for Railway Systems Business Unit, Mr. Barr, please start.
Good afternoon, everyone. Today, I'll provide you with an overview of Railway Systems BU's strategy as we head into the next mid-term plan. This will include addressing future growth and the plan for expanding our digital capability to meet the demands of the market. To turn to the first page of the presentation for key messages. In FY 2021, RSBU delivered high levels of revenue, and the order intake has been strong despite difficult conditions due to the impact of COVID-19. We plan to continue this trend, delivering the highest financial performance ever during the current mid-term management plan for Rail. The acquisition of Thales GTS, due to complete by the end of the financial year, will transform our capabilities and provide a step change in revenues, moving our revenue mix towards high profitability rail control.
In order to meet the demands of our customers in an evolving market, the business model will adapt to deliver our current core offering, complemented by new digital innovations in smart mobility and provide sustainable products for a future greener growth. On the next page. As a full-service global provider of transportation solutions with market-leading products and services, RSBU is strongly placed against the competition. Recently, the business has been reorganized into two lines of business: rail vehicles, which includes manufacturing and maintenance of rolling stock, and rail control, including signaling products, operations and maintenance, and integrated turnkey solutions. RSBU is a global Hitachi business with customers across 5 continents. Japan remains a core market for both lines of business and accounts for 20% of revenues. Of the remainder, 55% of FY 2021 revenues are from EMEA.
In FY 2021, 58% of our business was from the vehicles LOB. With the acquisition of Thales in FY 2023, this is forecast to change. In the current midterm plan, you will see later on in the presentation. Turn to the next page for overview of FY 2021. FY 2021 was a challenging year for the rail market, but our performance remained strong despite this. Importantly, revenues and order intake were ahead of budget, providing a strong platform for the business moving into the current midterm plan. Profitability was impacted by certain one-off events in some legacy projects and decreased asset efficiency due to the impact of COVID-19. However, we're confident of a strong future, and our performance will grow as the global passenger numbers continue to recover post-pandemic. Please turn to the next page.
Slide four sets out our midterm plan to FY 2024, in which we're targeting to reach almost JPY 1 trillion in revenue and 10% adjusted EBITDA margin, the highest levels ever in Railway BU's history. The strategy for this midterm plan is clear and focused on three key areas. Focusing on business as usual, our vehicles business is matched to customer demand as the market recovers from the impact of COVID-19, with a focus on winning high-quality projects with attractive long-term services contracts. Successful integration of Thales GTS business to capture the synergies and shift our revenue mix towards higher profitability rail control segment and expand our digital capabilities, utilizing the strength of Hitachi Group to optimize our processes and open new revenue streams in adjacent markets. The rail industry has undergone a recent period of consolidation.
The acquisition of Thales GTS will cement our position as a market leader in rail control, as well as being a key player in the overall industry. The rail market is strong and growing. Our customers are investing in growth for sustainability as well as capacity, and governments across the world look towards expansion of low-carbon efficient transportation solutions. Looking now at some of the key business challenges and investments we are making currently to achieve our goals. We strengthened our senior management team in Japan and implemented a new organization structure, as well as enhancing our internal processes, simplifying our business to deliver for our customers.
This reorganization will prepare us for the integration of Thales GTS and will be complemented by investment in digital and green products, as well as solutions to anticipate the future needs of our customers and provide the base for our transition to the as a service business model. For the overview of Thales GTS, we announced our intention to acquire the Thales business in August last year, and now regulatory approval is currently ongoing to enable the transaction to complete. This is anticipated before the end of the current financial year. Thales is very complementary to the current rail control business in terms of products and the geographic coverage, and it opens up new key markets such as Germany, Canada and Singapore.
Planning for integration is already underway as we look to capture synergies and expand in new markets and bring the benefits of Hitachi Group's digital capabilities to the combined new rail control business to create other opportunities in smart mobility. This is a key pillar in our business growth and will be an exciting next chapter in our expansion to become a global leader in transportation solutions. To cover how we will grow our Lumada business, digitalization of our business increases efficiency in both design and build phases during our projects, providing benefits to all of our customers. Core services such as maintenance are also being transformed to become predictive, remote-based services, and these will bring reduced cost while improving safety. The new smart mobility business is developing, and through Lumada, we're targeting technologies such as smart ticketing.
This is using customer solutions on our new GoGoGE product platform, which is currently undergoing pilot trials in Genoa, in Italy. This is building on our existing ticketing capabilities already in Japan. To focus on our green initiatives, as a green mode of transport already, rail is strongly influencing the future of travel, and RSBU is investing to improve and expand rail's green credentials. We're reducing the impact on our manufacturing sites by investing in green power alternatives. For example, at our plant in Tito in Italy, which is now over 50% powered by solar panels. We're also providing green solutions to our customers. Our Masaccio hybrid rolling stock platform is capable of running on both electric and battery power and is designed to be up to 95% recyclable. In the U.K., we're retrofitting batteries onto the Class 800 fleets, removing diesel engines from the network.
In Japan, the HIBARI hydrogen train in partnership with JR East and Toyota is now on trial. To conclude, RSBU is strongly placed in the market in Japan and globally. Transport systems and passenger numbers are recovering well from the impact of COVID-19. The acquisition of Thales GTS will be transformative for our business, bringing added scale, new markets, and the springboard for new opportunities in smart mobility. The investment in digital capabilities will be key as we move towards the as a service business model. This will take place during this midterm plan and will complement the core business, which together will ensure growth into the future. Thank you very much.
Thank you, Barr-san. We now will entertain the questions from the floor. Let me switch the screen. Please use the Raise Hand functions on the Zoom screen for those of you who have the questions. Of those of you who has raised their hand, I will point to you. Upon being called upon, please unmute yourself and then identify yourself with name and affiliations and state your question. I will be calling in the name shown on the screen. If you no longer will ask questions, then please cancel your question. No video capturing your face will be shown. I will entertain the questions first from the Japanese channel. No, I will entertain the questions both from Japanese or the English channel. Let me start with Japanese channel. Ayada-san. Ayada-san, over to you.
Thank you. Ayada is my name. I have two questions.
My first question is to Kojima-san. Toward the expansions of Lumada business and please talk about the framework in Tokunaga-san's presentation in the social DX, expansions is what is being aimed for. That's why he has mentioned the OT, IT and product being combined, as well as through its maximization, expand the Lumada business. What are the different roles given? Take for example, on the OT side, Hitachi Energy, Hitachi Rail, these are the businesses. But on the other hand, in IT, Hitachi, there's Hitachi Digital, Hitachi Vantara and GlobalLogic. So there are different teams. What is the team being formulated? How will the point of contact with the customers, who takes the lead in development in order to have a recurring business? What shall be the continued touchpoint? Will it be project by project or do you have the different framework?
Please explain about the framework that is in place. That's my first question to the extent you can share. The second is page 19 of Facchin-san's material. EBITDA margin is 8%-12% toward 2024. That is a target that is written on that particular page. Now, if you run the factor analysis, how you intend to raise the profitability, take for example, the revenue would go up, mix should improve, or the grid automations may further enhance, or the high voltage may further go up, or to reduce the risk and to reduce the unprofitability, or to improve the operations. Please share some of the major factors to achieve that higher percentage.
Thank you for your question. Responding to your first question, I, Kojima, will respond.
Now, the framework or the business model, the original framework of Lumada, from the very beginning, the starting point, is co-creation with the customers. If you are to start the co-creations with the customers, the customer will become the starting point. Hitachi have joined, or the GlobalLogic is now joining the team, and they have their customers as well. That shall become the starting point to further roll out the Lumada business. That is the basic thinking. Take for example, the utility customers. Hitachi Energy do have wonderful customers in their footprint. That customer will become the starting point. Take for example, in the field of grid automations, which is closer to the team doing that, and they will provide the support directly.
We will further enhance that, and Lumada cycle will create more points of businesses, and the GlobalLogic will do the digital engineering part, take for example, or the cloud service that can be utilized, and then the Vantara will also be involved. In this way, we do the plan, build, operate and maintain. This cycle will be monetized as a business and further being enhanced. That is the original thinking that we have. In other words, the point where there is a strongest intimacy, that will be the starting point, and then we will add some other elements to further enhance the entire cycle or the circle of business. That is the original way of how we are considering of expanding the Lumada business. Now, moving on to the second point about Hitachi Energy, the profitability. Claudio, could you respond?
Facchin-san, could you respond to that question?
Thank you for the question, maybe just to complement also on what Kojima-san just mentioned. When we looked at the synergy opportunities across our portfolio with Hitachi, we clearly saw the opportunity on joining forces with the IT and the OT dimensions that you mentioned. We have now, by now, a high level of engagement with weekly follow-up meetings. We have customer engagements jointly on both sides. I would say that, again, was probably trying to understand the opportunities, but now we have structured it in a very positive way with collaboration.
We are in a learning and exploratory way, and as Kojima-san mentioned, also jointly with our customers. On the margin corridor, the 8%-12%, if you look at where we are today, we're not yet into that margin corridor. We aim to be there in 2022, and then aim to be by 2024 at the upper end of that margin corridor. How do we get there? The three pillars that we have been driving in the current strategy, driving growth, shifting the portfolio, so the mix that you mentioned, but also driving operational excellence, productivity initiatives, what I call a productivity working capital initiatives, to optimize our cash flow as well.
All of that will contribute, and of course, we will have to navigate the challenges, the headwinds that we see on the supply chain, on the inflationary trends. At the same time, we clearly have a better position than we thought pre-pandemic. Now, with the growth, I show to you the very strong backlog that we have now entering into this new midterm plan. With also a better quality profile of that backlog, which give us the additional point to start by delivering revenue growth, which will be essential to achieve that profitability. That said, we have to, as you rightly mentioned, drive the mix, therefore the extra efforts in this midterm plan on service and on digital. Both are accretive business.
Both shift the pool of the profitability of our portfolio to drive that sustainable and profitable growth. Last but not least, as I mentioned, $500,000,000 every year needs to come in that plan in order to mitigate and compensate the headwinds that we see in the supply side.
Hi.
Thank you very much.
Thank you. Another question from the Japanese channel. Izawa-san, please ask your question.
This is Izawa speaking. Question. I have two questions. First is Hitachi Energy to you, Claudio Facchin, and another for Andrew Barr, Hitachi Rail. First starting with Hitachi Energy, slide 15. There's the order backlog increasing in HVDC. The order amount is growing, you mentioned. In the past year, the deals, businesses that you acquired and became the backlog, the ones, the new businesses for the future. In the initial stage, the profit margin that you anticipate in the initial stage, will this become high or is becoming higher than in the past? Or is the profitability declining? That is my question. When we record the revenue in the future, can you use creativity to improve profitability, profit margin up going forward? Thank you very much. If you could share with us your idea.
Second question is similar. Slide page number 27, rail order is shown. Railway Systems profitability had been on the declining trend until now, but the businesses that you acquired recently, is the profitability, profit margin recovering or is on the uptrend or not? When you post the sales in the future, what are some of the measures you can take to improve the profitability going forward? Thank you very much.
Hi.
Thank you for the question, Izawa-san. Well then, Claudio first.
Very important question, and that's why we have highlighted in our presentation. That when you look at the mix, an important part of this growth come from the projects that you mentioned. We clearly see HVDC as an essential part of the technology needed to drive this energy transition in the electrical system. As part of that, we being leader, we have not only been driving innovation in terms of technology, but also driving innovation in terms of how do we create a business model that allows us, together with our customers and our partners, to deliver on time, on quality, and on cost, very large and complex projects.
We've been going through this learning for quite some years, and if you look at the $2 billion that I mentioned that we have been acquiring in the last 18 months, they're all with these new business models. They're all in partnership where we concentrate on delivering our core technology. That's where we are leading. We also selected key partners that are leading and have the competence, the capabilities, and the experience to deliver everything around it, so that that technology can be deployed and utilized to decarbonize the energy system. Two areas. One is improving the profitability before acquiring the project, meaning delivering on better margins when we do the costing.
Preparing much better in terms of engineering, so that we can define in much more detail together with the customer and partners all the interfaces where the risk lay. The second part is also securing that the execution plan allows us to deliver as we committed before acquiring the order. For that, we have implemented systematically now for the last few years, what we call design to cost, design to value initiatives that allow us to better have understanding before acquiring the project on what the costs are, and also having then a stronger starting point, for instance, by sharing more engineering upfront. All of that give us the comfort that we will deliver according to that plan. Of course, the next question comes, how do you with the current inflationary trends?
How do we deal with the continuous headwinds on the supply chain side? For that, we have also been driving, looking at what are the terms, the conditions, the pricing, the variation clauses that allow us to secure that once again, we deliver on time, on cost, and on quality as per customer expectation.
Thank you, Claudio-san. Andrew-san, on the rail side, could you talk about the trend of the profitability and the response to the question, please?
Thank you very much, Yokoi-san. Slide 27 shows the FY 2022 results, and these were adversely affected because of the impact of COVID-19 on the business, as well as a small number of one-off events which affected our overall profitability. However, we are targeting orders into the future, which are long-term and give us the opportunity to access maintenance market as well as to use all of our capabilities within the business to remain highly efficient. As you can see on the slide, we were successful in gaining new orders such as the High Speed 2 rolling stock in the U.K. and the operation and maintenance contract in Riyadh.
The benefit of those two is that they attract a profitability in line with our future aspiration and also have long-term maintenance contracts as part of the main delivery aspect of the project. This gives us access to a long-term backlog, but also enables us to target the growth in our business and ensuring that our profitability remains in line with that. Alongside this, we were able to guarantee the book-to-bill above 1, and we continue to target a higher number towards 1.2 as a result of this targeting of these new projects.
We have focused very hard on making sure that our business is running efficiently, and this is why we've been targeting our business as usual, as well as looking for projects which match this, outline, which enables us to gain the profitability in line with the future aspirations and to remain as efficient as we can be, maximizing the capacity of our factories. This will continue to be a key feature of our projects that we're tendering for into the future to ensure that our backlog remains strong and enables us to continue to grow, as well as through the acquisition of Thales and into our long-term aspiration in the business. Thank you.
Thank you very much. Have they responded to the question that Izawa-san has raised? Yes. Thank you.
Thank you very much. From Japanese channel, I see some more hands, so let me call upon the next person. Ishino-s an. Ishino-san, please state your question.
Thank you. This is Ishino speaking. I only have one question. Now, I've been watching the past meetings, and there are something in common, which is adjusted EBITDA. No, the 10% comes first, it seems. Usually more higher numbers, such as, 20%, some outstanding figures may be presented. However, looking at the past materials, this seems to be the bad aspect of the old Hitachi and all, coming with very, mediocre numbers and nothing stands out. OT, IT, and there are so many such wonderful, solutions.
However, all shows the target of 10%, so the business model seems to be very mediocre. That concerns me. Why don't you come up with more prominent and standing out numbers? Why the reason?
Ishino-san, thank you very much. I, Kojima, will respond to your question. Depending on the sector and the business unit. The numbers comes with range. Take, for example, GlobalLogic, 24% or 25%. Many of the IT businesses, 15% or 16% on one hand. On the other hand, some are 7% or 8%. Actually, it's, there are some differences, but OT, IT, and product is the initiative to enhance the overall number. The service, the recurring, shall increase and for those having the low ratio as well as to improve the profitability. But it's a bit...
They are still in that phase. Now we are talking about 10% in this particular sector. That is why you are left with that impression. This particular sector, as I mentioned at the outset, well, this has a very long tail from the order intake until the revenue. Each of the price line have the hundreds of billions of JPY. This will change. Well, it will take some time before it starts to change and monetize. This still will take some long time. The lead time is very long. Now in 2024, we have to reach 10%. As was mentioned, the quality inside the pipeline has been going up considerably and toward the 2027 and further raise it to 14% or 15%, so gradually increase. That is the intentions behind this planning.
Ishino-san, when you have mentioned, your what you said is not correct at all. It's around 10%. No, we have higher perspective and trying to further promote digital. Thank you very much. If that would be the case, the level of contributions of Lumada and how that is reflected into the profit, and please disclose that, the Lumada's profit margin at each businesses. How the Lumada is pushing up the profitability of each business or the sector, if you can visualize that, I will appreciate that very much. Please give a considerations to do that. As you have rightly pointed out, that is indeed the directions that we are considering. Now, core business as well as the affiliated related business are the two categories.
However, we will divide into four in the monetized business, and we will disclose the volume as well as the margin level. We will change the disclosure so that we can have even closer and better communication.
Thank you very much.
We are almost running out of time, so this will be the last question. One more from the Japanese channel. Thong-san, please ask your question.
Can you hear me?
Yes.
Hello, this is Damian Thong speaking. I have one question about digital. Rail and energy, IT development, the internal in-house development, the organization. What kind of organization will you be? How will you change? You talked about Lumada and the synergy is being pursued. The internal IT development method and the method, how do you plan to change in terms of organization? In Thales Rail, what kind of organization change are you thinking of? Thank you very much.
Thank you, Damian Thong. Keiji Kojima would like to respond.
In each business unit or in each sector, digital and IT development capability resides. IT development resource was explained by Tokunaga-san. Most resides in DSS, but there are others, domain-specific IT development in other areas too. In rail, for example, Thales GTS will come on board, and there's a good solid IT team there. In energy, Hitachi Energy Grid Automation team is very much an IT team. The development going forward will be in each business unit, each sector's IT unit, as well as DSS, especially GlobalLogic and Vantara will do this very intensively. Collaboration within Hitachi will be the main part. Connective Industries, which we'll present after this, is the IT development team. GlobalLogic and Vantara will work together on a global basis.
There are specific domain IT teams in sectors, and there are general IT team in DSS. Those two will collaborate and pursue the development going forward. That will be the development organization. Thank you very much. For example, let's say one rail project coordination, this will be on the domain side people? Domain side people will do it mainly? Project coordination? How will this change? How will this be addressed, in a different way or? Yes. The customer-facing team will take the lead to coordinate the project. The utility-related customers will be Hitachi Energy Grid Automation team taking the lead. And in rail-related control, for example, will be Thales GTS IT team. They face the customers, so they will take the lead in this coordination. Understood. Thank you very much. That's all. Thank you.
Thank you, Thong-san.
Thank you very much. Now the time has come to end the sessions. With this, we would like to end the Green Energy and Mobility sector to a close. Thank you very much. Connective Industries sector session. Next sessions on Connective Industries sector will start from 4:00 A.M. Thank you.
The time has come to start the session on the Connective Industries sector. The presenter will be Masakazu Aoki, Executive Vice President and Executive Officer and General Manager of the Connective Industries Division. Please enjoy the video presentation first. Aoki-san, please. We are going to be switching over the screen for Mr. Aoki. Aoki-san, please start.
Hello, everyone. This is Aoki speaking. I will explain the business strategy of our sector. First of all, the purpose of the Connective Industries will be explained. As mentioned in the short movie at the beginning of the presentation, we have brought together our three strong business groups of the Urban, Advanced Technology, and Industry in this April in order to provide total solutions to complex and multifaceted social issues that transcend the boundaries between different fields.
By connecting data from each of these business groups, we will create new values and transform industry and society. Today's key messages are shown here. First of all, responding to complicated and complex social issues and the reason for establishing the Connective Industries. Number two, the evolution of, and expansion of total seamless solutions and expansion and strengthening of the current business. Three, accelerating global growth and creating green value. I shall follow this table of contents. First of all, I will give the overview of the Connective Industries. Now, this is the positioning of our sector. We have the Urban Group comprising Building Systems Business Unit and Hitachi Global Life Solutions. Advanced Technology Group, which is centering on Hitachi High-Tech and Industry Group, comprising Industrial and Digital BU, Water and Environment BU, and Hitachi Industrial Products.
In particular, the industrial digital BU is responsible for creating digital synergies, not only for our customers, but also for the sector as a whole. This is the business overview. The revenue from Connective Industries as a percentage of Hitachi's total revenue is 25%. This is the largest sector. The right-hand side shows the breakdown of the revenues of the JPY 2.7528 trillion in terms of urban, advanced technology, and industry. Now I will explain the business domains of the Connective Industries. First, in the product business in the physical layer, we have strong industry-leading products in the sector, including those marked with the which indicate the top three global market shares, and we are promoting these products globally. Now, based on these product business, OT controls and manages operations.
At the upper layer, management controlled by IT and workplace system are connected by strong products additionally, therefore enabling us to provide solutions in many fields through strong product and digital capabilities. This is our organization. Under my leadership, together with the heads of urban, advanced technology, and industrial groups, and the global leaders of the various regions around the world, we will further increase our ability to solve problems for society and our customers by combining the sector's strong product and digital capabilities. Next, let's look back on the 2021 Mid-Term Management Plan. This is display of the main measures taken under the 2018 and 2021 Mid-Term Management Plans in order to improve profitability, which you can see on the bottom.
We have strengthened our management base by withdrawing from the unprofitable businesses, transferring the diagnostic imaging business, and establishing a global joint venture with Arçelik in home appliance businesses. Meanwhile, the growth investments shown above include the acquisitions of JR Automation in North America and Kyoto Robotics, and the launch of Hitachi Automation, which will strengthen the robotics SI business. In the 2024 Mid-Term Management Plan, we will further evolve and expand the total seamless solution business. This chart shows the performance of the industry group, the group that I led until last year, since the 2018 Mid-Term Management Plan, showing the significant improvements in earnings due to portfolio realignment and a focus on total seamless solutions.
The Connective Industries group is a high-growth business unit that brings together the industry group and the urban and advanced technology groups, which have strong management foundations. The graph on the right shows the performance of the new sector shown in terms of the 2021 Mid-Term Management Plan. Now, I will talk about the aim of the Connective Industries business. I will discuss the changes in the market environment and the aims of the Connective Industries. This is a mapping of trends in the urban, industrial, and healthcare sectors, and the events that emerge as a result of rapid changes in the social environment, such as COVID-19 impact, increased natural disasters, and geopolitical risks. As you can see, each of these social issues straddle sectors and are becoming more complex and multifaceted.
The traditional boundaries between organizations and companies and the total boundary between sectors are becoming more and more important. Hitachi is focused on planetary boundaries and well-being as the most important things. Therefore, it is important to provide total seamless solutions by combining product OT and IT and transcending the product areas as well as by linking domain knowledge. This is the image of the Connective Industries and what we are aiming for. The diagram shows the CPS in the physical layer below and the modeling layer and the service layer above. Based on domain knowledge, based on the CPS of the physical layer, which utilizes the strength of our strong product business groups, we model business operations and create solutions.
We will expand and evolve total seamless solutions from the industrial field into the urban and healthcare fields. This is the positioning of Hitachi and its competitors in the industrial field, as explained in last year's IR meeting. The vertical axis shows the range of solutions offered from the partial layer to the whole layer. The horizontal axis shows the sophistication of the business model from left to right. The circles shows the size of each company in terms of sales in a rapidly complex social environment. High-level customer collaborative problem-solving at the overall layer is becoming increasingly important. Therefore, we aim to develop our solutions to the right, top right of the diagram.
New additions of healthcare and urban will also aim for the right-hand direction. By further expanding the scope of the total seamless solution overlapping among the sectors, we believe we can further differentiate ourselves from our competitors. Next, I will talk about the business strategy for the Mid-Term Management Plan 2024. This is the basic policy of the 2024 Mid-Term Management Plan. Based on the Lumada growth model, which is the data-driven cycles of value co-creation with customers, we engage with three key points to achieve our goals. First of all, in the area of digital engineering, we will strengthen the front engineering capability. In system integration, we shall evolve and expand our total seamless solutions. In the managed services, we will expand and strengthen functions of the connected products, by so doing strengthen recurring business.
The goals for fiscal year 2024 is revenues of JPY 3 trillion, adjusted EBITDA ratio of 13%, and the other revenues of JPY 1.1 trillion. Now, let me give you details of the basic policies one by one. The first point is the strengthening of the front engineering capabilities. Hitachi offers a seamless range of solutions and services, including business concepts and problem analysis to clarify objectives and measures. In April of this year, in order to accelerate the creation of digital synergies in the sector, the Industrial Products BU doubled the number of digital consulting staff to around 120, who are the key to front engineering and DX needs. By strengthening our front engineering capabilities, it will further increase our agility in the Lumada business cycle.
The second of these basic policies is the evolution and expansion of total seamless solutions that transcend boundary issues, which has been our focus of the sector since 2019. The boundary challenge exists in each area of vertically between management and the frontline, horizontally between supply chains, and in the places where different industries meet. We solve these boundary issues by utilizing our strengths by combining our products, OT and IT, and by co-creating with our customers. In particular, it is becoming more and more important to provide a place where urban, healthcare, industrial, and other fields can collaborate and connect in response to the complex and compounding issues of recent years. As mentioned during last year's meeting, this is the update of our total seamless solution.
In the 2024 Mid-Term Management Plan, we will accelerate the expansion of our solutions, which have been expanded into a wide range of fields such as urban and healthcare. Today, I would like to show some recent examples of these solutions highlighted in yellow. The first case example is our work with Suntory Beverage & Food in the industrial sector. Please look at the green box on the right. We are realizing further product safety and security with single bottle traceability and a next generation factory that continues to evolve. We collect a large amount of data from each line, integrate and consolidate the data in various formats, and utilize the data for traceability and visualization of factory data, which leads to the pursuit of safety and security as well as work style reform, realizing an IoT infrastructure from the perspective of overall optimization.
In addition, we contribute to system sophistication with products such as marking systems capable of high-speed special printing on the physical layer and Racrew, a compact automated guided robot. Second case example is an expansion into the semiconductor field. As shown in the green box on the right, the development phase shortens the development period of new products and processes. The prototype phase improves yield rate, and the mass production phase improves the productivity of mass production lines. We will greatly improve development and manufacturing efficiency by utilizing product data to address the issues of increasingly complex semiconductor device structures and manufacturing processes. This is an example of how we are already accelerating the creation of solutions at our collaborative creation sites near our customers. The third case example is the expansion into the medical field.
It shows a business model where devices are connected, operation data is connected, collected, and data is provided to customers and partners to optimize service based on the analysis. As shown in the green box on the right, this business model reduces device downtime, improves the quality of testing results, and improves the efficiency of testing work. The fourth case example is expansion into the urban field. Please see the green box on the right.
This system improves building management efficiency and operating quality, and provides building users with safety, security, and comfort. The building IoT platform in the center is connected to product solutions in our sector, including pumps, power supplies, elevators, lighting, security, human flow analysis, and air conditioning in order to visualize and analyze all data in the building, optimize the building, and improve services for users. The fifth case example is regenerative medicine field, connecting the field domains. In addition to the digital platform for integrated management of regenerative medicine, MES, and OT capability that we explained last year, we have added a wealth of new products such as CPC facilities, CPC modules, and automated cell culture equipment, which are key components in the manufacture of regenerative medicine product, as shown in the photo below.
The new products will link the industrial and healthcare sectors to optimize the entire value chain, dynamically linking data-driven manufacturing progress and therapy planning to post-marketing treatment results. The third basic policy is to strengthen the recurring business. The graph on the left shows the revenue from the entire sector and the recurring business for fiscal year 2021, and the graph on the right shows the service model development on the vertical axis and field service activities development on the horizontal axis, representing the positioning of each group in the sector. Toward fiscal year 2024, we expect revenue from the recurring business to grow faster than the overall growth rate, aiming to achieve business growth and build a solid profit base.
As shown on the right, each group will continue to advance its recurring business model in the upper right direction, shown in the arrow, thereby further solidifying its foundation. One of the measures to strengthen the recurring business is enhancing development of new recurring services business model based on connected products multiplied by digital, taking advantage of the business portfolio expansion in the new sector. First, by dramatically expanding the number of connected products from the current approximately 800,000 to approximately 2 million units, we will gain a deeper understanding of the actual status of customer issues. We will merge and strengthen our own advanced suite of recurring service applications that utilize data from products collected through the IoT platform. We will thoroughly utilize Hitachi's broad customer base and develop a new service business model through our product business knowledge and digital capability.
As one example of the recurring business cycle, I will introduce our approach to the circular economy of air compressors. The circle in the middle shows the air compressor recurring business cycle. In this business cycle, we are developing a four R re-business, including remanufacturing and rebuild in Japan and the U.S., contributing to a CO2 reduction by reducing the use of virgin materials, expanding the recurring business model from connected products, and expanding the business value in the circular economy. Next, I will explain our development for global growth. This shows overseas revenue by region for Europe, Asia, India, China, and North America, with fiscal year 2021 results on the left and fiscal year 2024 targets on the right.
As you can see, we plan to expand our business in all regions, and we will increase our overseas revenue ratio from 47% in fiscal year 2021 to 51% in fiscal year 2024. Of these, I would like to talk about North American business, which is targeting high growth, CAGR of 22% from the next slide. This slide shows the timeline of business strengthening in the North American market. By the end of MTMP 2021, the industry group acquired JR Automation following the acquisition of Sullair in the North American market and established the foundation for the robotics SI business. In advanced technology group, we strengthened our global product lineup, including semiconductor manufacturing and measuring equipment and particle therapy system.
In MTMP 2024, we will continue to work on building foundation for North American OT solutions business, strengthening robotics SI and digital, actively developing products connectedness, expanding recurring business, and strengthening semiconductor manufacturing and measurement equipment and digital, multiplied by digital in order to establish a total seamless solution system in North America and expand our business. Here, let me introduce a case example of the integration of robotics SI and digital solutions in North America. Last year, we introduced JR Automation's case study on Rolls-Royce, and this time, I am presenting a case example of Peak Nano, a company that manufactures special lenses and other products.
JR Automation has collectively designed and built a recipe management database system that works in conjunction with a robot system in the custom lens manufacturing process. The main feature of this project is that JR Automation partnered with Rockwell, ABB, and other companies to realize the entire project on a turnkey basis. This is how JR Automation is strengthening its robotics SI business in North America, utilizing digital solutions with an aim of further expansion. Next is our initiatives to generate green value. This is our environmental business roadmap. Hitachi's overall environmental targets are shown on the left. The red box is on carbon neutrality, and we aim to achieve zero greenhouse gas emissions at our business sites by fiscal year 2030, and throughout the value chain by fiscal year 2050. The blue box is on circular economy.
To achieve these goals, we will strengthen products that contribute to zero CO2 emissions and carbon neutrality, and work to build a foundation to resource recycling in circular economy. In addition, we will reduce the environmental impact in the entire value chain and contribute to Hitachi's goal of a CO2-free society and an advanced recycling society. These are products that contribute to zero CO2 emission and carbon negative. The photo on the upper left shows a process compressor for ammonia plants at a hydrogen ammonia plant and acceptance base. The photo below shows our CCS compressor in operation at the CO2 injection facility for Japan's first large-scale CCS demonstration test in Tomakomai, which has achieved a cumulative injection of 300,000 tons of CO2. In the next section, power generation and supply hydrogen, we are focusing on power generation, transportation, and charging stations using hydrogen.
In consumption, on the right side, we are focusing on the development of next-generation high-efficiency electrification system in the motor field, our original business. In addition, the IT/OT system shown at the bottom connects these products. We will contribute to CO2 reduction through the value chain with these products and key technologies. This is an example of building and accelerating the infrastructure for resource recycling. Hitachi Global Life Solutions built a resource recycling platform by using Lumada and is expanding its lineup of environmentally friendly products designed with recyclability and other features in mind. We are converting to a recycling business through subscription of these products and expansion of refurbished products. We are aiming for a resource recycling business model, where products are collected after disposal and recycled plastics are reused in products again. The last part is conclusion.
This is Connective Industries' key investment policy for its future growth. In Urban Group, we will strengthen our building IoT solution capabilities. In Advanced Technology Group, we will improve our proprietary semiconductor and healthcare technologies. In Industry Group, we will acquire global and digital businesses and aggressively invest in focus fields to facilitate business growth and enhance value, leveraging the characteristics of Connective Industries. We plan to invest JPY 300 billion in R&D cumulatively in the 3 years of MTMP 2024, an increase of more than 30% over the previous MTMP. Revenue from inorganic investments is expected to increase by JPY 170 billion. These are the target figures for MTMP 2024. The left graph shows the revenue of Lumada and the recurring business.
We aim to achieve revenue of JPY 3.2 trillion and adjusted EBITDA ratio of 13% in fiscal year 2024 by evolving and expanding total seamless solutions with Lumada at the core and growing through the recurring business. This is the conclusion. To repeat my message, our focus is to evolve and expand total seamless solutions, expand and strengthen recurring business, accelerate global growth, and generate green value to become a sustainable value creator by co-creation with our customers. Thank you very much for your attention.
Aoki-san. Thank you very much, Aoki-san. We will now proceed to the Q&A session. We will be switching the screen now. Mr. Aoki will be joined by Takashi Iizumi, General Manager of Healthcare Business Division and President of Hitachi High-Tech Corporation. Shinya Mitsudomi, Vice President and Executive Officer, CEO of the Building System Business Unit. And Kazuyuki Irie, CFO of the Connective Industries Division. Those of you with questions, please use the raise hand button on the Zoom screen. When your name is called, please unmute. State your name and affiliation, and ask your question. We will be calling you by the name shown on the screen. If you no longer need to ask the question, please release the raise hand button. We will not be showing the video of the person asking the question.
We will be taking questions on the Japanese channel, as well as English channel together. Any questions? From the media, from the institutional investors, as well as analysts, anyone present can ask your question. On the Japanese channel, Ishino-san, please. Please proceed with your question.
Thank you. A question regarding Hitachi High-Tech, I have a specific question. Now, regarding the semiconductor production equipment, in terms of operating profit, I think it is highest in terms of profitability within the business unit. Now, for the semiconductor business, to further expand profitability, is that included in the plan going forward?
Thank you for your question. My name is Izumi of Hitachi High-Tech.
As Aoki-san has already mentioned, we will utilize our co-creation centers with the customers, not just for the SVE, but based on the customer challenges, new solutions. New values will be provided not only by product, but by combining our capabilities to deal with the difficult problems, and to also make contributions to improve the management of the customer side. That is how we are trying to improve the profitability of this business. A question regarding etching. I understand that the profitability has been very high in the past, but for SVE, it's becoming smaller geometries and applications are expanding increasingly. I think that there is a significant business opportunity for you.
Do you have the intention of expanding into business domains that will be new to you going forward? Is that something that you are contemplating?
As you have rightly mentioned, the geometries are becoming more fine and there is also 3D. The analysis is becoming very difficult. The general purpose microscope will be combined in offering solutions to our customers. Furthermore, we will look into the status in considering the addition of new business going forward. That will be an option open to us.
Thank you very much.
We are welcoming question from Japanese channel. Ohkawa-san, please ask your question.
This is Ohkawa speaking. I have two questions. First is page 46, Lumada revenue. JPY 1.1 trillion is mentioned from 2022 to 2024, up by JPY 300 billion. What part will show growth? From fiscal 2021 to 2024, Hitachi High-Tech. Given the current number, we want to know if this growth number will really grow like this between 2022 to 2024.
Answer. Thank you. Aoki will respond.
Lumada revenue growth, the biggest part is lower left, connected products. As Lumada business, this is clearly defined this time, so the products that are not connected, there are many unconnected products, so equipment, devices will be all connected in the future. We've started some. As the sector-wide policy, we will pursue the connectiveness. Building and elevator, they are connected from the beginning, so our domain knowledge and expertise and will be fully leveraged to connect all products in our sector. We have this commitment and the strong enthusiasm to enhance the connectiveness. That is why we see the strong growth in Lumada. Using the data that we gain from that, this is the next phase in Lumada Managed Service. We will link this to Managed Service.
That is the second way we plan to grow the numbers. In the lower right, SI business. Industrial digital is the new name, so digital SI will grow. This is the third increase. From these three, we plan to grow Lumada significantly. Any other comments to add, Mitsudomi-san?
Thank you for the question. Yes, as Aoki-san said, urban is my department, the building business, and consumer electronics and air conditioner and other businesses. As Aoki-san just said, in buildings, there are many that are already connected, but the biggest business is in China. In China, the maintenance, there's still room for more penetration in maintenance. In the next three years, we want to grow the maintenance using solution using Lumada. This is where we think the big growth potential lies. Next, consumer electronics.
Now we are getting good response, so we are growing, and the market will grow further in home appliance. Connected home appliance products and the service using that has good, big growth potential.
Thank you very much.
Thank you.
Second question is on building business. Last year in the IR Day, you talked about JPY 1 trillion 12% in 2025, but today it seems like the target is changing a little. What are the changes from last year? Thank you. Last year, we said we will aim for JPY 1 trillion in 2025. The changes from last year is, we are confident that we will see a recovery, but the biggest China, biggest market, the real estate, overheating real estate, is now entering an adjustment phase.
We will try to ascertain when we will see a recovery and move towards 2025 and add numbers to achieve the target. In 2025, maybe, one year later, but 2026 or 27, we will continue aiming for JPY 1 trillion. Thank you very much.
Thank you very much. Thank you very much.
Next, question is from the Japanese channel. Ayada-san, please. Please proceed with your question. Thank you. A question. I also have, two questions. The first question is, regarding the connected products that you just mentioned. Let me clarify. Compared to your competition, what is your, offensive strategy? Because I'm sure that other companies are also enhancing their efforts in this area. You are with the strong physical strength in having products.
What is the strategy working with IT vendors or acquire IT vendors? What are the competition doing, and what is your strategy in terms of bringing to bear your strength, having IT within the group, and to achieve this CAGR of 29%? Shall I do the second question at the same time?
Let us respond one by one. I think that would be better.
This is Aoki speaking. I would like to respond to the first question. It is true that in terms of connected, this is an area of interest by other companies and industry as well. What is our differentiation edge? Connected is easy to say, but the mechanism of providing data is very important.
It starts with the hardware device. Wired hardly exists anymore. Wired signal will have to be considered. In terms of working with the communication companies is a possibility. In the absence of knowledge, it is not so easy. Security is also important factor to bear in mind. If it's only for the Japanese market, the barrier to entry may be low. To execute this globally is a different issue to the machines that are operating in the United States to be controlled from Europe and Japan is more difficult because radio law will have to be respected. In China, there are complicated laws as well. Connected is becoming a hot domain recently.
That is true. To realize this and to be effective is more important.
Otherwise, it doesn't make any sense to be connected. What can be brought about through connectedness is very important, and we have all the capabilities to enable this within our group. We have many technology in various sectors. DSS is a good case in point. Tokunaga-san, I also mentioned this in his remarks. In the United States, the IoT platform is what they are working with in terms of collaboration. Therefore, in this regard, I know that other companies, they are entering this field. Information is being disclosed accordingly. Utilizing the real industry IoT is where we can bring to bear our edge. I was wondering whether colleagues have other comments.
The activities of other competitors in the building, the one company out of the global top four, is working with another company in terms of IT. No, our strength is not just connectivity. That does not itself provide value. We have wide range of products, so we have also engagement with customers. We have been able to accumulate domain knowledge which can be combined to bring about digital solutions. We have in-house knowledge, not just working with the external partners. This is our overwhelming strength. Furthermore, as Aoki-san's presentation mentioned today, BuilMirai, the new platform, means that the building factors are included. We have domain knowledge. We don't have to work with other partners.
We have the internal knowledge to identify the minimum use of energies and best environment to be provided for the workers of the building. I believe this is also a strength for our group. That is all for me.
Thank you. I have a second question. This is somewhat different to what we have been discussing so far. In terms of material cost, it is increasing recently. EBITDA 13% target, how is this going to be impacted? How much is factored in? Are you assuming the current inflation level? Do you think that the 13% is still achievable, or is it a stretch target for urban, advanced, and industry? Perhaps the impact will be different from group to group.
Please elaborate f urther on the impact of material cost increase.
Thank you for your question. As you have rightly mentioned, the situation is very opaque, in terms of material cost increase. There are areas that we can pass on the cost increase, and there are other areas that is not so easy. We are factoring in the improvements, in this budget. In terms of profitability, I think the impact is around, a little bit less than 1%. It's less than 1%, 0.something%. Direct impact is more significant, but we have implemented mitigation measures. Therefore, we have implemented measures to contain it to, 1% impact. What is more problematic is the lack of availability of products such as semiconductors.
It's not just our cost increase. Because we have backlog in our sector, it is significantly increasing. Therefore, we can generate profit by posting revenues. That means that we have to ensure the supply chain availability. That is very important. I think Iizumi-san, your area has been impacted the most significantly.
Yes. In terms of procurement, this is an issue that is being continuing from last year. It is likely to continue this year as well. We are implementing measures that are needed to mitigate the impact. Cost increase is significant as well. Aoki-san has mentioned that we are trying to pass on the cost increase to the customers to increase the selling price.
We are trying to make sure that the impact on performance will be minimal in terms of operation. The situation is very opaque. Currently, it is our aim to contain the impact to less than 1%.
Thank you.
Thank you very much. Because of time constraints, we will take one question per person from now. Yamasaki-san, if you could ask just one question, please.
Thank you. This is Yamasaki. One question. On page 14 and 15, the three areas are now in one sector. How do you understand the synergy? Lumada, I think, cuts across all functions, but this Connective Industries. In Connective Industries, what kind of synergy do you anticipate? Thank you very much.
Thank you, Yamazaki-san. That is a very important question. The business units gathering in this solid fashion is probably the first of its kind in Hitachi. I've been with Hitachi a long time, but this is first time. We've had discussion before this was established, and we think and feel that we can have more synergy than we anticipated. The word recurring. I've been in charge of industry sector and started using this word recurring from 2019.
In this recurring model, companies in the sector are all thinking the same way. The method that we apply is slightly different, but the thinking is the same. I think we've had exchange relationship before, but as we came under the sector, under one roof, the contents are now being disclosed to each other. The worries and problems and the schemes and the mechanism are now being exchanged and discussed, as mentioned today. We can come up with common plan and think of how to improve the profitability of this recurring business. Various types of synergy is possible. Of course, digital and in recurring, we can utilize digital in recurring. The market needs and seeds capturing and how to accelerate the development and how to manufacture products globally, efficiently, and how to link this to total seamless.
We have seven business units. From your perspective, you may think different businesses have come together, but I think the way business is run is very similar. We can standardize and commonize many things and evolve together. Mitsudomi-san, anything else to add?
There are many forward-looking factors, promising factors. For example, building and home appliances and air conditioner we're discussing together. For example, in Japan, there are many service bases and logistics. The transportation of parts is very complex. If we can do this together, we can enjoy cost synergy. Cost side synergy can also be expected. Just an example.
Thank you. Izumi-san, Hitachi High-Tech was listed in the past, so anything you could add?
We discussed recently what I have high expectation is in the fourth of the four quadrants of Lumada.
The first CI sector, it's still zero. Our BU had been doing this very naturally, but it is not thought of as a business. It's a pre-range, free range. To have the products used, we do that process, but this process is now becoming complex and customers cannot solve by themselves, and we need to connect the boundaries. This business will become valid. We need to commercialize this business and find a big value in this business. If we can do that in our sector, there may be new businesses that were not clear in the past. That is business creation by Lumada. Maybe that is the biggest point that we need to aim for. We're only discussing, but we want to flesh out the details going forward and crystallize. Thank you.
Thank you very much.
Thank you very much. With this, we would like to bring the Connective Industries Sector's session to a close. Thank you.
The last session will be the independent directors' session. We'll be starting at 5:05 P.M. for the in-
It's now time, so let's get started with the independent director session, the first attempt at the Investor Day. We are very sorry that we are delayed by five minutes compared to the original schedule. Please hold on before I can switch the screen. In the independent director session, we have received the questions on the governance of Hitachi. Mr. Harufumi Mochizuki, Independent Director, and Mr. Helmuth Ludwig, Independent Director, will be responding to the questions. The sessions will be moderated by Yoshihiko Kawamura, Executive Vice President and Executive Officer. Over to you, Kawamura-san.
Good afternoon, everyone. Thank you for the kind introductions. My name is Kawamura. This will be the final sessions of the day. I shall serve as a moderator of this independent directors session. Very happy to be here. From 1:00 P.M., today's meeting has started, and you have heard the presentations from the executive side. In this final sessions, we invited two independent directors. From the viewpoint of outside independent directors, what is the status of Hitachi's management and is the main topic that we will take up. The two speakers was just introduced. We have Mr. Mochizuki in the studio here in Tokyo. The other person is Mr. Helmut Ludwig, and he is overseas. He is joining us virtually online. Thank you. Without further ado, why don't we get started?
First of all, I would like to invite the 2 independent directors to introduce themselves as well as to give the opening remarks. Mr. Mochizuki, could you introduce yourself? You've been serving us in 10 years of independent and outside directors. How has the board changing in the past 10 years? I believe that the role of the independent director has been changing, so please also comment on that as well.
Good afternoon, everyone. Thank you for the kind introduction. My name is Mochizuki. As was just mentioned, 10 years ago or 11 years ago, Mr.
Kawamura, then a Chairman, visited me and said, "Then please assume the post of the outside independent director of Hitachi." In the past 40 years, I was with METI, so from the viewpoint of administration, economic policy, industrial policy, trade policy, as well as the energy policies, are the main areas that I was in charge of. When it comes to corporate, I've been looking from outside the industry. With regard to the relationship with Hitachi, I've been having certain relationship with Hitachi. However, being in the company to be involved in the management strategy was the first experience for me. I thought that that was a challenging job, but I decided to accept the offer. Particularly Mr. Kawamura said in 2009 or 2008 through 2009, Hitachi had generated large amount of deficit, therefore, managerial reform is needed.
That was conducted for three years, the company did not go under. He was considering what next because if nothing is done, the same thing may occur once again. Therefore, he was determined to continue the path, and he asked me to provide the support. I was happy to be a part of that. I've been serving in the board of Hitachi for 10 years. At the board of Hitachi, I am the oldest person, and Bakley-san, and there is another person, but we have the 10 years of experience. In the meantime, managerial reform was underway in a significant way at Hitachi, so many things has changed. I can be the witness of this managerial reform. I think I myself have grown through this process.
Now talking about the managerial reform, in the meantime, in the domestic market, Hitachi always has been the big conglomerate. 70% of the sales is generated domestic and 30% in overseas, particularly as a prominent customers, power, industry, telecommunication, rail. Hitachi had these wonderful customers. In other words, Hitachi was supported, being enjoying, stable management supported by these companies. However, a Japanese company was domestic demand led and supporting the CapEx. However, there was a time that we in Japan lost those CapEx, capital expenditures, and so that was the fundamental issue that Hitachi was faced with. What become the subsequent target? Hitachi shall not risk be the same mistake once again. However, the technology of Hitachi is at one of the highest level in the world. Hitachi have to change the market.
Therefore, Hitachi decided to tap into the global market so that Hitachi's technological capability can be leveraged, will become a company that never go under, continue to evolve. Towards 2015, in the MTMP or the third or fourth MTMP, I've been following these different versions of the MTMP. In the initial phase, to change the company so that it will never go bankrupt. Unless the profit margin or operating margin shall exceed 5%, it no longer will be a viable business. It shall always have to exceed 5%. There were some businesses that were struggling to achieve 5%, so they were de-emphasized. That Hitachi was changing to stably generate profit. That was at the time of the first or the second Mid-Term Management Plan.
Those were the difficult days, and never to repeat the same experience. Hitachi chose to go global. Hitachi went to a global market to compete in the global market. That was the core message in the MTMP 2018. However, once Hitachi has become a global player, the companies that Hitachi was benchmarking totally changed. Hitachi used to compete with the power company, the heavy industries. However, Siemens, ABB, among other companies, has become the company that Hitachi started to benchmark against. In other words, Hitachi once again have to aim for the higher profit margins than in the two digits. Hitachi worked really hard. Currently, Hitachi is so close to achieving the double digit profit margin. Now in the MTMP 2024, rather than becoming a global player, Hitachi should become the global leader.
In other words, Hitachi be the winner. That is the new message incorporated into the new MTMP 2024, and you heard the message from the executive leaders today. From a very stable conglomerate and here in Japan to become a global leader, Hitachi has been going through the managerial reform. That is the 10 years of history that I witnessed at Hitachi. I shall not comment further. However, Mr. Kawamura. What he expected me is the governance has changed, or else Hitachi cannot generate the profit that enjoys a double-digit profit margins and start winning in the global market. There were many changes, but one of the major changes to change the governance. Because looking at the successful CEOs who enjoy the success in the business, it was instrumental in inviting those successful CEO into the board of Hitachi.
That was what I've witnessed in the past 10 years. Thank you very much.
Thank you very much for summarizing nicely of the past 10 years of history. Now moving on to Mr. Helmuth. Could you introduce yourself? Looking at your career background, you belong to Siemens, one of the companies that Hitachi was benchmarking against. You have a long history working for Siemens. On top of your self-introduction, what are the commonality between the Hitachi and Siemens, as well as what are the point of differences? Please refer to those points as well.
Yeah. Well, thank you very much, Kawamura-san. I'm one of the younger members on the board, so let me give you a little bit of background. Originally from Germany, then studies in engineering and business in Germany, U.S. and Spain. Beginning of the 1990s, I joined Siemens. About 30 years at Siemens, I was running different businesses with global and local P&Ls. One of them was expanding the traditional automation business into the digital world. Today, we will talk about the digital twin, the virtual and physical integration. They are running the post-merger integration process. We heard today a lot about the successes of bringing, for example, GlobalLogic into the family of Hitachi, and these were similar experiences that we had at Siemens, and happy to go deeper into this later on.
I also strongly believe that today industrial companies that want to be competitive, they need to integrate their deep domain knowledge. They need to integrate software and IT competence, something which we also see in Hitachi. For example, when I was global CIO at Siemens, my team and I, we focused on bringing IT back very, very close to the business and changing processes from the traditional engineered waterfall processes into more agile processes. From a personal perspective, today I work with the next generation of leaders teaching strategy and entrepreneurship at the Cox School of Business in Dallas. I represent shareholders and investors on different private and public boards, and I advise a global private equity firm in identifying opportunities for value creation in the industrial space.
At Hitachi, I have to admit that, Kawamura-san, I felt sincerely at home from day one on. The reason probably was that from a cultural perspective, from its roots going back to Odaira-san and Hitachi, or in my former company, Werner von Siemens, that these you can really feel in the DNA today. You could almost say sustainability built-in. One of the common mindsets, addressing your question of comparing Siemens and Hitachi, one of these common mindsets is to never give up the future for short-term profit, for short-term gain. I can see this in both companies. Sustainability of the company, but also sustainability at large. At the same time, a very strong innovation mindset. We heard today Suzuki-san how he spoke about how he invests in R&D and increases the investment.
I think we had in the board a very robust discussion. One of the board members was one of the leading innovators worldwide and has an incredible proven track record. He focuses much more on the vitality index, meaning what is the output? Something that I think we at can even improve further at Hitachi. When you look at differences from the experience I had at Siemens, I have now seen at Hitachi, I think the very robust Mid-Term Management Plan, meaning a three-year plan, which is supported bottom up by really every level of the organization. You can see. You saw it also today, but you will see when you speak to other levels in the organization. You'll see there's this clear commitment, and this has a very, very strong foundation.
That's something which I thought is very, very strong at Hitachi. If you look at something which I experienced at Siemens, for example, the robust matrix. Meaning the robust development between regional autonomy to be able to make very fast decisions locally versus global strategies. I think there is something which we probably want to take a closer look at Hitachi. One similarity which I think we also saw today, for example, when Shashank spoke about the engagement index. I think it's really impressive to see the very strong dedication to the talent of today, but even more the talent of the future. Something I see in both companies strongly expressed.
Putting it together, I have to say, I feel Hitachi is a very cool company with enormous potential, but I think, Kawamura-san, we get into this later in the discussion today.
Thank you very much.
I think, you've covered a lot of the topics that we wanted to take up in this discussion, and we will go back to that point later. We have received many questions beforehand. The time is very limited, but we would like to cover as many questions as possible. First of all, regarding the 2024 Mid-Term Management Plan, it was announced by President Kojima in April. I'd like to ask a question about this Mid-Term Management Plan. CEO Kojima said at the outset that upon formulation of this Mid-Term Management Plan, from very early on, there was discussions initiated at the board level. Very deep discussions were held at the board level for the Mid-Term Management Plan.
Mochizuki-san, what kind of discussions did you have at the board in formulating the Mid-Term Management Plan? Please share.
Regarding the Mid-Term Management Plan, it's a specific plan for the three years out. Prior to that, we also talked about the vision of the company preceding the formulation of the Mid-Term Management Plan. The board and executive management must have a common understanding regarding the vision, otherwise, effective discussion on MTMP. Between the board and the executive members, we discussed the vision. This has been shared within the organization. In the coming three years, the priorities have been identified in proceeding forward in the coming three years. That was the process of formulation of the MTMP.
As a result, around the latter half of last year, we had three opportunities to discuss the plan. At the board, we had discussions on three occasions. In Hitachi's board is very heated. Everyone is expressing their views. One topic can go on for one hour in terms of discussion. We had very extensive discussions. We have started this from initial stages. Alternative ideas were presented as well. We listen to everyone about the direction we should be pursuing. Now, we have a sharing of a strategy. That means that the differences in views are rather minor, but the pace as well as the timeframe and the emphasis differ.
Because there is such a wide process that we have to discuss, all the views were positive that was expressed, and there was encouragement for further specific measures to be included in the Mid-Term Management Plan. Based on that, on the executive side, what we mean by specifics is not because it's easy for us to understand, but after the presentation is made, it has to be communicated accurately to outside of the group as well. That's the reason why we ask for specifics. That was the nature of the views expressed. Therefore, the Mid-Term Management Plan became easier to understand, and the essence was focused upon in the plan.
Helmuth-san, regarding the Mid-Term Management Plan formulation process, as already mentioned today, Lumada is at the core supporting this effort.
You are a specialist in the digital field. What is the relationship between Lumada and the Mid-Term Management Plan? How do you evaluate? What is your take?
We saw it today. Lumada is core to practically every one of our businesses. This goes in the same discussion we had shortly before, that today, industrial leading companies need to integrate deep domain knowledge with software and IT competence. Specifically to Lumada, I think what we are seeing is that today almost everybody thinks more in platforms and wants to establish the platform of the industrial world when you go back to industrial companies. What do we have in Lumada is something which I think is based on three major pillars, where I believe it's this very, very strong basis. Number one is this focus on co-creation. Meaning if you think about value creation, it's all about creating first value for your customers and to create best the value of your customers understanding how they actually improve their processes, how they generate value.
Co-creation is number one. Number two is how do we translate this into repeatable solutions? There is this concept of containerization. This meaning that you're able to use different parts of the solution and reuse them in different applications at other customers in other situations. That's key. If you do this well, and you combine it with the domain knowledge of our different areas, be it in mobility, be it in energy, be it in the different industrial areas which we heard about today, then there is a real potential for creating scalability with the upside downstream potential of margin expansion.
I've seen this happening at my former company, where we translated in the mobility space a business which was purely a product business in relatively low single-digit profitability, and translated this into an outcome-based contract based on identifying and analyzing data, identifying and assuring on-time performance, and creating by this a double-digit profitability business. I think this is the opportunity. If Hitachi is able to practice the art of combining co-creation approach, this codified repeatable containerized solutions, then we are on the right track to have the scalability which really generates the margins we expect. I think we are on the right track. It's not an easy path, but it's a right start and a lot of great competence on board at Hitachi.
Thank you very much. On this question, I'd love to continue the discussions; however, we are pressed for time, so why don't we move on to the next question. Next question is about the major acquisition. I would like to solicit your views and ideas. Hitachi Energy in the 2020s and GlobalLogic. This was very large scale in JPY 1 trillion scale, so these were acquired and taken into Hitachi. But it comes with risk. Take, for example, the level of cash flow that it can generate or the process of integration. Acquisitions come with various risks. If I may look at the other companies' examples, there are many companies that were not successful. Major acquisitions that come with risk, how does the board evaluate?
As I mentioned at the outset, we have to determine what to take in, what to shy away from. That was what Hitachi was doing in the structural reform. Now, for the entire Hitachi, are we really coordinating? Are we discounting the business that we should not be focusing on? We should retain the business that shall generate synergy, and we should work on the acquisitions that can further strengthen the core business. Hitachi has divested many of the businesses. You said that there were three major acquisitions which have JPY 1 trillion scale. Hitachi divested and then made some acquisition. Even with the acquisitions, that did not hurt very much financially speaking, or did not give a major blow to the balance sheet.
At the same time, as a basic thinking, within the very major pillar of the corporate strategy, what is needed was acquired. Therefore, you talked about the three major acquisitions, inclusive of that major acquisitions. What is the purpose of the acquisitions? What synergy can be generated? Against those point, Hitachi was very clear. However, at the time of acquisitions was proposed, since this was such a major acquisition, there was so much discussion took place at the board. However, there is the common share. The point of discussions was very clear. Is this acquisitions instrumental to the further growth of Hitachi, will it generate synergy? The board members check those things out, which led to the strategic discussions and led to the go ahead of the acquisitions. Another point, many of the Japanese companies had the failure experience of major acquisition.
What were some of the learnings? Some of the Japanese large companies, when they acquire major businesses and from overseas, know-hows and the level of expertise was very low 10 years ago. Ten years ago, we witnessed many failures. Hitachi learned from those failures, and by going through the series of mergers and acquisitions. When mergers and acquisitions was conducted, there were some disciplines that definitely has to be protected, and Hitachi has become very sensitive. Hitachi has upgraded its skill level. Simply put, after the acquisition or before the acquisition, the due diligence has to be conducted. Everyone will conduct the due diligence, but even after the acquisitions, PMI becomes very important, post-merger integration. How hard you work on the PMI, you should follow through until the point to generate synergy. That is very important.
This very important process, independent directors were watching that. When I started 10 years ago and compare the skill level now, the skill level has enhanced considerably. Having that high level of skills, done these major acquisitions. With the global standard and conducted the risk alleviation for the acquisitions, sought for the synergy, and then very good follow-up, inclusive of the follow-up on the talent. Hitachi is doing all that. From that perspective, I can say that this is a global standard acquisition. Hitachi have the capability, showing the result, which is the world-class.
Thank you very much. Helmuth-san, from the expert of the digital, regarding GlobalLogic, it was JPY 1 trillion scale acquisition. Sales is JPY 100 billion, and it has grown by 10%. The acquisition price was tenfold.
With regard to this acquisition, what is the role that GlobalLogic are to play in order to show the good result of the acquisitions? Please comment on that.
Number 1, building on what Mochizuki-san just said, now the question number 1 we always have to ask is, why Hitachi is the best owner? That's exactly the question we asked with GlobalLogic. That GlobalLogic is a very well-run company with fantastic growth traction. That's something we saw already. Now why is it better together with Hitachi? There's synergistic value, but not simply in some Excel spreadsheets, but really from a strategic perspective. That's a robust, very robust discussion we had in the board around the value that GlobalLogic actually brings to Hitachi and brings to Hitachi's individual businesses, supporting them in their journey to offering much more value to their customers. Now, this has to be done. Mochizuki-san mentioned the importance is of course identifying the right target and making the deal happen.
What all matters is the post-merger integration process. How do we bring the different talents effectively together? There, you have to be very careful about the right speed. When we listen to Shashank today, we could see how on one hand, GlobalLogic keeps its dynamic as a stand-alone company, and at the same time is able to enhance the Hitachi business, and is able to be even more attractive for its talents. I think that's fascinating to see that the engagement index went further up because there is now much more opportunity for the talent on a broader canvas in Hitachi. When we look specifically at GlobalLogic, so besides the stand-alone, what we looked at in the board and also asked management is how does it transform the different Hitachi business units and businesses?
That's really made the main difference in why we believe that Hitachi actually is the best owner for GlobalLogic, and took finally the decision to acquire GlobalLogic.
Thank you very much for that. If I may move on to the next question, which is about the validity of Hitachi's strategy. We received a lot of questions about Hitachi's strategy. For one thing, Hitachi has more than 100 years of history, and the sales is very large at JPY 8 trillion or JPY 9 trillion. So economically speaking, there may be some profit has started to diminish. However, with the strategy, we are going to change that. Mochizuki-san, on this point, the large companies are to continue to grow. From that perspective, what are your views? How do you define the large company is one of the questions here. Hitachi is JPY 10 trillion company, it's been operating for so many years, but there are several challenges.
To become a global leader, Hitachi has to generate larger profit to enhance the profit margins, to have ample cash to compete. Unless Hitachi have all these, it just become big in its size, and Hitachi will not be able to win. Hitachi will recognize these drawbacks. To aim for global leader, Hitachi is well qualified to aim for global leader. In the past 10 years, I witnessed the history of Hitachi. In order to evolve the strong leadership and the vision with a strong leadership, steer the business under the strong leadership. The other one is never forget the challenging spirit.
Earlier, Helmuth-san has made the same point, similar point. Hitachi do have ample challenging spirit. Never to lose the challenging spirit. If we keep on to that mindset, even if the size may become very large.
I believe that we can further expand and grow. Helmuth-san, at business school, I understand that you teach at the business school and you know many different theories of the economic theories. Now, Hitachi has many of the listed companies, and Hitachi is still a conglomerate. With regards to conglomerate discount, what do you think of that? Because Hitachi is a conglomerate, it can observe bigger risks. The fact that Hitachi is a conglomerate, could you tell us your view?
I would differentiate conglomerate in the old sense of a conglomerate and maybe the conglomerate of the future. If you think about the conglomerates which we have seen in the past, very often, the more businesses they were in, the better it looked like. Which then the capital markets realized that this is probably not the best structure to have, and that is, capital markets can differentiate so much better than individual companies can do. Just being in different businesses is not the answer. From my point of view, a conglomerate of the future means something different. It means first of all, having a very clear vision and strategy. This was expressed also today by saying, because we, as Hitachi, we do have a very strong innovation strategy. There's this clear focus specifically on sustainability and on digital.
If this is the framework we're in, then you can go back and say, "So which kind of domains do we answer the question that we are the best owners?" We have to ask this question not only for acquisitions, we actually have to ask to answer this question also for the businesses we have today. When we go back into the history and that Mochizuki-san addressed, the last decade, there were a lot of businesses, whereas leadership, supported by the board, made the decision that those businesses potentially would not be best part of the family and would be better standalone. If you look at the portfolio today, it's a much more streamlined portfolio, which comes so much closer to the conglomerate of the future. This is where I believe there is significant value creation potential.
We talked about digital and domain knowledge. I strongly believe you will find similar development and sustainability. The attractiveness of an entity, especially in the times we're in right now, where we see a lot of external unexpected shocks, where you look for entities that have a certain resilience. Resilience for investors, but also resilience for talent, which have a much broader area to develop into. I think that has a strong attractiveness. Just being broad is not the answer. Being focused with a clear vision and seeing their synergetic behavior between different parts of the business, that's critical. Maybe a last comment there regarding synergies. I think we always have to reflect over synergies as something that hinders speed of decision-making. What we have to make sure is to keep speed of decision-making in the forefront and not being hindered by artificial synergies.
For me, it's very clear, speed over synergy is really what matters in the environment we're in in the future.
Thank you very much for the very interesting comment. We are running out of time very quickly. We only have five minutes left. Let's go to the last question, which is effectiveness of the outside directors. Now, the traditional directors discussion is looking at or supervising the management. That has been the traditional role. In Hitachi, as Mochizuki-san has mentioned, obviously there is a supervision function as well, but there are other activities or engagement between the management and outside directors. How do you evaluate the effectiveness of the outside directors, Mochizuki-san?
In the case of Japan, there is a significant discourse regarding the role of the outside directors in Japan today. We have to be very careful because we take.
If we take the Western approach, the outside directors are the majority on the board. The Western style is becoming more prevalent. If it's just a formality, it does not, it is not effective. The function of the board is more important. I feel that, as I have already mentioned, to share the vision is very important, and to have a discussion on the strategy. That is the objective of the board of directors. It's different to the executive management's discussion. Sharing of vision is very important because it necessitates the discussion on the vision of the company going forward.
Now, when we discuss outside directors in Japan, and I don't want to be too long-winded, but the most obvious mistake that is making is that dividing, making differentiation between the management and the directors. If you look at the English translation thereof, there are three types. Supervise and oversee, oversight, and co-chair. These are the three meanings. Otherwise, you cannot have the full understanding of outside directors as we see in the Western world. FSA, as well as TSE, are using the word supervision for all three functions that I just mentioned. In the context of Hitachi sharing the vision to formulate the strategy, and in this context, oversight is most important. If you use a supervise, it may be necessary if there is a conflict for a special reason.
That is not the case normally. Hitachi's board is engaged in oversight as well as co-chairing mainly.
Helmuth-san, I wanted to ask you more questions, but in fact, we have run out of time, which was 40 minutes. We will hear from Helmuth-san on a separate occasion going forward. Now, from the afternoon, thank you very much for participating in the Investor Day meeting. I hope that this initiative has facilitated your understanding of Hitachi. On the part of Hitachi, I would like to ask for your continued support and guidance going forward. Thank you very much for your participation today.