Hitachi Ltd Japan's biggest electronic conglomerate, expects double-digit sales growth in China on growing demand products ranging from telecom equipment and escalators to nuclear power equipment.
"We expect growth in the next few years to be as strong as it has been in the past two years, helped by new demand for events like Beijing Olympics in 2008 and the World Expo in Shanghai in 2010," President Kazuo Furukawa said on Tuesday in an interview with Reuters on the sidelines of ITU Telecom tradeshow in Hong Kong.
Hitachi's China sales have grown by more than 20 percent a year since about 2003, making up for 9 percent of the company's total sales in the first half of this year, Furukawa said.
Actual first-half sales in China this year were 422.3 billion yen ($3.66 billion), which compares with full-year revenue of 736.7 billion yen in 2005. "Not only will we want to expand in telecom equipment, we expect to expand our businesses in flat-panel TV, plasma displays, transportation systems, escalators, and other infrastructure businesses," he said.
Furukawa also said the company is in the middle of finalising a new mid-term business strategy for China to 2010, without providing further details. Hitachi operates 140 subsidiaries and has 40,000 employees in China. "We also plan to increase R&D and staff on the local level," Furukawa said.
Hitachi's commitment to China comes as a part of its strategy to expand abroad, and become less dependent on business at home where it competes with other conglomerates such as Toshiba Corp and NEC Corp last month, Hitachi said it aims to earn 45 percent of its group sales abroad by fiscal year 2009/10, up from 38 percent it had last year.
The Japanese company also forged an alliance with General Electric Co in the nuclear power business to win more contracts overseas, especially in the United States where the industry expects 25 new plants by 2020. Furukawa also showed his commitment to boiling water reactors (BWR) gear, versus competing pressurised water reactors (PWR) made by rivals such as the Toshiba-Westinghouse partnership.
China currently has selected PWR as its official nuclear reactor standard, but the market also speculated that the economy may need supply from the BWR camp to match surging power demand. Hitachi is also trying to rebuild unprofitable businesses such as flat-panels and hard disk drives (HDD) and recover profit margins after the company posted a first-half net loss seven times larger than the previous year.
"We are open to alliances in various areas, including plasma displays," Furukawa said. "That could include sharing of resources and technology or splitting up investments." For the full year, Hitachi expects operating profit to decline almost 30 percent to 180 billion yen while sales will rise 2.9 percent to 9.74 trillion yen.
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