NVIDIA. OpenAI. Even the U.S. government.
Hitachi now finds itself working alongside some of the world’s biggest players. What unique strengths does it bring to the table—and why is it being chosen over other Japanese companies? We spoke with President Toshiaki Tokunaga.
It’s been seven months since you became president. What kind of company do you want Hitachi to be going forward?
After a decade of structural reforms, Hitachi’s businesses have become remarkably stronger over the past three years, and our market capitalization has grown significantly. I feel fortunate to be taking over at this moment—and at the same time aware of the responsibility of deciding what comes next.
First and foremost, we need to carry this momentum forward and reshape Hitachi into a company capable of sustained growth. Our aim is to grow with digital technology at the core while delivering value uniquely Hitachi.
Bridging the physical and digital worlds
What do you see as Hitachi’s key strengths in the AI era?
Hitachi has all three: IT, OT (operational technology—technology that automatically operates machines and systems), and products. In the AI era, this combination actually matters.
Digital players are now using AI to improve the “real world” and make it more efficient. In that context, Hitachi’s ability to bring together OT (operational technology) and products—equipment and physical assets—becomes a major strength.
For example, after learning about Hitachi’s work in rail, NVIDIA expressed a strong desire to collaborate.
Plenty of companies have on-the-ground operations. What made NVIDIA and OpenAI choose Hitachi?
Because right alongside the teams running physical operations, we have people who understand digital.
We have people who can talk about railway technology in “railway language,” and people who can speak with NVIDIA in “NVIDIA language.” Companies that can create value while speaking both the language of the digital world and the language of the physical world are extremely rare.
When I visited NVIDIA two years ago and presented Hitachi’s vision to CEO Jensen Huang, he quickly jotted down “IT, OT, Product” on a whiteboard. Then he added arrows showing data flowing up from cyber to real, and down from real to cyber, and said, “This is what you’re doing, right?”
He went on: “NVIDIA can build digital twins on the cyber side, but we can’t go into the real world. That’s why we can do this together. I’ll sign here—you sign there.”
We signed an MOU on the spot, and within six months, we had built the HMAX AI solution.
With OpenAI, Hitachi gave about a 15-minute presentation, and Sam Altman started firing off questions—“Can you do this?” We answered, “Yes.”
The Next Move in U.S. Investment
So OpenAI reached out first—but it was you who suggested formalizing the partnership?
Yes. I think Hitachi is in an interesting position for them in this space.
They can collect data from the real world themselves, but they need partners to actually use that data on the physical side. That’s where we come in. We have a complementary relationship with AI players.
The AI business can broadly be divided into three areas: energy, large language models (LLMs), and applications. Hitachi has made it clear that we will not pursue LLMs—absolutely not.
Our energy business is also attractive to them. On the application side, OpenAI can bring their LLMs—so we naturally complement each other.
You also signed an MOU with the U.S. Department of Commerce and are increasing investment in the U.S., including new rail factories and a $1 billion transformer plant.
The U.S. is our fastest-growing market, and we have very high expectations for it.
For the United States, key focus areas include data centers to support AI, along with power transmission, distribution, and generation—areas that are also reflected in the fact sheet agreed between Japan and the U.S. Railways, including urban transportation, likewise represent strong demand across many regions.
In North America, an enormous number of data centers are planned. However, Hitachi’s current manufacturing capacity cannot meet all of that demand.
That’s why, if we can secure firm offtake agreements (long-term purchase contracts), confirm operators on the U.S. side, and obtain government approval, it becomes a major business opportunity. This MOU reflects that forward-looking thinking.
Do you see further investment opportunities in the U.S.?
We have already announced investments totaling $1 billion. While our order backlog has been building up significantly, we are carefully assessing whether to expand further.
The entire industry expects energy demand to rise—but will it really? Even if we decide to invest, it will take about four years for the factory to become operational. That means we need to make decisions while closely watching demand trends.
Turning breadth into an advantage
The so-called “conglomerate discount” has long been a criticism of Japanese conglomerates. Where does Hitachi stand today?
While we do need to divest businesses that drag down overall profitability or reduce capital efficiency, having a broad portfolio of operations is also a strength.
In the AI era, Hitachi itself can become a “Customer Zero”—meaning we use our own services first. The newly established railway factory in the U.S., for example, incorporates many technologies that Hitachi is already using as Customer Zero. Being able to demonstrate “this is how these technologies can be applied” is a powerful advantage.
Beyond management’s determination, if you look at Hitachi’s actual market capitalization, you can see that the conglomerate discount is already fading. Going forward, by further integrating AI with domain knowledge—the expertise Hitachi has accumulated over many years—I firmly believe this will evolve into a “conglomerate premium.”
Hitachi has grown internationally, while many Japanese companies have struggled. What made the difference?
A major factor has been reshaping our business portfolio through M&A.
Without Hitachi Energy—established after acquiring the power transmission and distribution business from ABB—we would not be where we are today. And without GlobalLogic, a major U.S. digital engineering services provider, we absolutely would not have reached this stage.
We fundamentally reshaped our portfolio—including expanding our rail business—and that has made a big difference. By narrowing our focus, taking a decisive approach to M&A, and successfully executing PMI (post-merger integration), we have come this far.
You’ve said that complementary M&A will be the focus through fiscal 2027. Does that suggest that large-scale acquisitions to establish overseas footholds are no longer a priority?
We haven’t declared that we will only pursue bolt-on acquisitions—those that strengthen or complement existing businesses.
Two things are critical. First, any investment must contribute to future growth. Second, it must improve Hitachi’s overall ROIC (return on invested capital) or profit margins. If those conditions are met, acquisitions beyond bolt-ons are certainly possible.
For example, we may divest some businesses in the Connective Industries sector going forward. But divestment alone could shrink our business scale and make it harder to build a conglomerate premium. So, if there are businesses with growth potential that can contribute to Hitachi as a whole, the possibility of acquisition is not zero.
How GlobalLogic reshaped Hitachi
Has GlobalLogic lived up to expectations since Hitachi’s ¥1 trillion acquisition in 2021?
So far, it has been extremely successful.
Thanks to GlobalLogic, digitalization has progressed across individual businesses, allowing us to expand Lumada—our DX support services—horizontally across the group. In fact, GlobalLogic now generates more revenue through synergies with Hitachi than from its standalone operations. That shows how indispensable it has become within the group.
Its impact on our culture has also been enormous. Even when we talk about our long-term goal of “Lumada 80–20” (80% of revenue from Lumada and a 20% adjusted EBITA margin in the Lumada business), no one pushes back anymore. That’s because people genuinely believe that with GlobalLogic, we can stay one step ahead of our competitors.
Are teams on the ground also working closely with GlobalLogic?
Yes, those opportunities are increasing. Working with GlobalLogic has become a real source of excitement and motivation for employees.
For example, when we acquired GlobalLogic, approximately 30 employees, primarily younger, from our Digital Systems & Services (DSS) sector were assigned to GlobalLogic. What really drives collaboration across sectors is the experience of younger employees taking initiative—trying things out and discovering they work.
Many of them don’t want to stay confined to their own ; they want to see the wider world. Having a Silicon Valley company join the group has clearly been a strong source of motivation. Having a Silicon Valley company join the group is clearly very appealing to them.
Compared with when you were early in your career, Hitachi feels like a very different company today, doesn’t it?
That’s certainly true. Diversity isn’t just something we talk about anymore—you feel it firsthand.
Having GlobalLogic and Hitachi Energy within the group means people with very different backgrounds are now part of our everyday environment. That has been eye-opening for us as leaders, and I think it’s also highly stimulating for younger employees.
A contrarian bet on “One Hitachi”
As you globalize, what do you want to change at Hitachi—and what must never change?
What must absolutely not change is Hitachi’s corporate philosophy and purpose—the very foundation that makes Hitachi, Hitachi. If we were to change that, we would lose alignment with the people who have joined us as partners.
Contributing to society through IT, OT, and products is something we must never abandon.
That said, there are still areas where we fall short. The most urgent is operating as a single company. It sounds simple, but in reality, it’s extremely difficult.
From a capital markets perspective, this is actually a very contrarian move. Many companies today are moving toward breaking themselves up into separate business units. But my hypothesis is that in the AI era, that approach could actually become a disadvantage. That’s why we’re steering toward operating as “One Hitachi.”
Of course, the capital markets may see this as adding complexity. So we need to clearly communicate the benefits and strengths of operating as a unified company.
To sustain growth, we must continue reshaping our portfolio. If we can consistently improve capital efficiency and profit margins through that process, I believe Hitachi can move to the next level. We want to get there by the end of the current business plan, in fiscal 2027.
So does that mean a move to a holding company structure—such as “Hitachi Holdings”—is unlikely?
No—based on our current thinking, not at all.
Hitachi is often compared with Siemens of Germany. While their revenues are broadly similar, Siemens’ market capitalization is roughly 1.6 times larger. How do you explain that gap?
Today, Hitachi has a diverse portfolio, but we haven’t yet fully conveyed our overall value to the capital markets. We still need to communicate that more clearly.
Put another way, if we can clearly demonstrate the value of areas unique to Hitachi—such as HMAX—and the areas where we can collaborate with hyperscalers precisely because we bring together IT, OT, and products, and if the market comes to recognize that this is genuinely lifting margins and improving ROIC, then I don’t believe we’ll continue to trail Siemens.
If the market recognizes that this is genuinely driving higher margins and improving ROIC, I don’t believe we’ll continue to trail Siemens.
In fact, I think we can surpass them in the near future. Looking at stock performance, Siemens has been largely flat over the past few years, while Hitachi—despite some volatility—has maintained a steady growth trajectory.
“I Simply Like People”
Whether it’s NVIDIA or OpenAI, decisions seem to come quickly. What flips the switch?
I think people who are capable of bold decisions are often driven by “that one unforgettable moment” in their lives. In my case, it’s much simpler—I just genuinely like people.
I was born and raised in Hitachi City. My father worked at a Hitachi factory, and I studied mechanical engineering at university. I grew up in a world completely disconnected from IT.
When I was job hunting, someone told me, “Hitachi also has a role called systems engineer.” At first, I said, “I’m not interested in computers at all.” But then they explained, “An SE is really a job where you work with people.” So I picked up a book, read more about it, and thought, Oh — I see. That actually makes sense.
Once I joined the company, I realized it was a job where people clashed, collaborated, and moved forward together as teams.
Now that I’m in my current position and get to meet so many different people, my curiosity has grown: What kind of person is Jensen Huang? What kind of person is Sam Altman? What kind of person is Trump? I want to understand the world’s leaders.
At the same time, I want people to learn about Hitachi and come away thinking, “Japanese companies can really hold their own.” Those two desires drive me every day.
One of the biggest motivators for me is my belief that Japanese companies can achieve even greater global success—and that Japan as a country can have a stronger presence on the world stage.
