TOKYO -- Hitachi is establishing an American research and development hub for Internet of Things-related technologies, investing roughly 100 billion yen ($915 million) in the area over three years.
The headquarters of the new services and platforms business unit will open in Santa Clara, California, as early as the first half of May. By recruiting engineers from both near and far, the base will expand to around 200 people by the end of the year through March 2017. It will be charged with developing foundational technologies in big data and the Internet of Things. The planned investment translates to a 30% increase from Hitachi's spending in the fields over the past three years.
"We will accelerate the speed of development by setting up a base in the U.S., where cutting-edge talent and information are concentrated," Senior Vice President Keiji Kojima said.
The move follows General Electric's establishment of GE Digital last year to step up efforts in developing new businesses that exploit the Internet of Things and other digital technologies. The U.S. company, which Hitachi considers a main rival, seeks to develop such business models as services that continuously monitor aircraft engines via sensors added to GE jet engines.
Hitachi also wants to provide a variety of maintenance and other services to go with its hardware business. The new U.S. unit is expected to help the Japanese company offer comprehensive consulting services to users of its hardware by developing necessary technologies.
Ideas include applying big-data analysis and artificial intelligence to predict demand for customers' products and then offer advice on production plans and new businesses. Helping power utilities that use Hitachi equipment generate electricity more efficiently by analyzing changes in demand is also being explored.
"If we just keep following the current path, we won't be able to take our operating profit margin beyond the current level" of 6-7%, President Toshiaki Higashihara said.
"We need to lift our margin to 10% or higher to compete with GE," Higashihara said. "For that, we must build new business models."