三菱電機（6503） – Mitsubishi Electric Corporate Strategy

Mitsubishi Electric Corporate StrategyM a y 2 0 2 2©Mitsubishi Electric Corporation1Introduction– Aiming to Solve Social Challenges Through “Circular Digital-Engineering” –Since assuming the position of President, I have been giving top priority on completing the investigation into the quality issues that have been causing inconvenience and concern to our customers and other stakeholders, and implementing reforms based on the investigation results to regain trust in the company. Then, I have been taking measures to improve the working environment to ensure that employees can work cheerfully and positively, and thinking about how to provide solutions to social challenges through our businesses by attending to our customers’ needs.We placed sustainability as the cornerstone of our management, and will promote solutions to social challenges through our businesses, and will flexibly meet the needs of each customer by providing the three processes of consulting, system engineering and maintenance/operation ceaselessly as “Integrated Solutions,” our new business model. What I want to strongly focus on in our future activities is the evolution of our Integrated Solutions by exercising our creativity and strengthening connections within the group through the use of data. We will provide evolved Integrated Solutions for our customers at all times, while aiming to become a “Circular Digital-Engineering” company that provides solutions to a wide range of social challenges with our customers through our businesses.From this fiscal year, we have established four Business Areas and assigned each business group to one of them. And we have also appointed Business Area Owners, who are responsible for working on corporate strategy from a medium- to long-term perspective, with a bird’s-eye view ofa wide range of business fields. We will accelerate the evolution of Mitsubishi Electricthrough these measures and contribute to the realization of a vibrant and sustainablesociety through our business activities.Kei UrumaPresident & CEO ©Mitsubishi Electric Corporation2Contents1. Mitsubishi Electric’s Sustainability Management1-1. Sustainability Management1-2. Circular Digital-Engineering Company that provides solutions to social challenges1-3. Integrated Solutions1-4. Sustainable Future by Mitsubishi Electric2. Progress of Medium-term Management Plan Towards FY2025 2-1. Strengthening of Business Portfolio Strategy2-2. Enhancement of Business Foundation for Sustainable Growth2-3. Initiatives for Creation of Innovation and Future Growth3. Three Reform Areas for Regaining Trust< Appendix >・ Single-year Outlook for FY2022 (Consolidated Performance)・ Outlook for FY2022 (Segment Forecast) and FY2025 target・ Outlook for FY2022 (Sub-segment Forecast) and FY2025 targetNoteFY2019FY2020FY2021FY2022FY2025: April 1, 2019: April 1, 2020: April 1, 2021: April 1, 2022: April 1, 2025- March 31, 2020- March 31, 2021- March 31, 2022- March 31, 2023- March 31, 2026©Mitsubishi Electric Corporation3Mitsubishi Electr ic’s Sustainability Management1©Mitsubishi Electric Corporation41-1Sustainability ManagementPosition the realization of sustainability as the cornerstone of our management to promote solutions to social challenges through our businesses. Clarify five challenge areas to focus on.Five challenge areasCarbon neutralAchieve a decarbonized society to curb climate change by reducing CO2 emissions from the company and societyCircular economyAchieve a society in which resources are effectively used and sustainably circulatedSafety/SecurityAchieve a resilient society that can cope with various environmental changes and risksInclusionAchieve a society in which all people are respected and everyone can lead free, fair and vibrant livesWell-beingAchieve a healthy and comfortable life for each individual, both mentally and physicallyMaterialityRealize a sustainable global environmentRealize a safe, secure, and comfortable societyRespect for all peopleStrengthen corporate governance and compliance on a sustainable basisCreate a sustainability-orientedcorporate culture©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation5551-2Circular Digital-Engineering Company to solve social challengesAim to transform into “Circular Digital-Engineering” company that provides evolved Integrated Solutions by co-creation and by integrating knowledge within and outside the Group.Contribute to solving various social challenges.Consulting, Marketingand SalesI ntegratedSoutionslSolve social challengesCustomersDigital SpaceStrengthening connectionsAccumulating wisdom & knowledgeExercising creativityInstallation,Maintenance ＆ Servicingand Customer serviceDataR&D, DesignBackofficeManufacturing, Quality assuranceCircular Digital-Engineering CompanyMitsubishi ElectricGroupContributes to solving social challenges by providing evolved Integrated Solutions at all times, through accumulating data from our customers, strengthening connections in the group,sharing wisdom and creating new value.©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation661-3Integrated SolutionsEvolution of Integrated SolutionsSupport the entire lifecycle from consulting to maintenance and operation.Evolve our Integrated Solutions by using algorithms with the Group’s strengths and by incorporating knowledge and assets from outside the Group.Integrated SolutionsSupport the entire lifecycle from consulting to maintenance and operationSystemengineeringConsulting[Proposal for introductionand renewal]Maintenance &OperationDigital TwinPrecise reproduction of real space in digital spaceKnowledge & assets from outside the GroupAlgorithmDataStrengths of the Mitsubishi Electric GroupImproved performance of integrated solutions through continuous evolutionCore componentsField KnowledgeAdvanced digital technologies©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation71-3Integrated SolutionsStrengthen value proposition through evolving Integrated Solutions Strengthen components as the base of our business, expand systems utilizing advanced digital technologies, and provide Integrated Solution with these at the core, to be driving the driving force behind continuous growth for complicated challenges.Strengthen vaue propositilon Integrated Solutions with enhanced components and systems at the coreAt presentSystems in which components are linkedEnhanced componentsFutureIntegrated SolutionsSystemengineeringConsultingMaintenance &OperationSystemsRealize secure, highly flexible/expandable systems utilizing various knowledge of fields and components.ComponentsPursue miniaturization, energy conservation and smartification by fusion of strengthen technology,such as power-electronics, control, etc., and advanced technology, such as AI, modeling, etc.Expand product and service layersProducts and services offered©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation881-4Sustainable Future by Mitsubishi ElectricA Future Created by Mitsubishi ElectricCreate a future with our customers and partners in a wide range of business situations, with an eye on diversifying social issuesCarbon neutralCircular economyVision of the Future We Will Create・Social infrastructure in harmony with global environment・Waste loss society・Manufacturing that perfectly fits your tastes・Disaster- and accident-free society・Secure network・Enables anyone to moveanywhere anytime・Language-agnostic communication・Life full of the blessings of natureInclusionWell-beingSafety/ Security©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation991-4Sustainable Future by Mitsubishi ElectricInitiatives for Carbon-NeutralAdopted dual approaches to carbon-neutral: Responsibility and Contribution.Develop internal initiatives into businessesResponsibilityMake the entire value chaincarbon neutralAchievecarbon-neutralContributionCreate/expand carbon neutral businessesProgress toward a carbon neutral society leads the Group to become carbon neutralResponsibilityCarbon neutral initiatives in the entire value chainFY2050Net zero greenhouse gas emissions in the entire value chainFY2030Reduce greenhouse gas emissions from factories and offices by 50% or more.(compared to FY2013)Initiatives to reduce greenhouse gas at factories and offices.・ Continuously invest 0.15% of revenue in carbon neutral Targetefforts.Multi-regionEMS ・ Use renewable energy to 85 sites in Japan in FY2022・ Promote expansion of internal renewable energy procurement using multi-region EMS(*).©Mitsubishi Electric Corporation©Mitsubishi Electric Corporationoperation of distributed power sources and storage batteries, and purchase plan of renewable energy certificates.*Multi-region EMS ： Energy management system that automatically optimizes power interchange of renewable energy between multi sites, 1 01-4Sustainable Future by Mitsubishi ElectricInitiatives to Realize Carbon-NeutralContributionCreate/expand businesses that contribute to carbon-neutral.To make society as a whole carbon neutral, accelerate R&D in three innovation areas: Green by Electronics, Green by Digital, and Green by Circular.Degree of contribution to greenhouse gas reduction in socetyiGreen by CircularPromote R&D to realize circular carbon use.Green by DigitalContribute to the improvement of energy efficiency and the expansion of renewable energy by using advanced digital technology.CO2FactoriesFuel &ChemicalsAtmosphereCCUSCCUS / Carbon recyclingRenewable energyHeat,HydrogenConsumersEMS integrating electricity, heat, and hydrogenGreen by ElectronicsPromote energy conservation and electrification of equipment by promoting the development of core components with higher efficiency and smaller size, etc.Toward achievement of the SDGsZEB(net Zero Energy Building)SiC/Ga-based power semiconductor devicesToward achievement of carbon neutralFY2030FY2050Main R&D ThemesCCUS / Carbon recyclingCO2 recovery from atmosphere and factory exhaust gasesHeat and steam utilizationFull use of waste plasticAnti-fragile systemFloating-type HVDCEMS integrating electricity, heat, and hydrogenMulti-region EMSSiC/Ga-based power semiconductor devicesZEB energy conservation / energy-creation solutions Inverter/motor system for xEVConversion to low-GWP refrigerantsCCUS: Carbon dioxide Capture Utilization and Storage, EMS: Energy Management System, GWP: Global Warming Potential, HVDC: High Voltage Direct Current©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation1 11 11-4Sustainable Future by Mitsubishi ElectricNew Management Structure to Achieve Sustainability ManagementEstablished four Business Areas (BA) that will enhance sustainability management.Accelerate solving social challenges through our businesses by BA owners envisioning their ideal state with a bird’s eye view of their businesses.BAiBusness GroupInfrastructurePublic Utility Systems GroupEnergy & Industrial Systems GroupElectronic Systems GroupIndustry andMobilityFactory Automation Systems GroupAutomotive Equipment GroupLifeBusiness PlatformBuilding Systems GroupLiving Environment & Digital Media Equipment GroupInformation Systems & Network Service GroupSemiconductor & Device Group©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation1 21 2Progress of Medium-term Management Plan Towards FY20252©Mitsubishi Electric Corporation1 32Progress of Medium-term Management Plan Towards FY2025FY2025 Financial TargetsRevenue¥5 trillionOperating Profit MarginROE10%10%Cash Generation(*)*Cash Generation: Adjusted operating cash flow (CF)¥3.4trillion / 5 years©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation1 4S t r e n g t h e n i n g o f B u s i n e s s P o r t f o l i o S t r a t e g y2-1©Mitsubishi Electric Corporation1 5Strengthening of Business Portfolio Strategy Approach to Business Portfolio StrategyClassify businesses according to their characteristics and optimize investment of management resources.2-1HighResilient BusinessesKey Growth BusinessesExpand profitabilitythrough efficient investment Revenue of ¥1 trillion Operating profit margin of 9% (FY2025 : Total of Resilient Businesses)Scale up and increase profitability throughconcentrated investment in growthRevenue of ¥2.6 trillion / growth rate of 8%(CAGR for FY2020-FY2025) Operating profit margin of 13%(FY2025 : Total of Key Growth Businesses)Value Recapturing BusinessesUse existing resources to gain new addedvalue that meets market demandsPotential Businesses/New BusinessesExpand data linkage/utilization-type solutions businessesReform business models of existing businesses and create next-generation businessesBusinesses with issuesConsider selling/withdrawing from less profitable businesses falling below a set thresholdBusiness growth potentialProfitabilityResilient iBusnessesTowardsJudgeLow©Mitsubishi Electric Corporation©Mitsubishi Electric CorporationKey Growth BusnessesiTowardsHigh1 62-1Strengthening of Business Portfolio Strategy Progress of Business Portfolio Strategy Key Growth Businesses Established a new production base in the Owariasahi district in response to demand for FA control systems in decarbonisation-related fieldsInvested approx. ¥13 billion to establish a new production base(Scheduled to start operation in Apr. 2025)Increased the production capacity for air-conditioning equipment to meet demand for heat pumps in EuropeIncreased the production capacity by investing approx. ¥13 billion in MACT(*1) in Turkey (Scheduled to start operation in Feb. 2024)Illustration ofnew production baseExterior view of MACTShifted to the operation system for integrated business operation from new installation to maintenance and renewal Established Mitsubishi Electric Building Solutions Corporation (Apr. 2022)Started mass production of “High Definition Locator” that contributes to ADAS technologiesFor consumer car, world’s first mass production of “High Definition Locator” that can receive centimeter level positioning correction signal from Quasi-zenith satellite (started in Oct. 2021)High DefinitionLocatorDoubled the production capacity for wafer fabrication to meet the strongdemand in automotive and consumer electronics areasDouble the production capacity by FY2025 compared to FY2020. Constructed an 8-inch line with higher production efficiency at the Fukuyama Factory and started construction of a 12-inch line.Exterior view ofFukuyama FactoryFA Control SystemsAir-Conditioning&Refrigeration Systems Building SystemsxEV/ADAS(*2)PowerSemiconductor DevicesibusnessesTowards the next key growth Potential Businesses/New Businesses Established a corporate venture capital (CVC)(*3) fund to accelerate open innovation aimed at creating new businessesEstablished ME Innovation Fund with a total investment amount of ¥5 billion with Global Brain Corporation (Jan. 2022).©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation*1 MACT：Mitsubishi Electric Air Conditioning Systems Manufacturing Turkey Joint Stock Company*2 ADAS：Advanced Driver Assistance System *3 CVC：Corporate Venture Capital1 7Towards resilient busnessesiJudge2-1Strengthening of Business Portfolio Strategy Progress of Business Portfolio Strategy Resilient Businesses Improve profitability of certain businesses and add them to Resilient Businessesprocessing machines, high-frequency optical devices, and IT infrastructure services.Laser processing machines High-frequency optical devicesAcquired a U.S.-based UPS maintenance company to expand the uninterruptible power supply business in North AmericaAcquired all shares of Computer Protection Technology, Inc (CPT), a company with a proven track record in the California area (Feb. 2022).Value Recapturing Businesses Businesses with issues Reviewed business of Kyoto Works, including the LCD TV businessDownsized the LCD TV business (announced in Nov. 2021), discontinued the commercial printer business, terminated in-house production of multi-video systems for indoor use (announced in Mar. 2022), and shifted management resources to our Key Growth Businesses, such as air-conditioning and refrigeration systemsEstablished a joint venture with JUKI in the industrial sewing machine businessAgreed with JUKI Corporation and Meiryo Technica Corporation to establish a joint venture in the industrial sewing machine business(schedule to be established in Jul. 2022)Aim to expand the industrial sewing machine business by combining the strengths of both companies (Jul. 2022)©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation1 82-1Strengthening of Business Portfolio Strategy Optimal Group Management StrategyPursue an optimal group management system by strengthening the functions and reviewing the division of roles of affiliated companies in each value chain. DesignDevelop structures and strengthen the development capability of S/W design companies that can accommodate the enhancement of Key Growth Businesses and the expansion of Integrated Solutions (improve productivity, increase personnel, incorporate new technology, etc.). Established Mitsubishi Electric Software Corporation in Apr. 2022 LogisticsDevelop a logistics system with the option of concluding strategic partnerships with global logistics companies, and rapidly respond to changes in the logistics environment and improve efficiency by introducing an advanced platform. Maintenance & ServiceEnhance our recurring revenue business by taking advantage of connection with customers, establish a business structure that maximizes lifetime profits, and create new business opportunities by sharing and making effective use of information accumulated within the Group. Internal Operation SupportFocus on employee welfare and tasks essential for rolling out each of our businesses, and improve efficiency primarily through the use of outsourcing. Melco Travel Corporation merged into Mitsubishi Electric Life Service Corporationin Apr. 2022©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation1 92-1Strengthening of Business Portfolio Strategy Priority Allocation of Resource InvestmentInvest resources in the amount of ¥2.8 trillion, up ¥0.8 trillion from the previous medium-term management plan, centered on Key Growth Businesses. Attain the FY2025 financial targets (revenue of ¥5 trillion, OPM of 10%). Started considering the use of the ¥0.2 trillion for each business field, out of the ¥0.5 trillion-yen strategic investment.Resource Investment (*1)Revenue / Operating ProfitPrevious Medium-term Management Plan(FY2016-FY2020) New Medium-term Management Plan(FY2021-FY2025) ¥2.0 tn+ ¥0.8 tn¥2.8 tnM&A¥0.1 tnCapital investment¥0.9 tnInvestment in DX and information security¥0.2 tnR&Dexpenses¥1.0 tnCapital investment¥1.2 tnStrategic戦略投資investment(M&A等)(M&A, etc.)0.5兆円\0.5 tnR&D expenses¥1.1 tnOPMKey Growth Businesses 44% (*2)Key Growth Businessesapprox. 60% (*2)・Separately set an amount of \0.5 trillion for strategic investment (M&A, etc.). Focus allocation of budget in Key Growth Businesses and flexibly make investments. ・Break down ROIC by location and business. Maximize efficiency of invested capital by utilizing ROIC also for business evaluation and investment decisions. FY2025 Financial TargetsRevenue: ¥5 trillion / OPM: 10% Key Growth BusinessesResilient BusinessesFY2025FY2025FY2020Value Recapturing Businesses, etc.FY2020FY2025FY2020Revenue*1 Allocation to growth investment, etc. (M&A and other strategic investment, R&D expenses, capital investment) *2 Ratio of Key Growth Businesses to total investment in all business divisions (excluding investment in non-business divisions)©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2 02-1Strengthening of Business Portfolio Strategy Capital Allocation PolicyFor capital allocation, giving top priority to investment in growth, further enhance shareholder returns through profit growth.In terms of cash generation, the source of capital, aim to generate ¥3.4 trillion over a five-year period, with a focus on Key Growth Businesses.Return profits to shareholders (dividends + buybacks) with a target of ¥0.6 trillion (Previous Medium-term Management Plan: ¥0.4 trillion). In addition, further improve capital efficiency by executing the capital measures. New Medium-term Management Plan(FY2021-FY2025) Previous Medium-term Management Plan(FY2016-FY2020) Cash Generation[Adjusted operating CF] (*1)¥2.7tnCapital Allocation Growth investment, etc.(*2)¥2.0tn Shareholder returns ¥0.4tn Increase in cash and deposits, etc. ¥0.3tn *1 After making adjustments, such as adding R&D expenses to operating cash flow*2 Strategic investments such as M&As, R&D expenses and capital investment ©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation¥3.4tn………Strategic investment (M&As, etc.) ¥0.5tn Growth investment, etc.(*2) ¥2.8tnShareholder returns target:¥0.6tnGenerate more cash through sale of non-business assets and reduction of working capital. Increase growth investments and shareholder returns through further cash generation. FY2021Dividends of approx. \85 billion and share buybacks of approx. \50 billion, for a total of \135 billion in shareholder returns2 1E n h a n c e m e n t o f B u s i n e s s F o u n d a t i o n f o r S u s t a i n a b l e G r o w t h2-2©Mitsubishi Electric Corporation2 22-2Enhancement of Business Foundation for Sustainable GrowthDiversity and Employee EngagementPromote respect for human rightsPromote an initiative for highly objective and transparent respect for human rights in accordance with the UN Guiding Principles on Business and Human Rights and the RBA(*1) Code of ConductContinue activities aimed at identifying and improving priority action items based on the results of the human rights impact assessmentEnhance the quality of support at contact pointsfor complaints and consultations related to human rights(e.g., ascertain and disclose the number of complaints)On the occasion of joining RBA (Feb. 2022), started introducing its advanced approaches and evaluation methods both internally and externally*1 RBA: Responsible Business AlliancePromote Diversity and InclusionEnhance activities aimed at improving workplaces that respect diverse human resources and values, and maximize individual talent and organizational capabilitiesIncrease ratio of female managersAs of FY2021, 1.25 times as high as in FY2020 ⇒target: double by FY2025Introduce a systematic training for female candidates for managerial positionsActively promote local staffPromote diverse work stylesExpand systems for remote work, career support leave, return-to-work position request after childcare leave, applications for change of work location, etc.Promote the understanding of LGBTQ peopleReceived PRIDE Index 2021(*3) Silver AwardOrganized a community of alliesEncourage male employees to take childcare leave(*2)65.3% in FY2021⇒ target: 70% by FY2025 Increase the hiring of people with disabilities*2 Male employees taking childcare leave: Including those taking leave when their spouse gives birth*3 PRIDE Index: An index developed by voluntary organization work with Pride to evaluate efforts to support LGBTQ people and other sexual minorities in the workplace.©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2 32-2Enhancement of Business Foundation for Sustainable GrowthDiversity and Employee EngagementRealize a work environment where all employees can work with vitality Positioning the prevention of recurrence of work-related issues as our top management priority, the Group as a whole is advancing “Mitsubishi Electric Workplace Reform Program” based on a third-party evaluation conducted by outside experts, while working to achieve a culture where “employees feel that they can consult with their superiors”, “failures are tolerated”, and “problems are solved together”, through connection enabled by open communication.Thoroughly implement measures to prevent harassment, enhance Build compensation structure with mental-health measures, prevent long working hours, and transform the highly convincing evaluations and mindset and behavior of management with 360 ̊ feedback awareness of market value Advance work-style reforms by pursuing new work styles through best mix of remote and in-office work Reform the personnel system to overcome the inward-looking culture, change the behavior of senior management, and support middle management and front-line workersEvaluation indicator: KPI(Employee awareness survey) 2nd half of FY2021 Actual Percentage of employees with pride and motivation in their work Percentage of employees who feel that they have a good work-life balance 54%65%Target80%or more80%or more©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2 42-2Enhancement of Business Foundation for Sustainable GrowthInformation Security / Product and Service QualityInformation Security Develop a comprehensive, multi-layered defense system As a countermeasure against cyber-attacks, which are becoming increasingly sophisticated with the use of cloud services and the spread of telework, work on “multi-layered defense” with centralized management of networks, devices, servers and the cloud, and zero-trust security (*1) measures.Strengthen network access controls and security measures for devices, and accelerate zero-trust security measuresEmbark on measures totaling over ¥50 billion investmentContinuously strengthen information management and operation systems, and aim for Level 3 or higher (*2) of the Cybersecurity Maturity Model *1 The concept of inspecting and authenticating all communications, with everywhere inside and outside the company considered as untrustworthy areas*2 Framework for Cybersecurity Maturity Model certification set forth by the US Department of Defense. Level 3 or higher means that excellent security measures and management systems are put in placeProduct and Service QualityProvide products and services that satisfy society and customers with the highest qualityUnder our basic quality assurance principles (*3), promote quality improvement activities by carrying out quality assurance reform and strengthening our quality assurance system to ensure customer satisfaction.Eliminate improper quality control practices by promoting quality assurance reformPromote quality improvement and quality assurance from development and design stages, including order receipt, to service provision and disposalThoroughly reinforce our basic quality assurance principles, and conduct quality-related education and human resource development*3 “1. Product quality is our top priority. It comes before price and on-time delivery.”, “2. Our commitment to the highest quality under any circumstances is unwavering.”, “3. Products must be safe to use, have a long usage life, and have consistent performance.” and “4. Every manager and employee involved in manufacturing a product shares equal responsibility for product quality.” ©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2 5Enhancement of Business Foundation for Sustainable Growth2-2Operation DXTotal optimization extending beyond the boundaries of businessAchieve total optimization extending beyond the boundaries of business by standardizing cross- business operations and centralizing reusable data. Promote Operation DX by increasing the sophistication of business management and improving productivity utilizing data and digital technologies. Formed a company-wide Operation DX project to reform business processes (Oct. 2021), completed selection of model businesses (Dec. 2021) and started to build a common operating system and an infrastructure for data use (Apr. 2022).Total optimization extending beyond the boundaries of businessBusiness Group ABusiness Group B・・・Business Group XUse accumulated data in Business DXCustomers’ equipment /systemsExternal systems (*)Maximize operations standardized across businessesCommonOperatingsystemAdjust and centralize data codes and granularity into a reusable formInfrastructure for data useUtilize centralized dataRevamp operational processes Reorganize information systems Formulate operational reform indicators for total optimization, set targets for reform based on the indicators, and carry out initiatives accordingly Investment exceeding ¥100.0 billion Develop data infrastructure Transform into a highly-profitable companythrough more sophisticated business management and a dramatic increase in productivity ©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation* Cloud services, systems, etc. of customers, partners, and suppliers 2 6 2-2Enhancement of Business Foundation for Sustainable GrowthRisk Management and Swift Decision Making Emerging Modern Issues Commitment to SustainabilitySafe plans for procurement and transportation risksPreparation forgeopolitical RisksSocial demand for human rights and environment protectionCommunication with StakeholdersPandemics, disasters, and economic sanctionsFormation of bloc economiesEconomic decouplingEnhancement of Business FoundationCompany-wide risk managementEstablished Corporate Economic Security Div. in Oct. 2020Established Corporate Risk Management Div. in Jan. 2022Established the position of CRO in Jan. 2022Independence of Overseas BasesDelegation of corporate functions and regional optimizationCrisis management and quick initial responseRenew the monitoring systemExploration/warnings of new risksEnhance regional control functionPromotion of local staff to executive positionsAccelerate localization of developmentBuild a Resilient and Sustainable Supply ChainInvestigate and ascertain choke points, diversify sources, reduce usage, develop alternatives•• Strengthen initiatives for highly transparent procurement in accordance with international norms (environment, human rights)Introduce highly transparent human rights DD*2 in line with international normsUnderstand risks throughout the supply chainthrough AISwiftly identify procurement risk in times of disaster using IT toolsIntegrated operations ofglobal logistics*1 CRO: Chief Risk Management Officer *2 human rights DD: The corporate activities that identify, prevent and mitigate impacts of human rights issues.©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2 72-2Enhancement of Business Foundation for Sustainable GrowthGovernance and DisclosureStrengthen Governance and Revitalize internal and external CommunicationAppoint independent outside directors as chairpersons of Nomination, Auditing and Compensation committees to strengthen the supervisory functionActual practices at Mitsubishi Electric General Shareholders’ MeetingPlanned to appoint an independent outside director as ExecutionSupervisionReporting toAppointmentReporting toExecutive OfficersBoard of DirectorsAppointment/Dismissal/Supervision of Executive OfficersBusiness Execution/Authorization TransferReporting toPresident & CEOExecutive Officers, etcsrotceriDChairpersonNomination CommitteeAuditing CommitteeCompensation CommitteeShifted to a company with a committee system (currently: nomination committee system company) in June 2003. chairperson of the Board of Directors(Oct. 2021 onward)More than 50% of members comprising each of the three committees shall be independent outside directorsPlanned to appoint an independent outside director as chairperson of each of the three committees(Jun. 2020 onward)Increase in the number of Board of Directors meetings held (regular/extraordinary)(FY2020: 8 times → FY2021: 20 times)Make the majority of the Board independent outside directors to further strengthen governance(Target: Jun. 2022) Revised the disclosure segments into business area (BA) units in order to disclose information in line with the new management structure launched(Apr. 2022)Sub-segments were also subdivided to improve the quality of information disclosureAppropriate response to revisions of legislation and other external factors Appropriate disclosure to stakeholders ©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2 82-2Enhancement of Business Foundation for Sustainable GrowthActivities to promote an inclusive societyEmployees and the company shall work together to promote the “three forms of coexistence” and realize an inclusive societyCoexistence with the Global EnvironmentPromote activities that remind us how much we appreciate nature, which nurtures a diversity of life and provides us with many blessings, and encourage environmentally conscious behavior, through activities to protect and nurture nature.Satoyama Woodland Preservation ProjectMitsubishi Electric Outdoor ClassroomCoexistence with Local CommunitiesCollaborate with NPOs and other organizations in the field of social welfare, education and other basic infrastructure for daily life to promote activities that focus on realizing sustainable and vibrant local communities where all people, including people with disabilities, can live their life in their own way.30th Anniv.Mitsubishi Electric SOCIO-ROOTS FundCoexistence with All PeopleCreate opportunities and environments where all people, from adults to children, with or without disabilities, can respect and recognize each other and improve their physical and mental health.Para-sports supportSports promotionCulture & arts support©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2 92-2Enhancement of Business Foundation for Sustainable GrowthInitiatives, External EvaluationsInitiativesContinue our commitment to the UN Global CompactContribute to the achievement of the Sustainable Development Goals (SDGs) through all corporate activitiesThe Mitsubishi Electric Group’s greenhouse gas emissions reduction targets acquired SBTi (*2) certification(Jan. 2020）External EvaluationsExpressed approval for the recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) (*1) Continue to promote initiatives and disclose information in accordance with the TCFD recommendations.Joined RBA(*3) (Feb. 2022) to build a sound supply chain, and introduced advanced initiatives and evaluation methods.Received the highest rating from CDP(*4) for “Climate Change,” and “Supplier Engagement”(*5)Received a silver rating on the “PRIDE Index 2021” operated by “work with Pride”(*6) for our initiatives related to LGBTQ people and other sexual minoritiesSelected as a constituent of the following investment indexes:・FTSE4Good Index Series・FTSE Blossom Japan Index・FTSE Blossom Japan Sector Relative Index・MSCI Japan ESG Select Leaders Index・MSCI Japan Empowering Women Index (WIN)*1 TCFD (Task Force on Climate-related Financial Disclosures): A task force for disclosure of climate-related financial information led by the private sector, established at the request of the G20 finance ministers and governors of central banks*2 SBTi (Science Based Targets initiative): An international initiative by the UN Global Compact (UNGC), the World Wide Fund for Nature (WWF), the CDP, and the World Resources Institute (WRI)*3 RBA(Responsible Business Alliance)︓ An alliance of companies promoting social responsibility in the *4 CDP: An international NGO that surveys, evaluates, and discloses environmental initiatives of global supply chaincorporations and governments©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation*5 Received the highest rating for the fifth time for Climate Change, and for Supplier Engagement*6A voluntary organization that supports the promotion and retention of diversity management related to LGBTQ people and other sexual minorities3 0I n i t i a t i v e s f o r C r e a t i o n o f I n n o v a t i o n a n d F u t u r e G r o w t h2-3©Mitsubishi Electric Corporation3 1Initiatives for Creation of Innovation and Future Growth2-3Open InnovationExpand our solution domain by leveraging external knowledge and technology through means such as M&As, co-creation with customers and partners, and collaborations with start-ups. Expand business domains through M&AsCreate innovation by collaborating with start-upsAcquisition of Swedish Elevator Company Motum AB (concluded a contract in Mar. 2022)Strengthen the business management foundation centered on elevator and escalator maintenance and renewals throughout Europe and other regions, while enhancing the building-solutions business in Europe by increasingly incorporating Mitsubishi Electric’s own building-related products and services.Co-create value with customers and partnersEstablishment of ME Innovation Fund (Jan. 2022)Established a CVC fund with Global Brain, an independent venture capital firm (total investment amount of ¥5.0 billion). Aim to reform business models and create new businesses by investing in start-ups mainly in the digital and green domains.*CVC：Corporate Venture CapitalCreate new value by collaboratingwith multiple industries Establishment of XCenter (Cross Center) (Dec. 2021) XCenter was established as a venue for promoting open innovation by presenting our vision of a smart city of the future through the exhibition of the latest DX and Integrated Solutions.It is utilized as a place to solve social challenges through co-creation with customers.Participation in Disaster Prevention Consortium (CORE) (Nov. 2021)Aim to build a resilient society by providing opportunities for diverse companies from across industries to gather and communicate, and through co-creation among companies, collaboration with national and local governments, and sophistication of disaster prevention and mitigation.©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation3 2Initiatives for Creation of Innovation and Future Growth2-3R&D StrategyPursue the enhancement and reform of existing businesses as well as R&D for new value creation in a balanced manner. Aim to address social challenges at an early stage through the active use of open innovation. Strengthen core technologies−Driving force for profitability improvement−Strengthen our differentiated technologies for components and systems, including technology to realize small, high-efficiency motors, and high-speed, high-precision positioning technology, by fusing them with advanced base technologies such as AI and new materials. Continuously enhancebase technologies−Foundation for business−Search for and createnew technologies−New source of growth−Further enhance technologies that support quality of and build trust in our products, systems, and services, such as power electronics, control, modeling, material analysis, AI, security, and data analysis/linkage. Take on the challenge of developing technologies that meet the needs generated by social change, as well as next-generation technologies that transform existing businesses, in a discontinuous manner, based on future insights and analysis of technological trends. Also, focus on expanding our proprietary technologies to create new usages and develop new customers. Solve social challengesAISecurityData analysis/linkageSystem buildingModel Based DevelopmentDigital TwinCore technologiesComponents / SystemsOptimizedcontrol technology for heat pumpsHigh-speed,high-precision positioningtechnologyTechnology to realize small,回転ムラhigh-efficiency motor抑制技術BasetechnologiesControlSimulationModelingPower electronicsCommunicationDesignMaterialanalysis・・・・・・Japanese/overseas universities and research institutes Partnercompanies ・・・Social changesExistingbusinessesProprietary technologiesOpen InnovationFuture insights / Technology trends Search for and create new technologies Ways of technology exploration 3 3©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation2-3Initiatives for Creation of Innovation and Future GrowthR&D Strategy – Major Themes -Core technologiesAchieved “ZEB” in the operational phase of SUSTIE, the ZEB technology test facilityFirst medium-scale office building in Japan with solar panels installed only on the roofCore technologiesTeaching-less robot systemContribute to unmanned factory operations by promoting automation of tasks for which it had been difficult to adopt robots.3D sensor▼Tablet ▲◀3D sensor◀Vision sensorNew technologiesHumans × MachinesRemote integration systemVisual haptics technology enables intuitive operation and expands the field of remotely operated robot introduction.New technologiesWorld’s first successful quantification of stress demagnetization of magnetsReduce resource risk and contribute to high energy efficiency of motorsThe result was obtained in a project, the Future Pioneering Program “Development of magnetic material technology for high-efficiency motors for next-generation automobiles (JPNP14015),“ commissioned by the New Energy and Industrial Technology Development Organization (NEDO).©Mitsubishi Electric Corporation©Mitsubishi Electric CorporationBase technologiesAI that can clarify its control rationaleContribute to the realization of a society that can use AI with peace of mind by clarifying AI control rationaleBase technologiesDesign technology for environmentally friendly materialsDevelop biomass materials from plant-derived raw materials to contribute to resource circulation and reduction of CO2emissionsthinned woodplant biomassmaterialmanufacturerecyclereuserebuildincinerationseparationusedisposalsalvage3 42-3Initiatives for Creation of Innovation and Future GrowthIntellectual Property StrategyStrategy 1. Open Technology Bank®Facilitate technology integration by Internal Collaboration &Open Innovation through visualization and analysis oftechnology assetsStrategy 2. Qualitative IP activity targets In addition to quantitative advantages, enhance qualitative IP capabilities that are compatible with AI/solutions Ascertain and visualize proprietary technologiesHypothesizepotentialapplications andgrowth areas forproprietarytechnologiesAscertainmissing partsproprietary technoogiesliVsua lizeandanalyze Internal CollaborationThorough utilization of proprietary technologyDevelopment of new solutionsPoC/Co-developmentLicense out technologySupplement missing partsOpen InnovationbusinessesexistingExpandbusinessesCreatenew Leveraging the world’s leading IP creation capabilities, qualitatively improve IPs that will formthe Business DX infrastructurePatent asset size(*1)No. 1in JapanNo. of patent registrations in Japan(*2)No. 1in JapanInternational application ranking(*3)No. 5globallyNo. of design registrations in Japan(*2)No. 2in JapanSolution ratioAI ratioCurrentFY2025 target10% ➡ 30%5％ ➡ 10%Co-create new businesses with internal and externalpartners to solve diversifying social issuesDevelop and execute IP/standards strategy in the IoT domain in alignment with activities tostrengthen IP capabilities Our progress in visualizing technology assetsInternal Collaboration• Began operation of a search tool for proprietary patents • (Oct. 2021)➡ Accelerate company-wide solution development• Released a technology map covering all patents owned (Dec. 2021)Open Innovation• Published a detailed patent distribution map for representative technologies (Apr. 2022)➡ Promote opportunities for dialogue and collaboration ©Mitsubishi Electric Corporation©Mitsubishi Electric Corporationwith external partnersIn addition to utilizing IoT in areas such as FA, electric power, and train, carry out standardization activities in the field of future telecommunication infrastructure, such as 5G, beyond 5G, and 6G, to contribute to solving social issues and expanding business. *1 Announced by Patent Result Co., Ltd. (total from Apr. 2019 to Mar. 2020)*2 Announced by Japan Patent Office (total from Jan. to Dec. 2021)*3 Announced by World Intellectual Property Organization (WIPO) (total from Jan. to Dec. 2021) 3 5Three Reform Areas for Regaining Trust3©Mitsubishi Electric Corporation3 63Three Reform Areas for Regaining TrustEstablished the Emergency Response Division and commissioned a quality-related investigation by an Investigative Committee of external experts in response to a series of improper quality control practices. First focus on completing the investigation with the Investigative Committee. Then, taking seriously and deeply reflecting on the findings, implement initiatives in three areas.Will also disclose information internally and externally in a timely and appropriate manner. Investigative Committee RecommendationsThree Reform Areas(1) Ingrain a company-wide understanding and correct perception of quality (ensuring quality through adherence with protocols) (2) Check and review processes such as procedure manuals from a third party’s perspective (3) Strengthen the quality control division (4) Support and strengthen middle management(*) (5) Bring the headquarters/corporate function departments and the manufacturing sites closer (6) Encourage affiliation with the company rather than the existing strong affiliations at a plant/works level (7) Implement measures based on the business group system quality compliance * General managers and section chiefs of manufacturing site/office©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation(a) Quality assurance reform ・ Establish the Corporate Quality Assurance Reengineering Group under the direct control of the CEO – Strengthen new quality assurance functions led by the head office – Share knowledge and provide flexible support across business groups ・ Appoint a Chief Quality Officer from outside the company(April 2022) ・ Plan to invest over ¥30 billion for investments in infrastructure development, etc. (b) Organizational culture reform ・ Company-wide reform project “Team Sousei (Creation)” formulates ”Robust Policies” for organizational culture transformation- Establish specialized organizations in each business group to promote and implement the reform・ Reform the personnel system- Overcome the inward-looking organizational culture, change the behavior of senior management, support middle management and front-line workers (c) Governance reform ・ Reform the Board of Directors to strengthen management supervisory 3 7(8) Demonstrate management’s resolve in strengthening functions ・ Establish a Governance Review Committee 3Three Reform Areas for Regaining Trust Organizational culture transformation: “Robust Policies” for the creation of a New Mitsubishi Electric Group“Team Sousei (Creation),” a company-wide reform project consisting of 45 members selected through internal recruitment, formulated ”Robust Policies” for organizational culture transformation. Various measures have been implemented based on the policies since FY2022. Robust PoliciesPromote positive, interactive communication as part of our culturePrioritize productivity by eliminating unproductive workFacilitate self-initiative among individuals and units through clarification and delegationCollaborate across divisions to maximize Group strengthTrust each other and share information transparentlyIncrease opportunities to learn from each other and grow spontaneouslytomorrowan evenbetter Measures to create ・Team members and Executive Officers will hold briefings at nationwide business sites and conduct direct dialogues with employees to deepen their understanding.・Establish specialized organizations for reform in each business group to strengthen the structure for ・In FY2022, the focus will be communication transformation (Measures such as addressing everyone by promotion and execution of the initiativesthe neutral honorific “san”）corporate culturethe negative Measures to reform measuresand related the policies Ilmpement “Employees feel that they can consult with their superiors,” “failures are tolerated,” and “problems are solved together”©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation3 83Three Reform Areas for Regaining Trust Strengthen quality governance by going back to the premise that “Product quality is our top priority” and implementing quality assurance reformUnder the leadership of the new Chief Quality Officer, the Corporate Quality Assurance Reengineering Group will lead efforts to “reconstruct the control function,” “address issues relating to technical capabilities and resources,” and “re-foster an awareness of quality compliance.” Realize effective quality internal control at each manufacturing site and strengthen head office supportComply with laws, standards, and customer specifications, and develop infrastructure to strengthen quality assurance processesEstablish “Company-wide Quality Day,” strengthen quality education and promote personnel rotation among bases and departmentsGovernance reform: reform the Board of Directors & establish the Governance Review Committee Strengthen management supervisory function & improve internal control and governance systems ・ Undertake sustainable, mid- to long-term initiatives to reform the functions, composition, and secretariat of the Board of Directors, as well as the three statutory committees. ・ Form a Governance Review Committee comprising three lawyers with no existing commercial relationships with the company, to assess internal control and governance systems. Executive Officers’ MeetingOversightReportsBoard of DirectorsReports & recommendsCommissionsProvides information Emergency Response DivisionImplement quality assurance reformReports & recommendsProvides information and cooperates Investigative Committee Investigates and determines causes of improper quality control practices, and formulates and recommends preventative measures Provides information and cooperates Governance Review Committee(Established on Oct. 2021) ・ Evaluates and recommends measures for improvement of the company’s internal control and governance systems ・ Clarifies the managerial responsibility of executive officers and board directors ©Mitsubishi Electric Corporation©Mitsubishi Electric Corporation3 9A p p e n d i x ©Mitsubishi Electric Corporation4 0AppendixSingle-year Outlook for FY2022(Consolidated Performance) FY2022Forecast (May. 2022)115JPY/US$125JPY/Euro18.0JPY/CNY4,770.0270.05.7%295.0215.0FY2019ActualFY2020ActualFY2021Actual109JPY/US$121JPY/Euro15.6JPY/CNY106JPY/US$124JPY/Euro15.7JPY/CNY113JPY/US$131JPY/Euro17.7JPY/CNY4,462.5259.65.8%281.9221.89.2%2,429.755.1%377.0267.06.1%191.84038.7%4,191.4230.15.5%258.7193.17.5%2,754.257.4%365.4248.85.2%365.53640.0%4,476.7252.05.6%279.6203.47.1%2,975.958.3%329.4217.14.3%167.54041.9% (Billions of JPY)RevenueOperating Profit（%）Profit before income taxesNet Profit *1ROE（Return On Equity）Stockholders’ Equity（%）Debt including lease liabilitiesDebt excluding lease liabilities *2（%）FCF（Free Cash Flow）Dividend（JPY per share）Dividend ratio（%）*1: Net Profit represents Net profit attributable to Mitsubishi Electric Corp. stockholders.*2: Debt ratio is calculated based on “Debt excluding lease liabilities” that represents bonds and borrowings from FY2019 because IFRS 16 Lease has been applied.©Mitsubishi Electric Corporation4 1Outlook for FY2022 (Segment Forecast)Appendixand FY2025 targetThe grouping of disclosed segments has been revised to business area (BA) units, with subdivided sub-segment information provided on the next page.FY2019ActualFY2020ActualFY2021Actual109JPY/US$121JPY/Euro15.6JPY/CNY106JPY/US$124JPY/Euro15.7JPY/CNY113JPY/US$131JPY/Euro17.7JPY/CNY (Billions of JPY)FY2022Forecast (May. 2022)115JPY/US$125JPY/Euro18.0JPY/CNYFY2025Target105JPY/US$115JPY/Euro15.0JPY/CNYInfrastructureIndustry and MobilityBusiness PlatformLifeOthersTotalRevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）1,057.468.86.5%1,369.669.75.1%1,650.7106.96.5%361.015.64.3%725.629.34.0%4,462.5259.65.8%1,021.988.38.6%1,265.840.73.2%1,539.5101.16.6%347.213.63.9%667.517.72.7%4,191.4230.15.5%946.141.54.4%1,480.896.46.5%1,673.092.65.5%382.826.46.9%737.326.73.6%4,476.7252.05.6%990.046.04.6%1,580.0108.06.8%1,760.099.05.6%430.027.06.3%740.023.03.1%4,770.0270.05.7%*Inter-segment sales are included in the above chart.*Figures above are shown by the new segment classifications. (Figures for FY2020 and before are shown for reference.)©Mitsubishi Electric Corporation\1.1tn7%\1.6tn11%\2.2tn11%\0.5tn10%ー\5tn10%4 2Outlook for FY2022 (Sub-segment Forecast)Appendixand FY2025 targetFY2021Actual113JPY/US$131JPY/Euro17.7JPY/CNY (Billions of JPY)FY2022Forecast (May. 2022)115JPY/US$125JPY/Euro18.0JPY/CNYFY2025Target105JPY/US$115JPY/Euro15.0JPY/CNYIndustry and MobilityInfrastructurePublicUtilitySystemsEnergySystemsDefense& SpaceSystemsFactoryAutomationSystemsAutomotiveEquipmentLifeBuildingSystemsAir ConditioningSystems & HomeProductsBusiness PlatformInformationSystems &Network ServiceSemiconductor& DeviceOthersTotalRevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）RevenueOperating Profit（%）946.141.54.4%383.315.34.0%327.523.17.1%235.13.01.3%1,480.896.46.5%776.1128.016.5%704.6△ 31.5△ 4.5%1,673.092.65.5%527.821.84.1%1,145.170.86.2%382.826.46.9%141.49.66.8%241.416.87.0%737.326.73.6%4,476.7252.05.6%990.046.04.6%400.023.05.8%310.018.05.8%280.05.01.8%1,580.0108.06.8%820.0130.015.9%760.0△ 22.0△ 2.9%1,760.099.05.6%540.024.04.4%1,220.075.06.1%430.027.06.3%150.010.06.7%280.017.06.1%740.023.03.1%4,770.0270.05.7%\1.1tn\0.4tn7%8%8%5%\0.4tn\0.3tn\1.6tn11%\0.8tn17%\0.8tn5%\2.2tn11%\0.7tn10%\1.5tn11%\0.5tn10%\0.2tn9%\0.3tn10%ー\5tn10%©Mitsubishi Electric Corporation*Inter-segment sales are included in the above chart.*Figures above are shown by the new segment classifications.4 3Cautionary StatementWhile the statements herein including the forecast of the Mitsubishi Electric Group are based on assumptions the Group considers to be reasonable under the circumstances on the date of announcement, actual results may differ significantly from forecasts.Such factors materially affecting the expectations expressed herein shall include but are not limited to the following:1. Any change in worldwide economic and social conditions, as well as laws, regulations, taxation and other legislation 2. Changes in foreign currency exchange rates, especially JPY/dollar rates3. Changes in stock markets, especially in Japan4. Changes in balance of supply and demand of products that may affect prices and volume, as well as material procurement conditions5. Changes in the ability to fund raising, especially in Japan6. Uncertainties relating to patents, licenses and other intellectual property, including disputes involving patent infringement7. New environmental regulations or the arising of environmental issues8. Defects in products or services9. Litigation and legal proceedings brought and contemplated against the Company or its subsidiaries and affiliates that may adversely affect operations or finances10. Technological change, the development of products using new technology, manufacturing and time-to-market11. Business restructuring12. Incidents related to information security13. Large-scale disasters including earthquakes, typhoons, tsunami, fires and others14. Social or political upheaval caused by terrorism, war, pandemics, or other factors15. Important matters related to the directors and executive officers, major shareholders and affiliated companies of Mitsubishi Electric Corporation4 4