Hitachi announced this week that it will invest ¥100 billion ($915 million) building a state-of-the-art research center in the United States to develop Internet of Things (IoT) products and technologies. A significant commitment by the company, with the project expected to take over three years to complete – the facility will be located in Santa Clara, California.
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The company says the project will begin next month and this facility will be in the company’s new services and platforms business unit. The R&D lab is expected to focus on developing “foundational technologies in big data and the Internet of Things businesses.”
Hitachi says it will recruit a substantial engineering staff, both from the local market and from afar. Current plans call for the hiring of 200 engineers by the end of the fiscal year in March 2017.
A Bold Step
The news represents a bold step for the company. The investment is not only a large one for establishing an R&D center in the U.S. – but it is also 30% higher than the company has invested corporately in the IoT channel globally, according to a report by the Nikkei.
“We will accelerate the speed of development by setting up a base in the U.S., where cutting-edge talent and information are concentrated,” said Keiji Kojima, Senior Vice President of Hitachi.
The large diversified Japanese company has significant holdings in computer and data industries, as well as in power and other heavy industries. The company considers General Electric (GE) as its main competitor.
Chasing GE Digital
Last year, GE established GE Digital in order to step up its IoT development, as well as other technologies. GE suggested that it may develop entirely new business models, such as a service monitoring GE jet engines that contain IoT sensors (made by GE of course).
Hitachi also believes it too can offer new “maintenance and other services” taking a similar path with sensors embedded in some of its hardware products. Part of the mission of this new U.S. R&D center is to help the company develop these new types of consulting services to users of Hitachi hardware.
“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%,” said President Toshiaki Higashihara. “We need to lift our margin to 10% or higher to compete with GE. For that, we must build new business models.”