Hitachi Chemical : Report on Inappropriate Product Testing, etc. by Special Investigative Committee

November 22, 2018
Hitachi Chemical Co., Ltd.

After it was revealed that inappropriate product testing, etc. had taken place regarding certain products manufactured by Hitachi Chemical Co., Ltd., the company established a special investigative committee comprised of external experts and other relevant parties, and conducted investigations to confirm the facts surrounding the case and determine the root causes. The company has now received an investigation report from the special investigative committee.

The summary of the report in English will be posted later as it is currently being translated.

We hereby offer our deepest apologies for having caused considerable inconvenience and concern to our customers, shareholders, and all other persons concerned.

With regard to the products which were determined in the report to have been subject to inappropriate testing, etc. we are working to verify the circumstances by analyzing the differences between the testing procedures agreed upon with customers and the actual testing methods that were conducted by the company, confirming the performance of the products in question with customer representatives present as observers, or re-testing product samples stored on the company's premises. Please note that we have not discovered any faultiness in product performance, safety issues, or legal violations as of the time of this writing.

The number of customers affected totals 2,329 companies, and sales of the products found to have been subject to inappropriate testing are equivalent to 13.9% of our consolidated revenues. We have classified the status of our response to customers into five phases, and are managing our response accordingly. As of the present time, the customers for which we have reached response phases A through to C account for 98% of the consolidated revenue of the products affected.

For details on the progress of our response to customers, please see the attached list entitled Status of Customer Response (By Product)

Total	Status of Customer Response (Note)
	A	B	C	D	E
Number of Companies	2,329	571	856	798	67	37
Composition Ratio	100%	24%	37%	34%	3%	2%
Ratio of Consolidated Revenue	13.9%	2.2%	5.3%	6.2%	0.2%	0%
Composition Ratio	100%	16%	38%	44%	2%	0%

Note

A:Performance confirmation completeB:Currently conducting performance testing. However, the customer has indicated that there are no foreseeable problems.C:Have informed the customer that the company believes there are no performance problemsD:Have informed the customer that the company has supplied products under the scope of investigationE:Will inform the customer that the company has supplied products under the scope of investigation

For details of countermeasures to prevent recurrence and punitive measures to the officers involved on the findings established in the special committee report, please see the press releases entitled 'Measures to Prevent Recurrence of Inappropriate Product Testing, etc.' and 'Announcement of Personnel Changes and Reduction of Remuneration for Directors and Executive Officers' which were published by the company on the day of this release.

The English version will be posted later as these are currently being translated.

Going forward, we will do our utmost to restore the trust placed in us by our stakeholders. In addition to steadily implementing the aforementioned countermeasures in order to prevent recurrence, we will also work to strengthen the Hitachi Chemical Group's governance and conduct a comprehensive reform of our quality assurance system.

The impact of this incident on the Hitachi Chemical Group's consolidated performance for the year ending March 2019 is unknown at the present time. If it becomes necessary to revise our projections on consolidated performance released on October 22, 2018, an announcement will be made at the appropriate time.