Working with trading house Mitsubishi Corp., the Japanese infrastructure builder will install a signal system for part of a key railway connecting Yangon and Myanmar’s second-largest city, Mandalay.
The order covers 140km of the 600km route. In addition to a centralized train monitoring system, the order includes digital switch controls, with delivery planned by June 2017. This portion of the project is worth roughly 2.4 billion yen, and will be funded by a grant from the Japan International Cooperation Agency.
Japan is expected to provide funding for the rest of the route, stretching nearly 500km, and Hitachi is likely to win that order as well, with the total project expected to exceed 10 billion yen.
Myanmar has a rail network spanning 6,000km. With aging equipment causing repeated derailments and delays, the Myanmar government is eager to update the infrastructure. Hitachi also hopes to win an order for a loop railway within Yangon.
Hitachi developed the signal system especially for emerging markets. It offers the same reliability as those for developed countries but has limited functions for automatic schedule adjustments and other features. Hitachi cut the system price to less than half of those marketed to developed countries by handling software adjustments at its Indian base.
Though specialist Nippon Signal and other companies also bid for the project, Hitachi’s price advantage seems to have won out.
The company hopes to expand sales to other parts of Southeast Asia and Latin America. The global market for signal systems is seen expanding 3% annually, driven by Asia and other emerging markets. It is currently estimated at 12 billion euros ($13.7 billion) and is expected to reach 15 billion euros in 2019.
Hitachi’s rolling stock business faces tough price competition from the merger of two Chinese state-owned giants. But signal systems continue to offer high margins.
For further expansion, Hitachi this year will acquire Ansaldo STS of Italy, the world’s No. 2 supplier of signal systems and a unit of defense and aviation giant Finmeccanica.