RFID: New markets for an old
technology By Fred Stakelbeck
First used during World War II to identify
aircraft as friend or foe, radio frequency
identification (RFID) systems have become
increasingly visible worldwide. They are used in
the United States and Europe for physical access
control, passport identification and records
management.
Last May, Venture Development
Corp, a technology and market research firm,
noted, "The global market for RFID systems
revenues will grow by approximately 36% annually
through 2008, with long-term growth outpacing
short-term growth - revenue will
reach
nearly US$5.9 billion by 2008." Much of the growth
will come from China.
Generally, RFID
systems consist of four distinct components: a
transponder or "tag", a reader, a database and a
software program. Tags can be either passive, with
no independent power source and a limited read
range, or active, containing an independent power
source that transmits a continuous signal. RFID
tags are normally attached to, or embedded in, an
object requiring identification, such as a pallet
or payment instrument.
Roughly the size of
a grain of rice, RFID tags contain an integrated
circuit that stores a unique serial number or
other information based in the tag's memory. An
antenna transmits information to a receiver,
called a reader, that sends a signal to the tag
and receives and stores the responses for transfer
to a data-management system.
The benefits
of RFID technology are improved handling
efficiencies, traceability, and immediacy of data
capture. The technology helps business because of
its ability to maximize operating income by
minimizing capital costs. Strategic business
objectives are met by increasing revenue through
reduced order-cycle times, eliminating manual
inventory counts, and maximizing shipping and
receiving efficiencies. The technology also
optimizes assets by reducing inventory and
improving forecast accuracy and enhancing safety
and quality control by improving responsiveness to
product recalls.
China offers an
intriguing market for the future acceptance,
development and implementation of RFID technology.
Early indications are that the technology is
already taking hold. In February, Beijing-based
Analysys International, an information services
provider, reported that China's RFID market grew
8.6% in the fourth quarter 2005, with most of that
growth concentrated in the identification-card and
public-transportation sectors.
"Once this
market blows out, it will become a multibillion
[dollar] business," said Tom Grant, chief
executive officer at ThingMagic, a US-based
manufacturer of readers, sensors and related
equipment.
So far, the government has been
the key driver in the early development of RFID
technology in China. Under the "Golden Card"
project, launched in 1993 to promote the use of
credit cards, individual identification cards with
embedded RFID chips were vigorously promoted. As a
result, more than 900 million RFID-enabled
identification cards are expected to be issued by
the end of 2008. Moreover, the Ministry of
Information Industry (MII) announced that China's
11th Five-Year Plan would include a comprehensive
RFID plan as one of the country's six major
information-technology initiatives.
At the
fourth RFID Application Summit Forum held in
Shenzhen recently, Dai Dingyi, deputy director of
China's Logistics Network Alliance, noted that
RFID adoption in China was growing "faster than
expected" and that the technology had already been
adopted in a wide variety of fields, such as
anti-money-laundering systems, traffic monitoring,
logistics and manufacturing.
The crowded
ports of Hong Kong and Shenzhen currently use RFID
systems to manage cargo shipments, and last month
Beijing Capital International Airport announced
plans for an RFID system for outbound luggage
transport and security checks. In addition to
government-related applications, RFID technology
has been considered for use by the country's
retail sector. Venture Development Corp, a
technology market research firm, recently reported
that RFID technology in the global retail sector
reached $161 million in 2005 and is expected to
reach $1.5 billion by 2010.
According to
analysis by Research and Markets, an international
market research firm, China is expected to use 5
trillion tags annually within the next several
years. A large number of those tags are expected
to be used in products supplied to Wal-Mart, the
world's largest retailer and a key advocate for
the use of RFID technology.
The most
likely area for implementation will be in
supply-chain management for the country's vast
manufacturing sector, as costs associated with
tags, equipment and services decrease making them
more affordable for small businesses.
In
an interview with ChinaTechNews.com last month,
Edward Zeng, founder of SparkiceLab, a
business-to-business global commerce provider,
noted, "China is the world's manufacturing hub. It
is 'ground zero' for innovations and applications
in the development of manufacturing infrastructure
and capabilities. China is a starting point for a
huge chunk of the global supply-chain."
According to Zeng, almost half of all RFID
tags will be sold in East Asia by 2010.
Obstacles to
implementation Although positive signs
exist for the eventual acceptance of RFID
technology in China, significant obstacles remain.
Technical difficulties such as the placement of
tags, transponder read-rate accuracy, and
patent-infringement lawsuits, as well as market
trends caused by "over-hyping" of the technology
and the large number of trial applications,
continue to plague early implementation efforts.
A much more controversial and problematic
issue is China's continued effort to introduce its
own RFID national standard. By rejecting the
widely accepted Electronic Product Code (EPC)
standard, a tag serial-numbering system promoted
by EPCGlobal for international use, Chinese
officials hope to avoid paying costly royalties.
But this delivers a serious setback to global
standardization.
In March, Chen Wei, a
representative of the MII, said that China would
press ahead with an national standard. According
to Wei, the main obstacles to a national standard
have been disagreements among concerned parties
within China and the ability of the country's
national standard to operate with the three other
international standards - ISO/IEC 18000, EPCGlobal
and Ubiquitous ID.
At present, several
Chinese working groups are heavily involved with
RFID-related issues. In 2004, the Standardization
Administration of China established a National
RFID Standards Working Group to draft and develop
a national standard. The Leading Working Committee
for RFID, a government-sponsored working group in
Shenzhen, has worked diligently to promote RFID
applications.
In addition, the Article
Numbering Center of China's Electronic Product
Code (EPC Global-China) Working Group and the
China Electronic Standardization Institute's
(CESI) RFID Working Group are all focused on
RFID-related issues. Currently, the Ministry of
Science and Technology and 13 other Chinese
government departments are drafting a white paper
on RFID in China, which will set the general
direction of RFID development for the country.
The International Association of Countries
and the International Electrotechnical Commission
are actively involved in setting international
RFID standards using a process whereby
representatives from interested countries and
business sectors undertake consensus-based
decision making. The Auto-ID Center, the
Electronic Article Numbering Association (EAN) and
the Uniform Code Council (UCC) are also key groups
working on the development of international
standards.
If China does decide to adopt
its own proprietary RFID national standard, it may
be in conflict with the supply-chain mandates of
important foreign companies such as Wal-Mart,
Target and Tesco, raising significant
interoperability issues. In particular, Wal-Mart,
which purchased an estimated $20 billion of
Chinese products in 2005, has already endorsed the
existing EPC standard. For purposes of
standardization, software data formats,
transmission capacity and the frequency range of
RFID tags are also important topics that will
require further discussion.
In addition to
standardization issues, RFID technology raises
important legal, ethical and privacy questions
that remain largely unanswered. For example, what
legal rights do Chinese citizens have if they feel
their privacy has been violated? Which government
agency or agencies will ultimately be responsible
for the collection and maintenance of RFID-related
data?
Last month, researchers at Vrije
University in Amsterdam released the results of a
study that showed that tags may be vulnerable to
viruses that could harm computer databases,
raising questions regarding the technology's
long-term viability.
But for China, it is
no longer a question of "if" RFID technology will
take off, but "when?" Claus Heinrich, a member of
the executive board of SAP AG, a leading provider
of business software solutions, noted in March,
"With China's ever stronger role in the global
economy, it is crucial for the country to leverage
new technologies such as RFID. Its adoption in
China will drive supply-chain efficiency,
visibility and adaptability for companies of all
sizes and industries worldwide."
China is
at an important point in the early acceptance,
development and implementation of RFID technology.
Beijing, along with domestic and foreign RFID
vendors, retailers, international standards
organizations and the country's manufacturing
sector, must work together to address the
outstanding concerns expressed by both businesses
and consumers. If cooperative and open dialogue
occurs, the future should be bright for the spread
of RFID technology in China.
Fred
Stakelbeck is an expert on bilateral and
trilateral alliances as they relate to China's
foreign policy. His writings address the
implications of China's emerging regional and
global strategic influence and relationships with
US national security. He can be reached at
Frederick.stakelbeck@verizon.net
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