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China is on its way to becoming one of the largest markets for radio-frequency identification tags, propelled in part by U.S. importers that want the technology to be used for tracking assets, market analysts said.

The Chinese government is implementing an unprecedented program to give its citizens RFID tags to verify their identities. China bought more than 100 million resident tags in 2005 and is expected to buy about 2.9 billion by 2009, according to In-Stat, a market research and consulting firm. RFID uses radio-frequency waves to transfer data between a tag and a reader.

"With a population of over 1.3 billion, the issuance of RFID-tag-inlaid resident ID cards by the [Chinese] Ministry of Public Security is one of the biggest RFID projects in the world," In-Stat concluded in a recent study.

Although China's primary market for RFID is currently resident ID tags, the country is expected to also become a leading user of RFID technology for product exports to the United States, In-Stat analyst Anty Zheng said.

Zheng said Chinese vendors will comply with requirements of U.S. companies. Wal-Mart, for example, wants 600 of its suppliers to be RFID-compliant by the end of 2007. RFID tags allow U.S. retailers to track their products while in-route to the United States in order to better ensure the accuracy and security of shipments, Zheng said.

Spending on RFID worldwide totaled $504 million in 2005, up 39 percent from 2004, according to Gartner, a provider of research and analysis on the global information technology industry.

"RFID will begin to experience broader industry adoption with business value-focused implementations toward the end of 2006 when new license revenue totals $751 million," Gartner said. By 2010, Gartner forecasts worldwide RFID spending will surpass $3 billion.

But one of the obstacles that has impeded use of RFID is the lack of a common global standard for the technology, said Michael Liard with Venture Development Corp., a technology market research and strategy firm.

In the absence of a global standard, China has said it will develop its own standard, Liard added. He said the International Standards Organization is expected to set a common standard sometime this summer.

Liard said the RFID market for retailers has historically been driven by the United States, with China and other Asian nations mainly watching from the sidelines. In next few years, however, Liard said those nations are expected to play a much larger role in using RFID, meaning that they should be involved in implementing next generation technology solutions.

COMMENTS

• The RFID is not scary in and of itself. It is the miss use of the RFID that is scary! Remember, guns do not kill people, people kill people! Same problems here. RFIDs provide significant benefits for society in automation of many processes - particularly the distribution of goods. While I think the RFID should be on the box things are shipped in and not remaining once removed from the box, there is a potential to track things to homes if the RFID is on the product itself. The same problem potentially applies to RFID on people. I see little advantage to any proper use of the RFID on a person unless you want to use it for improper purposes. I think it is far too late to impact the use of the RFID on products because it is generally wide-spread and will not be reversed. Distributors are using the RFID to identify products in warehouses to be selected automatically and transferred to trucks for shipment to fulfill orders to various locations the distributor serves. This eliminates the need for people to pick orders out of a warehouse for shipment and lowers the cost of the action significantly. It also shifts the jobs from relatively unskilled warehouse pickers to semi-skilled RFID makers and developers of order picking systems that are run by computers based on orders entered by stores many miles away form the warehouse. Similarly, once the order is picked for shipment the RFID automatically reduces the distributor’s inventory and when the inventory reaches a critical level the computer automatically places an order to replenish the inventory -- goods are ordered and delivered with little or no human intervention that reduces costs significantly. Such electronic orders can be placed anywhere in the world and will force production to those areas with the lowest cost to manufacture the product and ship it to the location involved. This is in part the reason that inflation in the United States has remained relatively low in the face of the recent tremendous increases in government spending and revenue reductions! Either we will begin to see inflation in prices or a significant reduction in government deficit. Taxpayer Posted May 1, 2006 9:30 AM
• This is scary. Aren’t we aware about the implications of having a type of "Trojan horse" infiltrating our own security systems? It appears that this would be one of the easiest ways for an enemy to break into us. This is foolish. Don’t we get most of our products from China? With better technology, and this type of information sharing, we are making it easy to let someone -- with mean intentions -- know the exact location in our offices, homes, etc., of every product that is made. This involves our own security system. What are we doing to control, or prevent this from happening? GovExec.com reader Posted April 28, 2006 7:11 AM
• Dear Robert M., Since you appear to believe that privacy is over-rated, why not sign your full name? Say, while you're at it, include your address, home and work phone numbers. Also, a little personal background about your net worth, debt-to-equity ratio as well as information about your wife and kids would help people form a better idea of why you hold the position you do on this issue. Cracked & Wired Posted April 26, 2006 12:54 PM