RFID in China
Massive internal market dwarfs others
About 65% of goods sold by Wal-Mart come from China. Mandates from retailers have yet to fall back to China exports, and there would be some inertia because a lot of the Chinese Wal-Mart suppliers of smaller size rely on their advantage of low cost and low margin. It is in doubt whether they will be able to afford RFID technology. However, contrary to thinking that retail mandates will result in large volumes of RFID tags used on Chinese exports, IDTechEx found that the biggest applications of RFID in China - even in retail - are serving the local market.
For example, due to its size, orders in China can be a magnitude higher than for similar projects in other countries. IDTechEx learnt of recent orders for several million smart tickets for university campuses and, potentially, 120 million tags just for tagging pigs in one province alone.
World's largest RFID order
China has issued the world's largest order for RFID - a $6 billion order for a national ID card scheme. These are contactless cards, operating at HF. By the end of 2005, China had issued 110 million national ID cards. The target is to issue 900 million ID cards by the end of 2008. Each card costs about $2.50, and Chinese companies only have been chosen to provide the entire solution.
Like many other Asian countries, the major driving force for the Chinese RFID industry comes from the government and so far most of the large-scale roll-outs are government-driven projects. Government initiatives mainly focus on the areas of public services, with the intention of improving safety and quality. In some circumstances, local governments provide support for major companies to deploy RFID projects. They include incredibly diverse applications, such as the implementation of active RFID to locate mineworkers and reduce casualties and deaths, integrated by Vision Electronic Technology Ltd. Others such as Shanghai Hsic has implemented RFID for tracking potentially dangerous items such as fireworks and gas cylinders. In particular, after cards, ticketing is the second biggest application for access control and transportation. Just this week Confidex announced an order to provide 125 million contactless tickets to a Chinese railway operator. For a full list of case studies of RFID in China consult the IDTechEx RFID knowledgebase www.rfidbase.com .
Progress on the Chinese national RFID standard
The national RFID standard in China has been one of the most debated topics. "If the RFID standards cannot be supplemented, adjusted or modified by China, the tremendous economic benefit brought by RFID will be abated", said Dr Wenfeng Wang, executive secretary of the new national standardisation workgroup, speaking to IDTechEx. "We cannot buy everything from other countries. We cannot store all our real-time information abroad," commented Ms Qi Zhang, Director of The National Golden Cards Project.
However, both Ms Zhang and Dr Wang emphasised that China should not isolate itself from the rest of world. The national RFID standard should include China's own IP, as well as be compatible and interoperable with international standards, they told us. Nevertheless, the standardisation process is unlikely to be completed soon. The standard framework might be announced within this year, but the whole national standard will not be established until 2007 at the earliest, during which time many companies may start deploying EPC based systems as the default standard. A second factor for the delay is that the government is keen to ensure local companies have necessary know-how and IP to compete with foreign companies. With many companies involved in projects such as the National ID scheme, Chinese companies certainly are building a phenomenal RFID manufacturing base and know how, which may become very difficult for companies abroad to compete with in due course.
Impediments to implementation
Although some believe that the lack of UHF frequency allocation is stalling progress of RFID in China, in reality Chinese companies are not hung up on forcing UHF into every application, but use the best frequency to get the job done. The major barrier to implementing RFID is the cost of the system. In some cases ROI does not work as it does elsewhere because labour costs in China are much cheaper. Moreover, the RFID development is limited by the lack of availability and capability of the enterprise information systems, which further increases the cost and undermines the value brought by the technology. Information sharing between companies is not easy. Nearly all the RFID deployments in China so far have been close-loop applications.
There are over 100 local companies involved in supplying RFID solutions. About 30% of these own their own IP and 40% act as resellers for companies from Europe and America. The rest represent companies from other Asian companies. For a detailed list of the major companies see the full report in the IDTechEx journal Smart Labels Analyst.
To read the full two part feature, including company profiles, the major applications and the biggest projects, see issues 66 and 67 of Smart Labels Analyst. These can be purchased separately or subscribe to the monthly journal for a year.