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IDTechEx on RFID Adoption in China

Research firm IDTechEx today released an assessment of RFID adoption in China. This article summarizes the key findings on standardization, impediments to adoption, the goverment's role, and the scale of Chinese deployments.
Aug 30, 2006This article was originally published by RFID Update.

August 30, 2006—Research firm IDTechEx today released an assessment of RFID adoption in China. Summarized below are the key findings:
  • Large scale projects. Much of the interest in China's RFID activity is retail- and supply chain-oriented. After all, 65% of the goods sold by Wal-Mart are manufactured in China. Were these goods to eventually be tagged at the point of manufacture in China, the volumes would be enormous. However, such an eventuality is years away, if it happens at all. Most of the current RFID activity in China actually serves the domestic market. Due to the country's size, the magnitude of its RFID initiatives is often far larger than analagous initiatives in other countries. IDTechEx cites a ten million-unit smart ticket university campus deployment and a 120 million-unit purchase for pig-tagging in a single Chinese province. Consider also Confidex's contract, announced today, to provide 125 million RFID tickets to the Guangshen Railway Company (see yesterday's HF RFID Market Sees High Growth and 125m Order). Perhaps the best example is the government's ID card initiative, which will see 900 million high frequency RFID cards issued by the end of 2008. According to IDTechEx, the value of the order is $6 billion.
  • Government drives demand. Much of the RFID activity in China is driven by government programs. And it's not just ID cards and train tickets. Many initiatives target safety improvements, such as the tracking of miners or hazardous materials like fireworks and gas cylinders.
  • Dubious prospects for a Chinese standard. IDTechEx points to the Chinese desire to protect its commercial interests by retaining some autonomy with respect to RFID standardization. Executive secretary of the new national standardization workgroup Dr. Wenfeng Wang is quoted as saying, "If the RFID standards cannot be supplemented, adjusted or modified by China, the tremendous economic benefit brought by RFID will be abated." At the same time, Dr. Wang acknowledges the need for China to avoid isolating itself on the issue. Whatever route China chooses -- pursuing a domestic standard, or not -- may prove irrelevant, as the market is moving faster than the government. EPC standards are seeing adoption already, and with the recent incorporation of Gen2 into the ISO standard for ultrahigh frequency RFID (see ISO Incorporates Gen2 into RFID Standard), that adoption is only expected to accelerate. IDTechEx says that 2007 is the earliest the government could establish a Chinese alternative, giving EPC that much more time to become entrenched as the de facto standard. Recall that ABI Research also recently predicted EPC's success on the mainland due to how slowly the Chinese government is moving (see Chinese RFID Standard Increasingly Unlikely).
  • Numerous impediments to further adoption. The cost of RFID is felt more acutely in China than in North America or Europe. This of course makes ROI that much more elusive for would-be Chinese implementers than for their counterparts in other regions. Exacerbating this issue is the fact that corporate information systems are neither very widespread nor mature, so even if there were higher adoption of RFID in China, it would be difficult to leverage that data into an organization or between trading partners. IDTechEx points out that "nearly all the RFID deployments in China so far have been close-loop applications." Lastly, labor costs are quite low in China, even by Chinese standards. It is often more economical for a company to hire workers to complete a process manually than it is to strive for automation by deploying technology like RFID.

Read the entire article from IDTechEx
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