RFID market remains under construction
EPCglobal's Gen 2 standard seems a shoo-in for acceptance, but global agreement on RFID standards is a ways off
By Dann Anthony Maurno, contributing editor -- Manufacturing Business Technology, 9/1/2005 6:00:00 AM
Ratification of RFID standards group EPCglobal's Class 1 Generation 2 UHF Air Interface Protocol—Gen 2, for short—has not yet brought RFID vendors and their customers under a single umbrella where interoperability is a given and adoption is simple.
RFID technology vendors that have introduced compliant offerings say the applications are well received by users, but the RFID story is still unfolding. The end is by no means clear.
Gen 2 defines the physical and logistical requirements for RFID systems operating in the ultrahigh frequency (UHF) range. It applies only to "supply chain RFID" hardware—i.e., the tags and readers required to meet the mandates of big-box retailers. It's an open standard that also supports cross-vendor compatibility and promises better information storage capability, security, reliability, and faster read rates—all leading to a drop in RFID tag and reader costs, and faster adoption of RFID technology.
Furthermore, the Gen 2 standard is the supporting platform for EPCglobal's electronic product code, or EPC. EPC is a number that uniquely identifies a specific item, pallet, or case. Think of it as the grammar for the information carried on an RFID tag. It is the combination of the Gen 2 standard and EPC that supporters say can fulfill the promise of supply chain visibility down to the item level.
Indeed, 2005 was supposed to be the "Year of the Integrator." With the Gen 2 standard newly ratified and ISO certification a virtual certainty, an army of RFID consultants were going to implement Gen 2-compliant RFID at hundreds of companies, using thousands of readers and millions of tags.
But something different happened, and perhaps something better. Potential users have taken a cautious and analytical approach to RFID, making their needs known to vendors and giving vendors time to respond. As Erik Michielsen, a director for ABI Research, Oyster Bay, N.Y., observes, "With the Gen 2 standards in development, and larger players promising to drive down the cost, there was a waiting game for larger-scale deployments, which parallels an education ramp-up."
Bob Scher, CEO of Dynasys—the distributor and technical support center in the U.S. for Texas Instruments RFID products, and for IDmicro's active RFID devices—sells Gen 2 tags, readers, and evaluation kits. "Education is the real story now," he says. "We sell more evaluation kits than production quantities, which tells me [companies] are experimenting, not rushing in."
Kevin Ashton, VP at RFID technology provider ThingMagic, concurs. "We see growth wherever we look, but we haven't seen the hyper-growth that venture capital-backed companies and analysts expected."
"2005 is the year of a market in development, not an explosion," according to Alan Melling, Symbol Technologies'senior director of business development. "We appear to be in the early stages of the adoption wave, and building," says Melling, adding that hardware vendors are ramping up production in time to meet customer demand for Gen 2 products.
What is Gen 2-compliant?
This question is a bit dicey at the moment. MET Laboratories,EPCglobal's testing partner, offers the "authorized" Gen 2 conformance test system. In theory, no company can claim its product is Gen 2-compliant without testing by MET, whose first tests took place this past August.
Meanwhile, vendors have been seeking the nod of such credible third parties as benchmarking organization and testing laboratory ODIN Technologies, which has tested tags from Alien Technologies, Avery Dennison, Impinj, Symboland, and Rafsec. In June, it released a study of handheld RFID readers designed to be Gen 2-compliant, citing Symbol, Psion, and LXE as market leaders.
Vendors also conduct interoperability testing to ensure the equipment works universally. "Interoperability testing is the biggest delay in any new standard," says Melling. "The technology isn't useful until that happens."
The International Organization for Standardization (ISO) also has given its indirect imprimatur to Gen 2. On June 7, candidate amendment ISO 18000-6 Part C, based on the Gen 2 standard, passed a preliminary ballot. The specification's final vote will be toward year's end, and the chances of its adoption are said to be very good.
But if Gen 2 standards are on their way to adoption, the position of EPC itself is less firmly guaranteed. With ISO 18000-6, the world will have a Gen 2-based standard that does not require EPCglobal membership—or the embrace of the EPCglobal numbering system—for its use.
Here's where things get complicated. A benefit of EPCglobal membership is assignment of a manager number, the part of EPC that identifies a company or entity. Several companies base this number on their global trade identification number, or GTIN. What the EPC manager number offers above a GTIN is a serial number to uniquely identify an item, pallet, or case.
GTINs are assigned by nongovernment industry organizations EAN International and the Uniform Code Council(UCC) for use in bar codes and RFID applications. EPCglobal is a joint venture between EAN and UCC (which have since merged into the global organization GS1). A company that joins EPCglobal, then, pays twice—once for a GTIN, and once for an EPC manager number.
EPCglobal says membership benefits go beyond the EPC number to include access to best practices for consumer privacy and public policy, certification and compliance testing through MET Laboratories, and links with other subscribers to create pilots and test cases. However, testing, influence, and access to other RFID users are available with or without EPCglobal membership—and its $75,000+ per year membership fee.
For this reason, some countries—China, in particular—question the value of EPCglobal membership. As a manufacturing hub with $438 billion in exports in 2003, and a $15-billion supplier to Wal-Mart, China's endorsement of the EPC numbering convention is vital to its adoption worldwide, but the country is seemingly poised to develop its own RFID standard to avoid paying royalties to EPCglobal.
Some companies use their GTINs in lieu of EPC manager numbers. Michael Guillory, vice chairman of ISO's U.S. Technical Advisory Group, says with GTINs in hand, and a no-cost ISO standard on the way, "China doesn't see the value of sending $100 million in hard currency to a U.S.-centric organization for no benefit other than to sell products it is already selling."
Other obstacles
The Department of Commerce says ensuring interoperability across systems and countries—and regulation of hardware and software—are impending issues. The U.S.-allowed spectrum is broader than elsewhere, and Gen 2 largely reflects the U.S.-allowed spectrum.
Early signs of global cooperation are fairly good. The Federal Communications Commission has modified regulations for RFID operation in several bands to more closely reflect European and Australian regulations. Asia/Pacific countries—including China, Japan, and South Korea—are allocating UHF spectra for use with RFID. Japan, in particular, is revising regulations to allow a frequency band for unlicensed, low-power, passive-tag RFID systems, which follows the U.S. model—and Gen 2-defined frequencies—more closely.
Yet China's hesitation is again at issue. As recently as June, it remained unconvinced of the necessity of Gen 2 compliance. However, there are signs of a thaw. EPCglobal President Mike Meranda conducted a goodwill tour of Southeast Asia in late July, and insiders say Chinese companies are beginning to see EPCglobal participation as a shorter route to global trade than developing their own standards or numbering schemes.
If, as Symbol's Melling believes, 2005 is a year of development—if not full-scale implementation—it has proven to be a remarkable year in which customers are demanding system rationalization, vendors are responding, and best practices are sorting out. The second wave of EPC adopters can expect a more smoothly operating solution. Says ABI's Michielsen, "Supplier momentum is increasing, and new software applications are taking this data, making it manageable, and tailoring it for decision-making."
As for the third wave of adopters waiting for all the kinks to be straightened out, they will have to be patient a bit longer. Some experts predict fully commoditized Gen 2 RFID between 2008 and 2010. "There's light at the end of the tunnel," concludes Michielsen.
