RFID Tag Makers Escalate ProductionRFID Tag Makers Escalate Production

Although radio-frequency identification garnered lots of attention in 2004, businesses aren't expected to rely heavily on the technology for several more years. Nonetheless, manufacturers developing the tiny tags are ramping up production.

SmartCode Corp. recently said it will expand production to about 30 billion tags a year by 2006. Next year, suppliers with hefty manufacturing clout, such as Texas Instruments Inc. and Philips Semiconductors, will begin their RFID chip production. These companies join Alien Technologies Corp. and Symbol Technologies Inc., which are already selling RFID tags that comply with specifications from EPCGlobal Inc., the industry group overseeing standards for passive RFID technology. Unlike active RFID tags, which have been in use for at least a decade, passive tags don't have batteries and instead draw their power from nearby RFID readers.

Passive RFID is the technology of choice for the mandates--some which kick off in January--from Wal-Mart, Target, the U.S. Department of Defense, and others. It's also the preferred technology for pharmaceutical companies and the U.S. Food and Drug Administration, which are testing RFID to combat drug counterfeiting. These initiatives generally call for suppliers to affix RFID tags on cases and pallets of goods and are expected to drive up demand for RFID tags and related equipment; a wild card for demand is the potential use of the identification technology in item-level shipments in the pharmaceutical and electronics industries.

Although Texas Instruments and Philips say they'll have no problem meeting demand in the years to come, they're waiting for EPCGlobal to finalize the next-generation, or Gen 2, specification for RFID chips. Debate lingers over when that specification will be ready.

"It's been postponed twice already," says Roy Apple, VP of business development for SmartCode. "Anyone who predicts this without hesitation is shooting himself in the foot."

Bill Allen, director of marketing communications for Texas Instruments' RFID group, says the next-generation specification is "locked in," and final ratification should happen by year's end. Texas Instruments is making sample chips based on the specification. Once ratified, it will be ramping into volume production in the millions per month by the third or fourth quarter.

Manuel Albers, director of business development for identification products at Philips, says it appears the next-generation specification may get final approval at the EPCGlobal board meeting scheduled for Dec. 3. Once the specification is finalized, Philips plans to have its first devices ready in the first quarter and mass production in the third quarter.

It's likely that the FDA is likely to recommend the use of RFID tags for drug shipments which operate in the megahertz frequency range, not the UHF range that are being used by most retailers, Albers says.

"Our main concern now is in working closely with the infrastructure providers to make sure they are ready to supply equipment like [RFID] readers that are Gen 2 compliant," he says.

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