Despite lingering fears of incompatibility between China’s upcoming radio frequency identification standard and international standards, the Chinese government’s plans to impose a mandatory standard for RFID are unlikely to result in sharply higher costs for companies that use the technology, according to an Oracle executive.
Despite lingering fears of incompatibility between China’s upcoming radio frequency identification standard and international standards, the Chinese government’s plans to impose a mandatory standard for RFID are unlikely to result in sharply higher costs for companies that use the technology, according to anOracleexecutive.
The question of RFID standards in China is important because of the country’s role as a global manufacturing center, with factories here churning out a large variety of products headed for export.
Mandating the use of an incompatible RFID standard in China would drive up the cost of using the technology, and manufacturing products for export from China would be more expensive and less competitive with goods produced elsewhere, said Kevin Walsh, vice president of Internet technology at Oracle, during an interview with IDG News Service in Shanghai.
“It’s the last thing that they want to do,” said Walsh, who splits his time between Oracle’s Redwood Shores, California, headquarters and China.
One company, SparkiceLab of Beijing, claims to have received the exclusive rights to issue National Product Codes (NPC), the Chinese equivalent of the Electronic Product Codes (EPC) designed in the U.S. that outline what information should be contained in the RFID tag. All importers and exporters in China are required to use NPCs by 2008, according to SparkiceLab.
While China is entitled to set its own RFID standards and requirements, the country will also have to meet the supply-chain demands of foreign companies if it wants to remain competitive as an international manufacturing center, Walsh said. “If you’re going to be producing products for export you can certainly regulate and control the part that’s domestic, but you can’t regulate what your customer wants,” he said.
Moreover, if China imposes an RFID standard that is incompatible with other standards, this would undermine the effectiveness of using the technology to more efficiently manage supply chains and would make the technology more expensive to use, by requiring multi-protocol RFID tag readers, for example, Walsh said.
“You have to find a way to make these things work together or else what’s the point of doing them in the first place?” he said.
China’s economy is on a roll this year, despite attempts by the government to slow things down and prevent overheating. The State Development and Planning Commission recently raised its estimate of how fast China’s economy will grow this year from 7.2% to 9%. That growth has been fueled by a surge in international trade. Chinese exports hit $360.6 billion during the first eight months of this year, up 35.8% compared to the same period last year, according to China’s Ministry of Commerce (MOFCOM).
According to MOFCOM, much of this export growth has been driven by demand for high-value products, such as precision machinery and high technology. These are the kinds of products where using RFID tags will be cost-effective and widespread, Walsh said. “You can’t use (RFID tags) on a product that costs 1 cent or 2 cents when the tag costs 20 cents,” he said.
The RFID tags that will be used to track high-value goods will be far more sophisticated compared with the passive systems in place today that are used to track inventory, Walsh said. Tags will be able to not only identify an item when it passes a sensor but also record information about what has happened to that item in between two sensors, such as whether the shipment has been exposed to heat or moisture that could damage the item, he said.
The adoption of RFID technology in China will create a flood of information that companies will have to manage and understand, opening up new sales opportunities for Oracle’s database and application products, Walsh said.
“That’s really going to be an explosion for our business,” he said.
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