Next-Gen RFID Heats Up

Better late than never. That's the mantra in the RFID market, where new standards are helping radio frequency identification to gain traction in several vertical markets.

In recent years, RFID chips, known as tags, were supposed to revolutionize the way retailers and other businesses track products through their supply chains. Using RFID tags in combination with antennas on factory floors or in retail stores, businesses intended to track products' every movement. Likewise, hospitals and government agencies hoped RFID would allow them to locate and track assets--everything from wheelchairs to medications to office furniture. But lofty prices and incompatible products limited RFID's initial acceptance.

Newer standards, including so-called Gen 2 chips, have revitalized interest in RFID. Compared to earlier RFID chips, Gen 2 chips offer greater security, broad vendor support and a single worldwide standard that obsoletes proprietary RFID protocols.

"Gen 2 is the standard many organizations have been waiting for," says Ed Golod, president of Revenue Accelerators, a New York-based sales consulting firm that serves technology companies. "Finally, customers can focus their RFID efforts on business applications rather than compatibility issues." Demand for Gen 2 chips appears strong. Roughly 75 million to 125 million Gen 2 chips shipped in the first half of 2006, according to Venture Development Corporation, a market research firm in Natick, Mass. Overall Gen 2 shipments for the year should exceed 400 million chips, estimates Robert W. Baird & Co., a financial management firm in Milwaukee, Wis.

Early Gen 2 technology proponents include Impinj, Intermec Technologies, Texas Instruments, STMicroelectronics and Zebra Technologies. Impinj, for instance, in August unveiled Gen 2 chips that can store detailed product information. The chips target such vertical markets as transportation (airline baggage handling), pharmaceuticals (medicine tracking), retail supply chain (manufacturing plant locations) and food commodities (temperature and humidity fluctuations, etc.).

Eager Gen 2 adopters include METRO Group, one of the world's largest retailers. Many of the company's international retail locations, known as Metro Cash Carry, are using RFID readers from Intermec to track and trace pallets and thereby improve inventory management. Perhaps most importantly, the Intermec RFID readers can collect information from both Gen 1 and Gen 2 RFID tags.

"That approach provides investment protection," notes Jill Cherveny-Keough, director of academic computing at the New York Institute of Technology (NYIT). "You can't abandon one RFID standard for another. You need to ensure they work together." NYIT, a college in Manhattan, is testing RFID to track books in its libraries.

Although RFID still hasn't lived up to its early hype, standards such as Gen 2 are helping RFID to gradually become a mainstream technology.

Joseph C. Panettieri has tracked the Silicon Valley since 1992. He keeps a daily blog at techiqmag.com.