[November 29, 2005]

Omron Sets Sights On U.S. RFID Market

By DAVID SIMS
TMCnet CRM Alert Columnist

Omron Corporation, a $5.5 billion Japanese manufacturer of automation and sensing products, will invest $20 million worldwide over 2005 and 2006 as a first step in seizing a larger share of the U.S. and global radio frequency identification market.

The company's aggressive entry into the U.S. marketplace focuses on its RFID label inlay and reader products. It aims to take advantage of Wal-Mart Stores' RFID shipping tag mandate to its top 100 suppliers.

Wal-Mart's RFID mandate now requires its largest 100 suppliers to put RFID tags on shipping crates and pallets. Starting in 2006, this mandate will be rolled out to Wal-Mart's next largest 200 suppliers.

Omron president and chief executive officer Hisao Sakuta, who has appointed himself as project leader, said applications involving Wal-Mart suppliers and others that focus on supply chain management are purely RFID-related and thus "will enable us to put to use our decades of experience in automation and sensing markets."

According to some estimates, the worldwide market for RFID technology was $1.49 billion in 2004. The demand for RFID systems is certainly increasing. Some estimates are that the industry will be worth $1.95 billion in 2005 and as much as $26.9 billion in 2015, with a lot of the profits coming from the sale of RFID hardware components.

RFID applications are used for such functions as security/access control, toll collection, animal tracking and automobile immobilization as well as stocking Wal-Mart, Metro AG, Target, Tesco shelves and for "other uses" by the U.S. Department of Defense.

However, people are increasingly worried about the loss of privacy in widespread RFID usage, given the ability to easily track RFID-tagged products. And such fears, if not addressed, could hobble the RFID industry.

"[RFID] will make objects -- and the people wearing and carrying them -- remotely trackable," charges Katherine Albrecht, a spokeswoman for the consumer group. "We have rock-solid evidence that they are already devising ways to exploit that potential," she tells the AP.

In addition to Wal-Mart suppliers, Omron's RFID's sales initiatives here include other mass retailers such as Best Buy and Target stores, electronics, pharmaceutical and consumer packaged goods companies and the U.S. Department of Defense.

Omron RFID products sold in the U.S. are designed and manufactured in Japan. Initial U.S. investments have included a headquarters office and training center for the division in Schaumburg, Illinois, a Chicago suburb. A testing center to help customers and systems integrators validate applications will be opened in nearby St. Charles, Illinois. Marketing and sales operations in Schaumburg will support sales and technical support teams serving the entire U.S. Following this U.S. initiative, Omron RFID will expand and create similar operations on the European continent and in China.

RFID tags act as portable databases that allow information to be accessed and modified through Reader/Writers at any point on the supply chain. They provide a non-contact, non-line of sight method of automatically gathering, inspecting and distributing detailed information.

Industry observer Evan Schuman has written in a review of Albrecht's book, Spychips, that it contains "a stunningly powerful argument against plans for RFID being mapped out by government agencies, retail and manufacturing companies. Sources and evidence for their arguments come from patent applications, interviews and confidential documents carelessly left on vendors' Web sites."

Among other examples the book's authors, Albrecht and Liz McIntyre, use vendors' own patent filings to bolster their case, such as the infelicitously-titled IBM filing "Identification and Tracking of Persons Using RFID-Tagged Items," and a Phillips Electronics 2003 patent application advocating placing RFID tags in shoes so they can be detected by RFID scanners embedded in floors.

Headquartered in Kyoto, Japan, Omron Corporation was established in 1933 and has been in the RFID business for over 20 years.

David Sims is contributing editor for TMCnet. For more articles please visit David Sims' columnist page.

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