RFID Lowdown: China’s RFID Woes

April 29, 2006

China’s RFID Woes

Wal-Mart’s attempt to get all its suppliers to apply RFID tags to their products is running into trouble with Chinese manufacturers reluctant to do so because various reasons, including rising costs and low profit margins. The American retailer, looking to usher in transparency in supply chains, announced in April 2004 that it had asked its top 100 suppliers to RFID-tag all goods supplied from the beginning of 2005. But the plan seems to be going awry, with Chinese companies that currently provide over 65 percent of Wal-Mart’s non-food products reluctant to comply with Wal-Mart’s directives.

One reason is that they have to bear the cost of not only the tags, but also the initial investment costs of software, scanning hardware, and consulting services. The returns from investing in RFID deployments are reaped only by a few parts of the supply chain such as shipping, packaging, warehousing, and marketing, being virtually non-existent for the supplying units. So the question arises – why should the suppliers have to bear the costs associated with RFID when the retailers reap all the rewards?

Even if a few suppliers are willing to bear the associated costs, their RFID initiatives are hampered by the temporary licenses they are issued to use the 860960 MHz UHF band that is presently assigned by the Chinese government for RFID use. The problem is further complicated by the fact that the frequency band is already congested with the services provided by GSM and CDMA mobile phone operators. Combined with China’s disinclination to let a foreign RFID standard control its local market, the suppliers find themselves in a rather difficult situation.

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April 29, 2006 | Permalink