Japan's Omron targets RFID tag market

IDG News Service - Omron Corp., a major Japanese sensor and automation systems maker, aims to invest $20 million between April 2005 and March 2007 to capture a larger share of the U.S. and global markets for radio frequency identification (RFID) tags, it said Wednesday.

The push comes partly in reaction to Wal-Mart Stores Inc.'s RFID initiative, which already has its top 100 suppliers attaching RFID tags to shipping crates and pallets destined for the retailer. Wal-Mart will expand this to cover its next 200 largest suppliers in 2006.

"Because Wal-Mart has so much clout, that's an obvious start, but we are interested in entering any market and doing business, particularly with retailers, consumer electronics outlets and the pharmaceutical industry," said James Seddon, a spokesman for Omron in Tokyo.

Other targets for the company's U.S. push include retail stores such as Best Buy Co. and Target Corp. and the U.S. Department of Defense, which has its own RFID mandates for suppliers, according to Omron.

The company is hoping to attract customers by producing more reliable RFID inlays than its competitors, Seddon said.

Typically, Omron produces RFID inlays, which is the name given to an RFID chip and antenna combination, on a roll and supplies them to companies that package them, for example, for use as stick-on labels. Because they are produced on a roll, it's difficult to remove faulty inlays, so label makers receive both working and defective inlays from manufacturers.

Although Omron doesn't charge for the defective inlays, they do represent a nuisance to the tag makers. Omron claims yields of 95% to 98% with its RFID inlays, which is significantly above the industry average, it said. Omron said average yields are around 80% -- meaning roughly one in five tags is defective.

As part of this push, the company will move its RFID operations into a new division that will be directly under Hisao Sakuta, Omron's president and CEO. Offices have already been established in Schaumburg, Ill., and in Amsterdam to target the U.S. and European markets, respectively. The division is planning to open an office in Shanghai in March 2006 to target the Chinese market.

"RFID is an important, global initiative which requires a large investment," Sakuta said in a statement. "I believe RFID could be a major growth engine for the company."

Omron isn't the only Japanese company to have taken notice of Wal-Mart's RFID tagging initiative.

Earlier this week, a group of major Japanese electronics companies formed a consortium to work out guidelines regarding the use of RFID tagsfor inventory control. Part of the group's work will be to ensure interoperability between any domestic Japanese system and those being used in other countries. Wal-Mart's decision to require tagging was a major driver behind formation of the group.

The Home Appliance Electronic Tag Consortium was founded by Sony Corp., Toshiba Corp., Hitachi Ltd. and Matsushita Electric Industrial Co. (known for its Panasonic Corporation of North America unit), the four companies said this week. The group also counts Sanyo Electric Co., Sharp Corp., Victor Company of Japan Ltd. and Mitsubishi Electric Corp. as members and Mizuho Information & Research Institute Inc. as coordinator.