RFID in China – the next frontier

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 4/19/2005

At a recent conference sponsored by InformationWeek, Addons Wu, the chief information officer for General Motors in China, announced that GM would not implement RFID technology in its assembly and supply chain operations until the Chinese government decides on a standard for RFID tags.

GM China is not alone. In fact, look before you leap might best describe the current state of RFID in China, according to some who have traveled and worked with Chinese business leaders.

“To put RFID in Asia in context, you have to start with the premise of the China business model,” says Stanley Chew, director of international operations for HighJump Software (952-947-4088). “Most of the goods are manufactured by contract manufacturers who tend not to make a big investment in technology because labor has been plentiful and cheap.”

In fact, Chew adds, most Chinese manufacturers and distributors don’t have anERP, warehouse management or other prerequisite information system to support RFID.

Those same manufacturers are now expressing concerns about how RFID and compliance labeling is going to affect them. “They know that to maintain their competitive advantage they have to be more than just the low-cost provider,” Chew says.

That realization has resulted in two different dialogues about RFID in China, says Mark Mechem, director of business advisory services for the U.S.-China Business Council (202-429-0340).

One camp involves the business leaders who are doing the manufacturing. “They don’t want to support multiple tag technologies for the United States, Japan and the EU and they don’t want a Chinese national standard being foisted on the world,” says Mechem.

Those same leaders have another agenda: If they want to become globally competitive, they have to adopt international best practices, especially around the supply chain. “Logistics is an area where China does not excel,” explains Mechem.

At the same time, there is another camp inside the government that has a keen interest in developing an RFID market for China. “They want to collect royalties on their own intellectual property rather than pay royalties to Western vendors,” says Mechem.

It is probably too early to tell how this will all play out. But for anyone doing business in China, it will bear watching. “The Chinese know that RFID is coming,” says Mechem. “I believe they’ll try to leverage their power to have an influence on the direction their standards will take.”