Makers of radio frequency identification (RFID) hardware, which includes IC-based RF "tags" and reading devices, are rapidly approaching a time, industry analysts say, when that vision can become a reality. Equipped with a new breed of short-range RFID systems, the manufacturers plan to deploy their technology in retailing, banking, public transit, quick-service restaurants, hospitality and vending.

Using similar technologies, they're also looking at a host of other new applications. The most prominent of those are supply-chain management and inventory tracking, in locales ranging from high-end clothing stores to factory floor assembly lines.

"Up to now, the market has been largely driven by traditional applications, including pet identification, toll collection and automotive systems," said Michael Liard, senior RFID analyst for Venture Development Corp. (Natick, Mass.). "But we're starting to see an uptick in emerging markets, such as point-of-sale and supply chain."

In February, Texas Instruments RFid Systems made a major entry into the contactless payment market when it announced its new "proximity payment transaction platform," which includes a reader module and Proximity Integrated Circuit Card (PICC) chips. The platform is considered important because it complies with the ISO/IEC 14443 Type B standard, which allows for the greater security measures and higher data rates needed for financial transactions. It works by allowing transaction information to be stored on a radio frequency chip and securely transmitted over the contactless interface. American Express, MasterCard and Visa have already jumped aboard on the concept and endorsed the standard.

The first major piece of TI's platform, the Multifunction Reader Module, introduced on March 4, supports the low-frequency (134.2-kHz) technology already used in the popular ExxonMobil Speedpass, as well as 13.56-MHz technology. TI's circuit card chips, due out in the second quarter, include a configurable memory architecture and dynamic encryption capabilities. They can be packaged into various-sized cards, tokens and keyfobs.

Texas Instruments sees the new platform as an alternative to the non-RFID-type chip cards being touted in Europe, where online transactions are far less common than in the United States.

"The problem with the competing chip card infrastructure is that it caters to offline transactions, and therefore requires a more complex and expensive chip," said Andy Richardson, strategic marketing manager for wireless commerce at Texas Instruments RFid Systems (Northampton, England). "Most merchants prefer the idea of contactless payment, which is why it's gaining momentum in the United States."

The retail market has also been a focal point for Philips Semiconductors. On March 11, Philips announced that it would embed its RFID chips into the labels of every new garment bearing the Sisley brand name produced by European clothier Benneton. The semiconductor maker estimated it would ship 15 million RFID chips, based on its I.Code integrated circuits, for that application.

Philips I.Code technology includes a CMOS-based SLI line, which operates at 13.56 MHz and offers read distances of up to about five feet, and an HSL line that operates at 2.46 GHz and has a read distance of almost 10 feet.

Philips said that the I.Code-based labels are being used by Benetton to track its garments throughout its supply chain. As part of the initiative, all garment boxes are also to be fitted with I.Code-based labels. They are then tracked using I.Code-compatible readers and wireless-LAN netpads.

Philips' I.Code chips, embedded in the labels, are incorporated into garments during manufacturing. They are imperceptible to the wearer and remain in the clothing items throughout their lifetime. The labels store information relating to the style, size, color and intended destination of items. Benetton claims the technology will radically automate key aspects of its supply chain, starting from manufacturing and distribution and going all the way through to inventory control across the company's 5,000 stores worldwide.

In contrast to traditional bar-code technology, smart labels give users highly automated scanning that does not require line of sight and that allows multiple items to be scanned simultaneously. As a result, boxes containing a variety of Benetton garments, for example, can be scanned at once and information can be uploaded directly into the company's computer system.

"It's all about saving handling time," said Duverne of Philips. "They can do inventory much faster because they can check products by flashing a reader at passing items."

Engineers say that the technologies in the retail industry work effectively on the factory floor as well. Unlike retail, where short read ranges are often desirable to help maintain the privacy of users, factory floor customers want longer ranges. By increasing RF tags and their antennas from about 1 square centimeter to the size of a credit card, RF hardware makers have been able to boost the read ranges of their systems to well beyond 15 feet, in some cases. By doing so, they enable OEMs to quickly and easily track products as they travel down the assembly line and out the door.

Labels based on Philips Semiconductors' I.Code RFID technology are being used by the fashion industry to track garments through the supply chain.

"I.Code allows you to bring a pallet of goods through the portal reader and instantly recognize the amount, size and color without any labor or handling of boxes," Duverne said.

RFID hardware manufacturers such as Omron Electronics LLC (Schaumburg, Ill.) have incorporated an additional twist for factory floor users by developing an RFID tag with high-speed read/write capabilities while moving at speeds of up to 1,180 feet per minute, or about 20 feet per second.

"Users never have to worry about replacing this tag because they've written to it too many times," said Nick Infelise, product-marketing manager for Omron's AutoID group.

For the near future, experts also have high hopes for an RFID technology developed by Alien Technology Corp. (Morgan Hill, Calif.) that employs a novel manufacturing method known as fluidic self-assembly. Called Nano-Block ICs, the fluidic self-assembly chips are poured over a substrate, where they settle into recesses and are made into electronic package code (EPC) tags. The unusual manufacturing method could enable Alien to cut the cost of RFID chips to as low as 5 cents apiece, the company has said. In January, Alien announced the first major commercial order for the EPC technology when the Gillette Co. ordered 500 million of the devices.

If such technologies succeed in cutting costs to as low as 5 cents apiece, industry observers say, it could open up opportunities in products ranging from lipstick containers to breakfast cereal boxes.

If that happens, these observers say, RFID's current annual market size of $964 million would be dwarfed by its future performance. And even if prices don't drop that sharply, analysts say the RFID market can still expect rapid growth during the next five years.

"By late 2004 or early 2005, we're going to see an uptick," said Liard of Venture Development Corp. "The supply chain will bolster this market for several years to come."