RFID in Japanhttps://www.forbes.com/home_asia/newswire/2004/03/21/rtr1306512.html
FEATURE-Japan touts tiny tracking chips as next big thing
Reuters, 03.21.04, 8:58 PM ET
By Eriko Amaha
TOKYO, March 22 (Reuters) - A pile of dirty dishes is a sign of good business at Japan's conveyor-belt sushi restaurants, but those dishes can be a huge hassle when it comes to tabulating the bill as each plate carries a different price tag.
But at Oban, a sushi bar in downtown Tokyo, a waitress plucks a paperback-sized reader from her waist belt, places it on top of a stack of plates and in a matter of seconds the bill is calculated.
The Oban waitress is using a system called "Oaiso", which uses a reader to scan IC tags attached to the plates and transmits the data to another machine that produces the bill.
Although the market for IC (integrated circuit) tags, tiny traceable microchips that can be used for product identification and inventory control, is still in its infancy, some analysts say the technology may be Japan's next big thing.
"It's a product that has quite a lot of long-term potential. The market could be quite big," said William Gallagher, analyst at Credit Suisse First Boston (CSFB).
Private research firm Yano Research Institute expects the market for just IC tags to expand to 24 billion yen ($225 million) in 2010/2011 from about four billion yen in 2003/04.
The Japanese government, however, is much more bullish.
It sees the use of IC tags taking off by 2007 and estimates the market, including peripherals like software systems, will grow to as much as 17 trillion yen ($159.2 billion) by 2010/11 compared with an expected 500 billion in 2005/06. Figures for the current year were not available.
"The size of the IC tags will get smaller and prices will come down," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities Inc, adding that the tags could be a driving force in the stock market in coming years.
"They can be used in various fields, so it will certainly become a key topic for the market."
DRIVING SHARES HIGHER
The Oaiso system, developed by unlisted Ishino Seisakusho Co Ltd and Glory Ltd <6457.T>, Japan's biggest maker of money-handling machines, is already used at about 120 sushi restaurants in Japan.
Its success helped push Glory's shares up 67 percent last year as the company focused on the tags, as well as IC cards, which use the same radio frequency as IC tags but only need to be passed within range of a frequency acceptor to read and store information in a chip.
UFJ Tsubasa Securities analyst Ken Maruyama says the stock, which is now trading around 1,800 yen, has upside potential of another 20 to 30 percent.
The market buzz over the new technology has also pushed up other stocks like Toppan Forms Co <7862.T>, an industry leader in printing business forms.
The stock jumped as high as 1,485 yen in early March, a level last seen in November 2002, after the company announced plans to manufacture new IC tags this fall.
Bigger players are also gearing up for what could become a post digital-products boom.
Electronics conglomerate Hitachi Ltd <6501.T> has developed tiny IC tags called mu-chips.
The chips are already being used in advance tickets for the Aichi World Exposition, scheduled to open in March 2005 in Aichi Prefecture, western Japan, to prevent counterfeiting and help organisers manage admissions.
Hitachi expects sales of mu-chips to grow to 15 billion yen in 2005/06 from less than 100 million yen in the year to March 2003.
Omron Corp <6645.OS>, Toppan Printing Co Ltd <7911.T>, Dai Nippon Printing Co <7912.T> and NTT Data Corp <9613.T> are also among the companies taking aim at the market.
PRIVACY, TECHNICAL HURDLES
Because of the sheer volume of information IC tags can store, possible applications range from administrating public records and medical files to tracking library books and delivery goods.
Department store operator Mitsukoshi Ltd <2779.T> said it would introduce IC tags, which some analysts say may one day replace product bar codes, this fall on limited items to manage inventory and sales.
Japan Freight Railway Company in January installed a computer system by NEC Corp <6701.T> which uses IC tags, also called RFID (radio frequency identification) tags, to monitor its 65,000 cargo containers.
But there are still obstacles to wider applications because of privacy issues and technical problems.
In the United States, for instance, retail giant Wal-Mart Stores Inc (nyse: WMT - news - people) announced plans to introduce RFID tags on their products.
But the retail giant has run into strong objections from privacy advocates who worry about a corporation's ability to track consumers' every move.
Some analysts are also sceptical that the use of IC tags can grow into a wide-ranging market.
"The real money, to me, seems to be in the software side of taking information and processing it rather than printing of the tags," said CSFB's Gallagher. Toshio Takahashi, an analyst at Mizuho Securities who follows Toppan Printing, Japan second-biggest printer behind Dai Nippon, agrees.
"A tag currently costs about 30 to 40 yen and even if Toppan Printing sells as many as 100 million of them, it would only make three to four billion yen," he said.
"That's not much for a company which has more than one trillion yen in sales and about 70 billion yen in recurring profit."
Hideyuki Matsue, an analyst at Yano Research, adds that companies would have to come up with a standard platform for the tags and related systems as manufacturers, distributors and retailers would all be monitoring their products.
"Because this involves many firms, the key for this technology to take off is standardisation," Matsue said. ($1=106.84 yen)