November 30, 2005, 10:32 AM — Omron Corp., a major Japanese sensor and automation systems maker, aims to invest US$20 million between April 2005 and March 2007 to capture a larger share of the U.S. and global markets for RFID tags, it said Wednesday.
The push comes partly in reaction to Wal-Mart Stores Inc.'s RFID initiative that 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 retailers such as Best Buy and Target stores 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 combo, on a roll and supplies them to companies which package them for use, for example 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.
While Omron doesn't charge for the defective inlays they do represent a nuisance to the tag makers. Omron claims yields of between 95 percent and 98 percent with its RFID inlays, which is significantly above the industry average, it said. Omron said average yields are around 80 percent -- 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 chief executive officer. Offices have already been established in Schaumburg, Illinois, 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 tags for 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.