SINGAPORE--The Generation 2, or Gen 2, chip compliant to EPCglobal's standard may contain more features than required by businesses, according to an industry observer.
The Gen 2 chip was a result of "a compromise between a [number] of suppliers" in the RFID space, said Francis Dell'ova, business unit manager of RFID and RF memory products at ST Microelectronics, which manufactures RFID chips for various frequency bands. He spoke to ZDNet Asia on the sidelines of the RFID Connect Asia 2006 conference here.
The EPCglobal Gen 2 standard was released in 2004, and Gen 2-certified products were made available in 2005, Tan Jin Soon, executive director of GS1 Singapore, which drives the EPCglobal standard, said Wednesday at the conference. Last year, Tan noted that the standard helps to attain interoperability between tags and readers produced by different RFID suppliers.
While the Gen 2 chip combines improved and additional features compared to the Gen 1 chip, the production costs are higher, even though it is smaller, due to the manufacturing complexities of the next-generation chip, Dell'ova noted.
"We are thinking maybe they (users) don't need that many features," he said, adding that realizing cost optimization of Gen 2 is likely to take place in 1 to 2 years' time, when there is sufficient user feedback.
According to Dell'ova, it is possible to drive the costs down by focusing on the "efficient subset" of Gen 2 specifications, or the parts that are most needed, and this could set the stage for a third-generation chip.
Cost is said to be a major factor in the slow take-up rate for RFID. Analysts believe that the RFID tag costs need to drop to about 5 cents before its use becomes mainstream.
Philips, another RFID chip player, announced last week that it will use plastic instead of silicon, in a bid to cut chip costs. Dell'ova, however, noted that the use of polymer in RFID is still in the "laboratory stage" and "key issues" need to be resolved in order for the technology to graduate to an industrial level. The issues include support for ultra high frequency (UHF) bandwidth and the availability of non-volatile memory, or read-write capability.
The industry could see the price of the RFID tag fall to 5 cents or less this year, according to EPCglobal's Tan.
Tan said at the conference that Japan is aiming to produce a 5-cent tag by the end of 2006. The effort, spearheaded by the Japanese Ministry of Trade and Industry, also targets to introduce tags costing 2 cents by 2008.
Dell'ova added that ST Microelectronics is confident of producing a sub-2 cent Class 1 Gen 2 chip by 2008, provided the production volume exceeds 1 billion.