Royal Philips Electronics NV and Sony Corp. announced Thursday that they have formed a partnership to develop radio frequency identification (RFID) technology they hope will become the standard for mobile payment systems and work in a wide variety of short-range consumer electronics devices, laptops and handheld computers.
The two global electronics giants believe their RFID device -- which they call Near Field Communications (NFC) -- can beat the rival Bluetooth short-range communications system already embraced but not fully deployed by a wide range of mobile phone and computer manufacturers.
Jeremy Cohen, a spokesman for Royal Philips in Amsterdam, said that if the two companies can achieve volume production they could produce NFC devices "at a cost of pennies vs. dollars for Bluetooth."
RFID tags work by embedding a miniature transmitter in a small token attached to a key ring, a "smart" credit card or in a cell phone. The chips have a short range of 15 to 300 ft. and are read by a companion device located in a point-of-sale terminal, such as ExxonMobil Corp.'s Speedpass device embedded in a gas pump. RFID chips also include built-in memory modules ranging from 64KB to 1MB for storage of such things as "electronic wallet" information needed for mobile commerce.
Philips/Sony RFID chips will transmit in the unlicensed 13.56-MHz band; ExxonMobil currently uses the 134-KHz band, but is evaluating the 13.56-MHz band. Bluetooth systems are short-range radios with a range of about 3 ft. that transmit in the unlicensed 2.4-GHz band (the same used by wireless LANs) and are capable of voice communications. The voice application is lacking in RFID chips.
In a recent report, Gartner Inc. in Stamford, Conn., estimated that today RFID would cost between 28 cents for disposable chips and up to $20 for rugged transponders used in harsh environments. But Gartner predicted that simple, passive RFID tags could sell for as little as a nickel.
William Clark, Bluetooth analyst at Gartner, said Bluetooth chip sets cost about US$5 each. He finds the Sony/Philips estimates of RFID chips costing pennies "hard to believe." But, Clark said, if the Sony/Philips joint venture can achieve economies of scale and convince other manufacturers to embrace the open NFC standard, "this would pose a significant threat" to the much-hyped Bluetooth standard and industry.
Cohen said Philips already has a leg up in the mobile payments industry due to the fact that Visa International Inc., based in Foster City, Calif., already uses the company's Mifare RFID chip technology in its smart credit cards, which are widely used in markets outside the U.S.
Joe Chouinard, vice president of Visa and co-president of the Mobile Payments Forum, which includes American Express Co., MasterCard International Inc., Visa and Tokyo-based JCB, said Visa and the forum would not take sides in a battle of payment technologies for now.
"We're device-neutral," Chouinard said, adding, "there's a number of technologies that might take off for [mobile] payments. But as far as we're concerned, the jury is still out." The forum, Chouinard said, is working to create standards that will support all types of mobile payment technologies.
Officials from the Bluetooth Special Interests Group were not immediately available for comment.