Philips and IBM in major R&D alliance

26 Jan 2004

Electronics giant Philips has joined forces with IT giant IBM to jointly research and develop customer systems for radio frequency identification (RFID) and smart card applications that could be rolled out across global retail and manufacturing organisations.

The two firms will combine their industry expertise to address the growing need for advanced high security smart cards and RFID technology in day-to-day business processes, operations and consumer lifestyles.

Technologies such as RFID are finding widespread early adoption in a variety of places, ranging from inventory control in the US Army to collaborations between the Massachusetts Institute of Technology (MIT) and Wal-Mart, to enhance inventory management and the shopping experience of the consumer. Agricultural uses of RFID have also been mooted, with farmers using RFID chips to keep an eye on cattle movements and milk shipments.

However, the advent of RFID in the retail world has also brought with it a raft of consumer concerns over privacy, an obstacle the technology industry will have to work hard to overcome.

Both Philips and IBM intend to roll out RFID solutions for supply chain management, retail and asset management, as well as smart card solutions for finance, e-government, transportation and event ticketing.

As part of the alliance, IBM is building an RFID system to be used by Philips’ semiconductor division’s manufacturing arm in Hong Kong. The system is aimed at improving business processes within the manufacturing and distribution supply chain as well as inventory management and customer satisfaction. The project, which started in November, will be fully live during the course of this year.

Through the RFID alliance, Philips hopes to eventually roll out end-to-end large-scale global projects for its retail and manufacturing customers.

“Our relationship with IBM will mean stronger time-to-market, improved customer confidence levels and the opportunity to leverage each others’ brands and expertise,” said Scott McGregor, president and chief executive officer, Philips Semiconductors. “It is Philips’ mission to continue bringing greater benefits to both companies and today’s ‘Connected Consumers’ – enabling them better access to information, entertainment and services. To this end, the RFID system in East Asia being built by IBM is a good illustration of Philips adopting the very technology it is driving into the marketplace.”

The vice president of IBM Global Service’s wireless e-business division, Terry Hopkins added: “We are committed in helping companies boost levels of advanced product tracking and inventory control, as well as developing an end-to-end assessment of the specific costs and benefits in adopting RFID and smart card technology within their business processes.”

By John Kennedy