Philips Semiconductors plans to deploy millions of its radio frequency identification (RFID) microchips in China's fast-growing retail sector, according to president and chief executive Scott McGregor. The move comes after an announcement last week of a worldwide project with casual clothing manufacturer Benetton. Mr McGregor said: 'We have made some strides penetrating the China market, starting with the transportation sector. But the retail industry provides even larger opportunities for our RFID integrated circuits.' The Netherlands-based chipmaker, along with partners Lab ID and Psion Teklogix, is undertaking one of the world's largest and most comprehensive item-level implementations of RFID technology in the retail market. Clothes produced under Benetton's core brand, Sisley, have been fitted with RFID labels based on Philips Semiconductors I.CODE chips. Benetton will use these 'smart labels' to track garments across its supply chain using I.CODE-compatible readers and wireless local area network-linked pads, which were developed and manufactured by Lab ID and Psion Teklogix. 'Philips Semiconductors' work for Benetton proves to the supply chain management community that RFID technology is now being used in large volumes for item-tracking, and is beginning to reach the consumer,' Mr McGregor said. 'We estimate [that we will ship] 15 million I.CODE ICs to Benetton for this project this year, making it the single biggest roll-out of RFID technology in the fashion industry to date.' Philips' I.CODE ICs are incorporated into garment labels during the manufacturing process. Imperceptible to the consumer, they remain in individual items of clothing throughout their lifetime. The labels store information relating to the items' style, size, colour and intended destination, radically automating key aspects of Benetton's supply chain from manufacturing and distribution through to inventory control across the company's 5,000 stores worldwide. Mr McGregor said China's position as a large international manufacturing base and distribution point presented an opportunity for Philips Semiconductors to pursue RFID projects. 'We will work with partners,' he said, including systems integrators, software applications developers and makers of RFID tag readers. Smart labels overcome the limitations of traditional bar code technology. It is important to the retail industry in terms of authentication, accurate inventory control and checking multiple items in and out of the various stages of the supply chain. A recent report from Boston-based technology market research firm Venture Development Corp (VDC) said global shipments of RFID systems - including transponder chips, readers, software, and services - reached about US$965 million last year. It expected this market to be worth US$2.7 billion by 2007. Global shipments of RFID transponder chips, as made by Philips Semiconductors and Texas Instruments, reached nearly US$76 million last year. Mr McGregor said Philips Semiconductors had sold about 500 million RFID microchips in the past 10 years. The company was improving its packaging techniques so that it could ship billions of these chips to meet growing demand, which would be fuelled by industries in emerging markets such as China. RFID-enabled chips are behind Philips Semiconductors' MIFARE contactless smart-card system used for the Beijing Municipal Administration's One Card Project. Fare collection for buses, taxis and the metro railway in the capital is fast, secure and easy. Other mainland cities, such as Dalian, Wuhan and Guangzhou, have also adopted the MIFARE system for their public transport operations. Recent research by VCD showed that the highest demand for RFID hardware has come from the industrial sector, which accounts for 44.5 per cent of products. Next is the transportation, distribution and warehousing sector, which accounts for 30.3 per cent. The retail services sector accounts for only 4.3 per cent of RFID hardware products.