The See-It-All Chip

Italians have been early adopters too. In 1998 appliance maker Merloni Elettrodomestici started turning out Ariston appliances--washing machines, dishwashers and refrigerators--with RFID readers that will eventually allow them to communicate with products bearing smart tags. Washers, for instance, will be programmed to read clothing labels for cleaning instructions. But that vision had a setback last spring, when Benetton nixed RFID tagging for its Sisley line because privacy groups threatened a boycott. Benetton is still determined to use RFID for inventory, hoping to replicate a system in place at Prada's New York Epicenter store. Sales personnel there can search inventory without leaving clients, thanks to RFID tags. Next year Prada hopes to roll out RFID in its new Beverly Hills store.

While the U.S. and Europe are concentrating on using RFID in logistics, Jun Murai, head of Japan's Auto-ID center at Keio University, says gadget-crazy Asians in Japan, South Korea, Singapore and Hong Kong are more likely to want household items with RFID chips that can communicate with a home network. The Chinese are more pragmatic. Shanghai and 44 other cities already use an RFID payment system for public transportation. In Singapore's library system, all 9 million books, videos and DVDs are embedded with antitheft chips, allowing self-checkout. "With bar codes, you need to precisely align the reader and the tag, but with RFID even old people and young children can use the system," says library-board senior development manager Wong Tack Wai. With costs down to 40¢ an item, libraries in Australia, South Korea, New Zealand and Macau have adopted the island's patented system.

With Wal-Mart requiring RFID tagging on pallets and cases, the stampede is on for U.S. suppliers to get up to speed. Earlier this month, the Auto-ID Center planned to issue its first RFID privacy guidelines, promising clear notification, choice and confidentiality. Saffo thinks that RFID may save us all some headaches in the future. It certainly might have helped a certain actress caught shoplifting in Beverly Hills, he says. "If only Winona Ryder had waited a couple of years, floor sensors would have detected her purchases as she headed out the door, and just charged her credit card." --With reporting by Steve Barnes/Little Rock, Dan Cray/Los Angeles, Chaim Estulin/Hong Kong, Jeff Israely/Rome, Nadia Mustafa/New York, David Schwartz/Phoenix and Nathan Thornburgh/Boston