Breeching the security of safety- or security-intensive products such as auto parts, set top boxes, military electronics, or smart batteries can be a lucrative business that is well worth the nominal investment required to create lookalike packaging and labeling, or to change the system firmware to allow unpaid access to licensed content. Because the counterfeiter does not incur any of the costs associated with product development, he quickly covers his capital investment at the expense of the authentic product manufacturer or service provider.

Figure 1. Challenge Response Sequence: Tag Updates Challenge after Every Successful Challenge Response.

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RFID devices can be as small as a grain of rice, with enough memory to store encryption keys, algorithms and chain of ownership information. They do not require direct line-of-sight for access, allowing them to be embedded into virtually any product, including drug vials, cosmetics or jewelry.

On their own, RFID labels are not at all secure because the product information is broadcast over the air and can be intercepted easily using a sub-$100 RFID reader. However, there are RFID implementations that provide security that approaches that of a secure microcontroller.