Maybe RFID's Time Hasn't Come Just Yet

The case for spending on passive radio frequency identification labels is still a tough one to make.

The case for spending on passive radio frequency identification labels is still a tough one to make.

That's according to some new findings from ABI Research, which show the market for passive RFID - especially UHF labels - has not grown as quickly as those in the industry expected.

The culprits? Price, volume, and return on investment. Manufacturing costs for UHF labels are sill at levels that make high-volume deployments (and economies of scale) less  than attractive.

"At current prices, many end-user companies in the retail/CPG supply chain struggle to determine a compelling business case for RFID," said ABI research analyst Robert Foppiani. "Those companies that have high-value, high-risk goods are often able to find a business case to justify the investment in RFID passive labels at current prices. But many members of the value chain are operating on thin margins, and most are unwilling to drop prices any further until there is much greater volume."

As such, label vendors are trying different tactics to wring every cent out of the cost of their products, ABI said. Alien, Avery Dennison, Texas Instruments, and NXP hope their strap technologies will be the answer, while multiple vendors are hoping to shrink the size of an IC to obtain more units from a single wafer.

Meanwhile, the research firm says some EPC Gen 2 RFID vendors are engaged in "loss-leader" activities, offering labels at unsustainable prices in an effort to gain market share. Eventually, some will drop out of the running, or will find niche markets.

ABI believes cost reduction tactics will not have a short-term effect on market volumes, as the big price cuts seen in the past year were necessary to attract end users complying with mandates. The firm also says future vendor attempts at lowering production costs will make more sense as higher volumes are reached. Users will proceed cautiously, and volumes will rise slowly and steadily rather than dramatically.

To access the full report, visit www.abiresearch.com

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