Starting July 25, 2012, Japan will shift its UHF RFID spectrum from the traditional 952.2 - 957.4MHz range to 916.8 - 923.4MHz. This means that the entire band will fall within the current FCC approved UHF spectrum (902 – 928 MHz), which is used throughout North America. Thus, all future Japanese certified EPC Gen2 UHF RFID tags and readers will be modified to operate in the new band. The Ministry of Internal Affairs and Communications (MIC), the body that regulates the Japanese Radio Frequency Band, has made the decision after erecting the previous standard in 2002.
What’s In It for Me?
In short – Global UHF tags will work better.
Historically, “world” or “global” tags (which include most label tags and some of the newest metal mount tags) have operated from 865 - 960 MHz; that is, from the lower end of European spectrum (865.6 – 867.6 MHz) to the upper end of the Japanese Spectrum. The bandwidth they will be designed for now is about 30 MHz and 30% skinner; thus, future world tags can have greater sensitivity because their operational band need not be so great. As a result, world tags will read farther. Additionally, manufacturers, when crafting region specific tags and readers, need not devote any time to a third design (outside of the FCC and ETSI versions). For those of us with an already deployed Japanese UHF RFID Solution the news is not so great: future tag innovations and part availability will decline rapidly.
Europe’s regulatory body, the European Telecommunications Standards Institute (ETSI), has been investigating a similar voyage to the FCC spectrum, which could happen as soon as 2014. These developments, along with recent events such as the Impinj IPO, Avery Dennison’s prediction for 2011, the Motorola Split, the new Sirit and OEM Motorola Reader, and the shrinking number of tag manufacturers suggest a maturation of the RFID market that will pick up steam.
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“There will be a public bid for the 950 MHz band ... and there is a huge debate going on currently on the possible auctioning of the band for the first time in Japan.”
Jin Mitsugi, associate at Keio University, and member of the ministry's UHF RFID regulation development working group.
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William H Solomon
Senior ODIN Engineer
As one of ODIN’s senior engineers, William has spearheaded the design, delivery, and management of ODIN products and clients in the fields of healthcare, aerospace, financial services, and government/military
p.s. Congrats to O's DH Chris Davis on his 17th inning win as a relief pitcher yesterday, and to Nat's OF Bryce Harper on his first career stolen base, home plate.
Innovative RFID Tags
Onchip a subsidiary of FEC Inc. displayed the world’s smallest on metal and non-metal mount RFID tags at the show. The on metal RFID tag utilizes the metal surface as a booster antenna for optimizing RFID read performance. Both tags have a very short read-range, but are suitable for authentication and loss prevention.
Figure 1: An Onchip tag attached to a specimen vial on
Xerafy and Omni-ID continued the trend of battling each other with similar solutions established with tool tags (as discussed in our last blog post) as both companies used the RFID Journal Trade Show to introduce thin metal-mount tags designed for use in label printers.
Metal Mount RFID Tags from Printers
The Xerafy MetalSkin and the Omni-ID Flex LP/AI RFID Tags are sold on rolls that can be printed and encoded with Zebra, Intermec, or other RFID UHF printers. Printer vendors commented that it would take some tweaking and tuning for the printers to print and encode either tag, but the ability is not far off.
Figure 2: The Omni-ID and Xerafy printable on/off metal RFID tags
Omni-ID won Best in Show for the ProView UHF RFID tag. The ProView operates on both passive UHF and active 433 MHz protocols, and includes an LCD display that can be programmed over either protocol. The ProView is suitable for changing human readable information on re-usable bins in manufacturing, supply chain, advertising and similar verticals.
Vizinex (formerly RCD) released a line of wristband UHF tags meant for people tracking. Applications such as automatic patient tracking at hospitals will benefit from these tags. Integration into a dwinQ based social-media solution at sporting events, conferences or shows will allow users to experience full social media integration into everyday activities.
PS - if the Caps and Bruins series wasn't such a nail biter this blog would have been up much sooner. Go
B's! CAPS!! (correction made by editor)
This week I'm back at ODIN's HQ with an exciting breakthrough in the world of technology- but I'm getting ahead of myself.
Last year ODIN had a record year as many of you know - we had massively successful RFID projects like Vail Resorts, J&J, Airbus, etc.
These Fortune 100 companies putting RFID into production is a great sign that the industry and the technology have finally broken through the science project stage and can be used for mission critical business applications.
ODIN deployed hundreds of readers at Vail's top five mountains with 99.9% uptime and accuracy despite -35 degree temperatures in some places.
That is proof RFID can be very accurate and highly dependable. That dependability and accuracy of RFID will drive the first uptick in what will become the much sought after "hockey stick" diagram showing an explosion in market size and company revenue but it won't sustain it.
ODIN will double our revenue this year in healthcare and IT asset tracking but that doesn't mean there is scale yet. Scale comes when you change the game and slash prices.
Sure there are plenty of applications like putting a $.50 tag on a $3,000 medical device that make sense, but to change the way people behave and get rid of what I call parasitic roles (more on that later) you need the costs to keep declining.
This fall we saw an alarming trend in RFID tags with raw material prices driving tag cost up. That was very bad, but technology has again come to the rescue. I met with several of our clients and partners in Europe last week and had the chance to meet a start up company that has what they call a breakthrough technology. I have heard this so many times since we started developing this RFID industry that I took the claim with a grain of salt.
When I met with them, however my doubts were quickly swept away. This company has invented a way to bond antenna substrate directly to paper labels and attach a chip using 90% less material getting nearly the same performance (the ODIN labs are verify that as you read this).
If the performance is as promised this means prices will go down dramatically and more applications will be open to using RFID to replace the parasites on a company's bottom line - people who are paid to count, find and track things.
Those parasites add no value to a company- they cost money but do not produce anything. they need to be eliminated to create value. Good RFID Software, a well desingned system based on physics and cheap tags is what it will take. The five cent RFID tag is now very real and the better news is that it is very green, a lot less waste and pollution. A big provider like Avery Dennison, or Zebra should buy this company today and add their scale and disruption and in a year we'll have a three cent RFID tag that will explode the applications of RFID and they will have an investment that looks like a big hockey stick. Boom time!
Many people have probably seen the news about rising commodity prices reported in publications ranging from the Wall Street Journal to the Financial Times. We reported in August about the shortage of silicon chip capacity causing tag shipment delays and again in September that RFID tag prices were holding firm despite increased volumes due to supply chain and cost challenges.
We now have additional evidence that RFID is being impacted by global economic trends. RFID tag cost for label tags is rising along with commodity prices.
Avery, UPM and Spinnaker raise Label Prices used for RFID tags
ODIN has reviewed letters sent to tag converters between October 15th and November 1st from Avery Dennison’s Fasson Roll unit, UPM Raflatac and Spinnaker. Each cited the continued rise in raw material costs and component supply shortages for the tag price increases. One vendor commented:
“For a variety of reasons, including stronger demand for pressure sensitive products and worldwide shortages of certain key components that are also consumed in other industries, we have seen a persistent escalation of our costs throughout the course of this year. Furthermore, all information currently available to us indicates that this inflationary trend will continue in 2011.”
How does this impact RFID Tag Buyers?
These letters are specific to the suppliers of label stock. As some of the largest suppliers of labels to tag converters this will have a direct impact on RFID tag cost for end users. Since the label is typically only a small percentage of the input costs of an RFID tag, the costs will be less of an impact for RFID users than those relying on barcodes. Expect this move to increase converted label tag costs by 1-2%.
The key question is what other component supply prices are also rising? We need look no further than copper and silver. Both metals are near or above all-time highs and are common materials for RFID tag antennas. On the flip side the other most common tag antenna material is aluminum. Pricing for aluminum is actually down over the past two years due to excess smelting capacity in China. We know of one tag maker who is in the process of switching from copper to aluminum antennas specifically to keep costs down. Expect RFID tags with copper or silver antennas to rise in price and no impact on antenna cost if they use aluminum.
What should end users do?
Each of the letters mentions that prices will go up in December. As a result, there may be some benefit in placing orders now as opposed to waiting until January. For large volume tag users, the difference could have a material budgetary impact. For specialty tag users that buy metal mount tags for tracking assets, price pressure will come from other commodity areas that we will continue to monitor. We don’t see prices for specialty tags being impacted by these announcements although other inflationary pressures may have an impact.
Impact on RFID Adoption
What impact will price increases have on industry growth? We see little negative impact on adoption over the next year. The pressures businesses are facing to do more with fewer resources has led to a substantial upsurge in adoption of RFID driven automation. The business cases and ROI models continue to be strong for a wide variety of applications even if there is a small rise in RFID tag costs.
Have you seen RFID tag costs rise or related material impacts? Are you a producer who is not raising tag prices despite the increase in material costs? Comment below so our readers can get the latest market information.
Download the RFID Tag Pricing Guide here.
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To close out our recent theme on RFID tag cost, I thought I would point out an under reported story from the Wall Street Journal earlier this month (RFID 24-7 was one of the few). It was an analysis of Avery Dennison’s retail information unit which includes RFID and commands healthy 12-14% profit margins.
The other side of RFID Tag Cost is Revenue
After a disappointing 2009 when retailers saw sales volumes plummet, Avery is experiencing a strong comeback this year. The article cites estimates that Avery will generate $50 million in RFID revenue in 2010 and it could grow to $150 million next year. At the industry average tag price of 12.35 cents cited in ODIN’s recently published RFID Tag Pricing Guide, it calculates to over 400 million RFID tags sold.
Avery isn’t alone in its rapid growth and improving economics. As we reported earlier (RFID Tag Supply Chain Delays) many tag suppliers are on back order due to such strong demand. It is widely known in the industry that companies such as Alien Technology have produced record tag sales each quarter this year.
Will Avery Sell a Billion RFID Tags in 2011?
Let’s do some math. What if Avery’s RFID unit triples its revenue to a whopping $150 million next year as some analysts predict? Even if we assume a price drop of only 5% in 2011, that would generate over 1.25 BILLION tags sold. If the revenue is only $100 million and prices drop by 10%, the total volume would be 900 million. One billion annual tag sales seem certain no later than 2012 and we are probably looking at numbers closer to two billion for that year.
These are clearly the kind of numbers many early investors were looking for when Walmart and the U.S. Department of Defense made their first RFID announcements in 2003. It has been fashionable to talk down RFID due to growth rates over the past six years that didn’t meet short-term expectations. With RFID adoption growing rapidly across multiple industries, we expect the dominant RFID narrative to shift permanently in 2011.
What do you think about Avery’s march to one billion tags?
Who do you think will be the tag market share leader next year?
Join the discussion by adding your comment below.
Up until this year, RFID tag cost was our most frequent inquiry from end users. While it has now slipped behind questions related to tag performance and RFID software, it is still among the most requested information. Today ODIN released its second annual RFID Tag Pricing Guide™ and it's a free download.
Published RFID Tag Costs Unchanged in 2010...mostly
If you automatically expect tag prices to fall every year you may be surprised that 2010 was a remarkable year of price stability. Label tags common among suppliers to Walmart and the U.S. Department of Defense were virtually unchanged across our the vendors surveyed (see table). Specialty RFID tags by contrast saw some published price increases despite the fact that rabid discounting has caused actual tag costs for many of these metal mount tags to fall.
|Qty||Low||High||Average 2010||Average 2009||Trend
||↔ No Change
Some tag price examples from the RFID Tag Pricing Guide are included in the table above. You can see how small quantities of label tags actually fell by a small factor while a mid-range order of 100,000 tags remained unchanged. Pricing changes for 1 million quantity orders is included in the guide which is free to our readers. It also includes details on specialty metal mount tag pricing trends.
The Recession and Increased RFID Tag Demand
A number of factors influenced RFID tag pricing in 2010 but the most notable were the impacts of the recession and increased demand.
The recessionary environment in 2008-2009 led many companies to cut back on capacity for tag conversion and even upstream for tag silicon production. As demand for tags came back and global demand for silicon chips grew faster than expected, there were two forces moving tag supply toward scarcity. This led to significant RFID tag supply chain shipment delays and capacity constraints as reported in our August blog.
Demand growth for RFID tags was driven in part by Walmart's apparel tagging initiative. This program alone increased the expected RFID tag growth rate for the industry by at least 3x. To compound matters, tag demand growth exceeded manufacturer expectations in other sectors ranging from IT assets to orthopedic implants. We saw similar demand in RFID Software and readers.
The increase in demand and shortages of key tag components conspired to sustain year over year tag prices. The changes in actual prices paid since 2009 are statistically insignificant with the exception of small form factor metal mount tags which actually saw significant price declines in 2010.
Implications for 2011 Tag Pricing
The one thing that seems clear is that most tag producers expect 2010 to be a record year in terms of unit volume and revenue. We see this as a good sign that the industry is hitting profitability and an indicator that RFID tag producers are likely to get aggressive in tag pricing again in 2011 as they try to build market share.
The 2010 RFID Tag Pricing Guide™ focuses on UHF passive RFID tag cost. To read the full discussion download the 13 page report.
If you have any questions about RFID software, RFID readers, or Learning about RFID drop us a line.
Also, join the discussion and leave a comment. Did you experience tag shipment delays this year? Did you see tag prices drop, hold steady or increase in 2010?
Can you imagine waiting 10 weeks for RFID tags? It’s happening today. This does not affect all vendors equally, but there are clearly shortages occurring today and end users should plan accordingly.
Industry insiders tell me that there are two key drivers to the current delays. First, many silicon producers didn’t upgrade their equipment on schedule in 2009 due to the economic climate. This has created capacity constraints at a time when chip demand has been increasing across numerous industries.
The RFID Value Chain Squeezed
Some RFID inlay producers have been plagued by short shipments as chip suppliers can’t fulfill order volumes. This cascades down the RFID value chain as inlay producers then can’t fulfill orders from tag converters keeping inventories low and lengthening order fulfillment lead times. Ford can’t ship cars if they don’t have tires. Converters can’t ship tags if they don’t have inlays. Waiting on inlays turns into waiting for tags.
Walmart Initiative also Increasing RFID Tag Demand
The second driver of the delay is an increase in demand. Although only made public recently, Walmart’s apparel tagging initiative was communicated to its apparel suppliers months ago. Tag manufacturers confirm they started seeing some impact from the program as early as March of this year. This increase is material and is creating capacity constraints at the inlay manufacturing level as well. Reik Read of Robert W. Baird & Co. and publisher of RFID Monthly had predicted a 40% increase in UHF Gen 2 RFID tag inlays in 2010. He is now predicting 125% - 150% tag inlay sales growth for the year.
Beyond Walmart, there are many less publicized areas of increased tag growth ranging from RFID IT Asset and RFID Weapons Tracking to numerous manufacturing, healthcare and consumer applications. Walmart is a key driver, but only represents the tip of the iceberg in passive RFID adoption today.
End User Strategies to Address RFID Tag Shipment Delays
It is important for end users to understand that all types of passive RFID tags use the same precursor materials. Silicon chips are an important component that is part of a larger global commodity market. Silicon demand has increased across the board in 2010 as low inventories and production from 2009 were quickly overwhelmed by demand for chips across a wide range of electronic equipment.
End users don’t need to panic. However, you should plan for it. Some RFID tag suppliers will continue to face this problem for at least another quarter as silicon production is over capacity worldwide and the Walmart initiative continues to grow. Don’t delay your order until the last minute and keep in touch with your tag supplier to track tag shipment lead times.
What about RFID Tag Cost?
Finally, classical economics apply to RFID economics. When there are supply shortages you should not expect short-term price reductions. Most tag suppliers are trending toward record sales in 2010 and there are few incentives today to reduce price to capture new business. The good news is the difference between short and long run economic models. As the industry adjusts to the new capacity requirements and volumes continue to grow, manufacturing costs will fall. As costs come down, several tag suppliers will seize the opportunity to reduce pricing and capture market share.
What have you seen on tag shipment lead times? Comment below.