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Insider's BLOG from the RFID Experts

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Is there a looming RFID Reader Shortage?

  
  
  
  

RFID Reader Supply ChainLast week we discussed the current phenomenon of delays in the RFID Tag Supply Chain.  The obvious question is whether other components in the RFID solution set are also impacted.  The short answer is yes. 

A number of RFID reader manufacturers have also experienced supply shortages which are leading to customer shipment delays.    Whereas RFID tag shipment delays are driven by shortages in silicon chip availability and increased demand at least in part driven by the Walmart apparel tagging initiative, reader manufacturers are facing a broader variety of challenges.

RFID Reader and Tag Shortage Similarities

There are clearly some similarities between the shortages of tags and readers.  First, the global silicon shortage is a key bottleneck.  Silicon chips are the brains of RF radios.  These radio chips are manufactured by companies such as Impinj and Austria Microsystems  which have not been immune shortages in chip availability.  The Taiwan Semiconductor Manufacturing Company (TSMC) operates the world’s large silicon wafer foundry and announced in April that it was at full capacity.  At that point, any company that hadn’t already booked orders started looking at long lead times for components.

The second similarity is the increase in demand for RFID Readers.  Walmart is one culprit, but there are many other sources of demand driving reader sales today ranging from IT Asset Tracking, Weapons Tracking and Aerospace Tool Tracking to automating visibility in the medical device supply chain.  Everyone in the RFID industry saw several projects slated for implementation in 2009 shift to 2010.  At the same time, most RFID reader manufacturers focused on depleting inventories to show improved financial performance in 2009.  This led to 2010 where projects were funded but RFID reader inventories were low. 

More Complications in the RFID Reader Value Chain

There are some notable differences between the RFID reader and tag value chains.  RFID readers are more complex devices with many more components.  More components means more component suppliers; anyone of which could delay a shipment. 

One area that has impacted RFID reader availability is antennas.  While not a core component of the reader, most ship with antennas and handheld readers ship with very specific antennas.  We have seen antenna suppliers that last year were delivering orders in four-six weeks are now quoting 10-12 weeks and still falling behind.  The issue is partially production capacity, but is driven primarily by shortages of key raw materials.  A leading handheld RFID reader manufacturer can’t ship one of its most popular products because of this very situation.

When it comes to handhelds there are other challenges as well.  Another handheld manufacturer confirmed that it is experiencing shipping production delays because of a global shortage of LED displays.  This is largely driven by a sharp increase in demand for LED based devices.

What should RFID buyers do?

You don’t need to panic, but you do need to plan.  First, work with your RFID partner to determine likely lead times for the components and make sure they fit with your schedule.  Second, make sure your RFID partner has multiple sources of supply and experience with a variety of readers.  This will ensure you can deploy and operate your RFID system even if a key supplier cannot ship.  Third, make sure your RFID software is capable of managing RFID readers from multiple manufacturers.   This will ensure you are not held hostage by a single manufacturer. 

Supply chain problems have a way of working themselves out over time, but they often inflict short-term pain on customers in the process.  Some planning up front can help RFID users avoid these problems today and going forward.

Add your comment on RFID supply chain delays below to join the discussion.

If you would like to read more about the impact on the RFID tag supply chain, click here.  

Comments

Despite increasing market demand, Impinj is able to meet customer needs for both Speedway family RFID readers and Indy reader chips. 
 
 
 
 
 
Posted @ Thursday, August 19, 2010 7:17 PM by Scot Stelter
Thanks Scot. I understand that Impinj continues to be able to fulfill demand although some others in the industry are facing issues. In particular the availability of silicon used for low end, USB, readers has been in short supply.
Posted @ Friday, August 20, 2010 9:07 AM by Bret Kinsella
 
In speaking with industry insiders, bulk encoding will not overcome the need for printing and encoding due to the complexity of the retail supply chain. Apparel manufacturers have a very complex and intertwined supply chain based on the mix of orders received from retailers.  
 
Bulk encoding only addresses those items that are 25 of the exact same thing (color, size, style, etc). One of the current problems faced by bulk encoding is the ability to account for everything in the “package”. In other words, if only 24 of the 25 items were encoded, then someone needs to open the package and manually scan each item to find the missing unit. “Re-encoding” of the entire unit cannot be executed, since serialization has already occurred.
Posted @ Friday, August 20, 2010 12:30 PM by Carolyn Ricci
Carolyn - good point on the bulk encoding. For any application that has a wide variety of items to track, bulk encoding often creates significant issues in aligning product data with tag numbers. Since there is still a tag association step, it is not necessarily any faster or more accurate than print and apply. 
 
Just as important, pre-encoded tags cost more. For anyone with high volume tag needs, the additional cost for pre-encoding tags can be far more than the cost of installing print and apply infrastructure.
Posted @ Monday, August 23, 2010 10:07 AM by Bret Kinsella
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