RFID Tag Cost on the Rise?
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.
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