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  RFID and Automatic Identification Focus: Our Weekly Feature Article on Topics of Interest to those Using or Considering RFID or other Auto ID Technologies  
 
 
  - January 27, 2009 -  

RFID News: The Five-Cent Tag is Here, the Five-Cent Tag is Here! Well, Almost



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Chinese Company Now Offers Inlays in US for 5.8 Cents; Will it Have an Impact on Adoption?

 
 

 

SCDigest Editorial Staff

SCDigest Says:

This will not result in a true five-cent tag, of course, but now at least the key component of a tag is available at a cost that starts with a “5.”


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Somewhere along the way at the original Auto ID Lab at MIT, the vision of the five-cent tag was born.

The concept was that by simplifying and standardizing the design of RFID tags (a strategy that was ultimately embodied in the Electronic Product Code (UPC) standards), RFID tag prices (then very expensive) could be dramatically reduced – perhaps to as low as just five cents each.

At that low price level, many predicted RFID adoption would take off, as low recurring costs for tags would make the ROI favorable for an increasing number of potential applications, especially in the consumer goods-to-retail supply chain, where costs for tagging billions of cases and items were clearly a big barrier to adoption.

The “five-cent tag” took on something of iconic status, akin in some ways to predictions of a world with 500 television channels, and was cited as the likely future state in virtually every report or white paper on RFID, it seemed, for several years.

The march towards realizing this five-cent tag vision has taken longer than many expected, with the perpetual back and forth between tag prices, which impact tag volumes, which impact tag prices, etc.                

But, we are getting closer.

Chinese Company Offers New 5.8-Cent Inlay

Slowly, but surely, tag prices have been dropping. Of late, at high-unit volume purchases (in the millions of tags), prices for so-called “inlays,” have been at or near the 7 cents per inlay level. An inlay is a chip and antenna combination, which generally must be converted into a usable tag form, such as a label. That process adds several pennies or more of additional cost beyond the inlay itself. In some applications, however, such as embedding a tag inside a corrugate carton, an inlay might be used directly.

(RFID and Automatic Identification Article - Continued Below)

 
     
 
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Inlay prices in the 7-8 cent range were announced over two years ago. They have remained about flat ever since, in part because volumes have not dramatically increased in the past few years, as the manufacturers hoped. Some also believe the 7-cent tag prices were offered at little above true manufacturing cost, in the hopes of stoking volumes.

Now, Chinese RFID tag and reader company Invengo, which has a strong presence in some Asian markets, but relatively little in the US and Europe until now, this week announced entry in the US market with a new EPC-compliant inlay at a price of just 5.8 cents each on purchase volumes of 5 million or more. Invengo’s growth into an Asian RFID leader was turbocharged in 1999 with a contract from the government for a huge system for China’s railroad network. This will not result in a true five-cent tag, of course, but now at least the key component of a tag is available at a cost that starts with a “5.”

The company’s headquarters and tag production facilities are both in Shenzhen, China. Its Chinese web site lists a number of patents awarded in China for RFID reader technology.

Invengo will maintain inlay inventories in the US for customer shipments. In general, inlay manufacturers do not sell directly to RFID using companies, but rather to label converters and other players in the RFID tag value chain, which in turn sell compete tags to users.

Whether Invengo is really making a profit at a 5.8-cent price point is not known. It can’t be much.

We are still some years away from a true 5-cent tag for end uses but, with a 5-cent inlay, the journey has just become a bit shorter.

Is the prospect of 5-cent inlays and EPC tags perhaps 2 cents cheaper important right now? How big a barrier are tag prices to RFID adoption today? Let us know your thoughts at the Feedback button below.

 
     
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Feedback
2009-01-29

January 29, 2009

Carlo Nizam from Airbus said it best when he said 'RFID is not the final destination. It is an enabler. But it is not the final destination.'

I think this statement applies to the 5-cent tag. Great, the price has finally dropped to near 5 cents, but this does not guarantee ubiquity.

The 5-cent tag cannot help a company if they do no know what to do with the tags, how to integrate them into their other systems, and what to do with that data and how to use it to really transform their supply chains to become more demand driven.

In today's environment, RFID tags, even 5-cent tags, have a ceiling of usefulness that is reached quickly before you have to combine them with other auto ID and wireless technologies.

RFID needs to prove it can enable a process better than existing technologies and systems. Because don't forget, tags are just part of the cost. There still is hardware, middleware, services, software, change management and more.

Five cent tags lower the cost to suppliers forced to burden retail mandates. But until you can show them how to get value out of the system, you can give the tags away for free and it still will not truly transform a company's supply chain.

William P. McNeill
AMR Research Research Analyst

Comment from SCDigest Editor Dan Gilmore:

I agree in general, but I still think a real question is, are tag costs still a significant barrier?

That is what many said a few years ago - were they wrong? If these kinds of price reductions aren't stoking much adoption, then you are absolutely right, and even free tags wouldn't do much - but that is contrary to what many have thought, is it not?

I heard the CIO of Tyson Foods, for example, say in 2004 or 2005 that they saw lots of applications when tags got to be about 5 cents. I think we can all agree thought that in some applications, especially, consumer goods to retail, while low cost tags weren't a sufficient condition for adoption, they were a necessary condition.

There could be no real ROI with the full cost of tags at 25 cents or whatever.

Dan Gilmore

McNeil responds back:

I agree with you it was a barrier for the retail compliance mandates. Right now I’m working on a report around RFID's potential use in post-sales activity and price definitely is not a barrier. The barriers so far are figuring out the use case, the limits posed by the current technology, measuring ROI, and getting suppliers on board.

I think I was thinking of that. I'm speaking with Boeing and Airbus because they seem to be the farthest along but if you know of any others, please let me know.





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