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Category: RFID, Automated Data Collection, and Internet of Things

Should You Buy Into RFID Solution Leader Impinj’s New Initial Public Offering?

 


RFID Chip, Reader and Software Provider Seeing Rapid Growth, has Huge Share in Several Markets

June 28, 2016
SCDigest Editorial Staff

Impinj, the Seattle-based provider of a variety of RFID-based solutions, is for the second time in its history looking to become a public company with an initial public offering, after the previous effort in 2011 was pulled back.

Should you buy the stock? We have no idea. But a look at Impinj’s S-1 filing with the SEC as part of the IPO process has some interesting data in it.

Supply Chain Digest Says...

Beyond the impressive market share numbers, Impinj believes its future is bright because such a small percentage of things today are tracked with RFID tags versus the potential market.

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Impinj was founded in 2000 based on the research of Carver Mead at the California Institute of Technology and his student Chris Diorio. In 2006, Impinj became one of the first the companies to introduce products based on the EPCglobal UHF Gen 2 standard.

At that point in time, Walmart's vision for a massive RFID program of tagging individual cases of products still looked viable, and Impinj was well positioned to benefit enormously from that program. A well-known investment research firm reported in 2006 that Impinj was receiving a major order for RFDI readers from Walmart to support the program's rollout into DCs and stores.

Alas, the Walmart program fell apart not long afterwards - and the consumer goods to retail market tanked as a result and has not really revived since, at least at the case level, though there is some activity crtainly at the item level.

However, Impinj pursued other applications, and in 2008 enhanced its product line by acquiring Intel's RFID division, including an Intel-developed RFID reader chip which Impinj renamed Indy R1000. It has been one of the leading chips for use in RFID readers by other manufacturers.

Now with a few years of impressive sales growth behind it, and a little bit of profitability in recent years, Imping is going back to the IPO well, hoping it says, to raise about $60 million.

Revenues were $78.4 million in 2015, up 23% from the $63.7 million it generated in 2014, which in turn was also strongly up from $55.4 in 2013. It had profits of $900,000 in 2015, and $297,000 in 2014, neither much above breakeven levels but psychologically important for potential investors versus being in the red.

It spent just over $17 million in R&D in 2015, which equates to a very large 21% of revenues.

A look at Impinj’s financials for the past four years is shown in the graphic below.

Impinj's Financials 2012-2015

 


Certainly, Impinj’s market share in several product segments is impressive, and far higher than we realized here at SCDigest.


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In its S-1, for example, Impinj claims that it has 65% market share for passive UHF RFID tag chips compliant with the EPC Gen 2 RFID standard and that 70% fixed readers made by others use its reader chips, as do "the majority of handheld readers."

Beyond the impressive market share numbers, Impinj believes its future is bright because such a small percentage of things today are tracked with RFID tags versus the potential market.

"Apparel, shoes, jewelry, pharmaceuticals, medical supplies, documents, automotive parts, sporting items and food are among the more than a trillion such everyday items connectable to the digital world," the S-1 notes, adding that "Despite the fact that today’s digital infrastructure can process, analyze and use data from such items, the physical infrastructure and processes required to capture and deliver item-level data has historically been nonexistent or labor-intensive, expensive, time-consuming and ineffective, so these items remain unconnected."

It believes RFID technology will eventually change this situation, and that the "market opportunity is massive."

The company says external research has predicted that the number of EP2 Gen2 tags that will be sold globally will jump from 5.3 billion in 2015 to 20 billion in 2020. It sees retail and healthcare as the two largest markets, though opportunities in other sectors are also referenced.

However, it does note that market adoption "has historically been slower than anticipated or forecasted by us and industry sources." There is no doubt about that.

Impinj adds that it plans "to invest in next-generation reader ICs [chips] to improve functionality, reduce costs, and make Impinj-based readers ubiquitous in industrial and consumer devices and facilities infrastructure."

So, all told a pretty good story, but in a market that the company itself notes has been slow to develop, though Impinj itself is seeing rapid growth. Do you believe in RFID? If yes, then picking up a few shares may be a good bet.

A offering price or even range has not been set.

Are you bullish on RFID's future? How soon will critical mass actualy get here? Let us know your thoughts at the Feedback section below.

 

Your Comments/Feedback

Tom Tamburrini

President, Tamburrini Enterprises
Posted on: Oct, 26 2016
 I've been in the retail technology sector (Spectra-Physics, PSC, Datalogic, Tyco) for most of my career and have seen the promise of RFID ebb and flow. However, with the adoption of RFID by the big players such as Inditex, Macys, Lululemon, Levis, M&S and others, it feels like the time has finally come for mass adoption. In my opinion, the key has been getting the supply chain tagged and that's starting to happen, not only in closed loop chains, such as Inditex and Lulu, but also at Macys. I think that everyone thought that fixed infrastructure would be needed to really capitalize on the benefits of RFID, but handheld readers (with an occiasonal portal reader) are proving enough of an advantage to allow the early adopters to see positive ROI in a reasonable amount of time. Soon, companies such as Intel and Impinj will drive down the cost of fixed reader infrastucture and mass adoption will accellerate. I think we will see critical mass sometime in mid-2018. 
 

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