RFID Market In for Major Shakeup, Report Shows

A study out of Europe questions many of the key assumptions about radio-frequency identification, including the expectation that current technology is headed toward a one-cent chip and that item-level tagging is still far away.

Although it said the RFID market is booming and predicts it will continue to soar for years—from less than $2 billion this year to almost $27 billion by 2015—many of the radio-frequency identification assumptions in the U.S. retail space are flawed, according to a new report coming from analysts at IDTechEx in Cambridge, U.K.

The extreme volumes of RFID products and usage needed to reach such dollars are plausible, the report said, if put into context.

"Even if one wrongly considers the RFID tag to be nothing more than a barcode replacement, such figures are not necessarily unrealistic because there are somewhere between 5 and 10 trillion barcodes printed in the world every year," the report said.

"However, these tags will not reach the 10 trillion level before 2020 at the very earliest, where they will need to cost less than one U.S. cent and be entirely printed, like a barcode is today."

That "entirely printed" part is the key conclusion of the report; it reflects a new way of looking at RFID in the near future.

Printing tags in one swipe with metallic ink or other methods, as opposed to manufacturing them using several discrete components that have to be made and assembled separately, is the only way to get RFID prices anywhere near the level that will make item-level tagging cost-effective for widespread use, the report concludes.

/zimages/2/28571.gifSun Microsystems Inc. is looking to launch RFID customer centers in Taiwan, Japan and Europe. Click here to read more.

"Even the 5-cent chip is going to be very difficult to achieve" with current RFID technology, said Noel Eberhardt, an IDTechEx director who is also a retired vice president of advanced technology at Motorola.

"In order to get a one-cent tag, it will have to be an alternative technology" with the chips being created "right off of a printing press."

That would change more than the chips themselves. "A low-cost chip is only half the answer. You also need a low-cost reader," Eberhardt said.

"You cant have [a lot of] $2,000 readers. Stores will go bankrupt with that."

The current silicon chip approach simply wont work for the long term, the report said.

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