In another negative end-of-the-year report for RFID, ABI Research on Wednesday reported that the passive RFID label market—particularly UHF labels—has had disappointing growth because of unrealistically aggressive pricing.
"In a classic vicious circle dynamic, production costs for UHF labels—and hence for Gen 2 passive labels—are still at levels tending to inhibit the high-volume deployments that would provide economies of scale," an ABI statement said. Said ABI analyst Robert Foppiani: "At current prices, many end-user companies in the retail/CPG supply chain struggle to determine a compelling business case for RFID. Those companies that have high value, high risk goods are often able to find a business case to justify the investment in RFID passive labels at current prices. But many members of the value chain are operating on thin margins, and most are unwilling to drop prices any further until there is much greater volume."
The report said that Alien, Avery Dennison, Texas Instruments, and NXP "hope that their strap technologies will" cut costs while "multiple vendors are hoping to shrink the size of an IC to obtain more units from a single wafer. A number of EPC Gen 2 RFID vendors are engaged in loss-leader activities, offering labels at unsustainable prices in an effort to gain market share. Eventually, some will drop out of the running, or will find niche markets where their products can find a role. ABI Research believes that cost reduction tactics will not have a short-term effect on market volumes. The substantial price cuts seen in the past year were necessary to attract end users complying with mandates."