RFID has become an increasingly common technology in consumers' lives. The technology can be found anywhere from toll collection to credit cards to personalized billboards: MINI USA, which produces MINI Cooper automobiles, has come up with a program in which its billboards read an active RFID chip in a key fob and give MINI Cooper owners personal messages as they drive or walk by. Although RFID has been gaining momentum, the volumes are not where analysts expected them to be. What this means for the future development of the labeling industry's RFID involvement might not be clear, but most agree that the technology is here to stay and will continue to increase in use.
In 2006, Gen 2 tags became the dominant RFID technology, with Gen 1 tags fading into obsolescence. According to Raghu Das, CEO of IDTechEx, Cambridge, UK, Gen 2 tags are much faster than the previous versions and offer better performance. "In the last five years," he says, "the technology was not good enough for wide adoption. The technology isn't holding adoption back that much anymore. It's more business cases, cost and things like that."
Other technological developments continue apace. Bert Moore, director of communications for AIM Global, Warrendale, PA, USA, says, "Both tags and readers have been improving incrementally. There is increased focus on integrating sensors and thin battery technology in thin, flexible tags, and at the other end of the spectrum we are seeing more rugged, hard shell tags are being developed."
RFID saw growth in 2006, but not as much as had been predicted. IDTechEX had predicted that 1.3 billion tags would be in use in 2006, but the number turned out to be 1 billion. The company, which produces educational programs in this and other industries, says that pallet and case tagging and pharmaceuticals missed forecasts for 2006.
Regarding growth, Michael Grudecki, director of sales and marketing for Unified Barcode & RFID Inc., Palatine, IL, USA, says, "I think we've seen a small blip north, but it's not where I think a lot of people thought it would be in the way of users and sales. But that doesn't mean there's still not a lot of interest in the technology."
Photo courtesy of RSI ID Technologies
Joe White, vice president of product management and tag engineering for Motorola's Enterprise Mobility Business's RFID division, says, "The use of RFID has increased in the past year and we observed healthy year-over-year growth from 2005 to 2006. The greater market has moved beyond a laser focus on supply chain mandates. There is now a broader interest in how RFID can generate business value in other ways, especially in closed loop implementations focused on asset management. As such, the use cases for RFID and interest level in RFID have grown." (Motorola's RFID division was formerly known as Symbol Technologies, located in Holtsville, NY, USA.)
Users and applications
RFID technology is being used in a variety of areas. Moore says, "We seem to be witnessing a continued growth of users that are working with trading partners on open systems applications and also a resurgence of uses of RFID in security, access control, asset tracking, and other closed systems."
Dimitri Desmons, vice president of RFID marketing for Impinj Inc., Seattle, WA, USA, says, "The newest class of users includes companies that are leveraging the benefits of UHF Gen 2 into a much broader set of applications. For example, the benefits of item tagging for inventory control applications are leading more and more retailers to pilot the technology for high value goods such as apparel, CDs and DVDs."
Tawnya Clark, vice president of sales and marketing for RSI ID Technologies in Chula Vista, CA, USA, says the most common applications for RFID are in consumer packaged goods (CPGs) and pharmaceuticals.
George Reynolds, global vice president of marketing and sales at Avery Dennison RFID in Pasadena, CA, USA, says, "Aside from supply chain carton and pallet tagging, the most popular applications currently are probably asset tracking (very broadly defined), smart tickets (mass transit and event access) and contactless payment systems."
In addition to pharmaceuticals, products that benefit from common RFID applications include high-end cosmetics, alcohol and tobacco, says Jeff Kohnle, director of asset tracking business at TI RFID Systems in Dallas, TX, USA.
Svoboda says, "The most popular applications include closed loop (RFID control systems in which the tracked objects never leave the company or organization), manufacturing automation, security, ticketing, transportation, media management, and rental. The most publicized applications are retail supply chain tagging and pharmaceutical e-pedigree."
White says, "In addition to applications that increase supply chain visibility, which have been popular for some time, the most popular applications we are seeing include asset management, baggage handling and item level tagging for marketing and promotional purposes. We are also seeing meaningful growth in the tracking of temperature sensitive goods (also known as cold chain tracking)."
The percentage of converters involved with RFID is small, though the field is being closely watched by many or most. Reynolds says, "There are probably fewer than 50 RFID label converters in the US and about 20 each in Europe and Asia. The number is definitely growing, but the rate has probably slowed in the last couple of years. This is due, in large part, to the slower-than-expected growth rate of the overall RFID market, especially the retail compliance segment." He adds, "Every converter has RFID somewhere on their radar screen, but for many converters, RFID is not as close to the center of the radar screen as other potential growth and/or diversification opportunities."
Svoboda sees stunted involvement as well. "The number of converters involved in RFID has been growing, although the growth rate has significantly subsided in the last 18 months. The current number of two dozen or so converters provides plenty of RFID converting capacity for the current market demand."
Das puts the number of converters involved with RFID at dozens. He says, "I think that number at the start of 2006 was growing. At the end, it was evening off. In 2007, it might decline. Those already in the market are having trouble shifting volumes they already have. That's not a great invitation to join them."
It is difficult to put a price on RFID tags and labels because of the many factors that go into determining the cost, such as volume and tag type. Reynolds says, "The current price for a finished RFID-enabled shipping label or tag is under 20 cents. The price varies quite a bit depending on factors such as label size, RF performance characteristics and naturally quantity of labels purchased." He compares the 20-cent average to the price of 50 cents that he says was the average a year or two ago.
He explains, "The clear takeaway here is that prices have dropped considerably over the last two years, they have stabilized even more over the last 12 months, and they are actually well ahead of the volume of RFID labels currently being consumed. So although I wouldn't look for any dramatic price drops in 2007, the inevitable trend over the next couple of years will be steadily downward."
Clark doesn't expect to see decreases in price in the very near future either. She says, "Most tag manufacturers are offering forward pricing to help drive adoption and move the market forward. Although tag manufacturers continually streamline production and become more efficient producers of higher quality tags, eliminating waste and maximizing throughput, with such aggressive pricing currently offered, we don't expect to see a decrease in tag cost until early 2008."
Although the timeline may be unclear, most agree that the cost of RFID tags will come down as volumes increase and the technology evolves.
Item level RFID
Many believe RFID use at the item level is the future for the technology. Although some item level use has been going on, tagging items with RFID, especially with UHF, is not a common practice. Clark, of RSI ID Technologies, observes, "While HF has been used for item level tracking for some time, UHF item level tracking is relatively new. Since the beginning of 2006 we've seen a substantial increase in interest and acceptance for UHF item level applications. We currently are working on both HF and UHF item level pilots."
One industry in which item level tagging has gained attention is pharmaceuticals. Motorola's White gives the example of Purdue Pharma, which uses UHF RFID to track bottles of Oxycontin along the supply chain. Das, from IDTechEx, says that although there are great benefits to tagging pharmaceuticals, that application has not taken off as quickly as expected. He says, "The US Food and Drug Administration recently seems to have backed off a little bit. It will take a few years for volumes to pick up."
Item level RFID tags from Impinj
According to Moore, of AIM Global, a number of item level RFID pilots are in use. New Balance is using RFID on shoe boxes, as are some Japanese stores. In Japan, RFID is being piloted at the item level to recycle computers as well. Das says Best Buy had a trial going on in the US, which tagged books and DVDs. He says, "We think that boosted sales 7 to 15 percent on DVDs." Although the pilot was successful, Das says Best Buy didn't roll out the project because the tags needed to be applied to the DVDs manually at the store, which was too expensive to justify.
Some item level applications have been in use for quite some time. Kohnle, from TI RFID Systems, says, "Item level in general is the current closed loop that we've been serving for years. Businesses like library book tagging we've been doing for years with UHF tags. Garment tagging is another version of that." He also says LF tags have been used for livestock for years.
In order to ensure that the RFID tags and labels work, companies must test the products. Testing differs among companies, but they all perform tests and most guarantee a certain percentage of success. RSI ID Technologies' Clark says, "We test our tags during both the production and converting processes and have experienced average yields of about 97 percent for our Gen 2 tags. However, since we test the tags after the manufacturing process as a finished label we guarantee our customers the shipment of 100 percent good tags."
White, of Motorola, says, "RFID tags and labels are tested in several different environments and applications along the supply chain. They are tested at the integrated circuit (IC) manufacturing stage, the inlay manufacturing stage and the label conversion stage. Yields of more than 98 percent and customer delivery of near 100 percent are the norm."
The testing process can be very involved. Impinj's Desmons explains, "Each wafer containing tens of thousands of UHF Gen 2 chips is 100 percent factory tested and inspected both visually and with electrical acceptance criteria. Every chip on the wafer is then tested by writing data into each chip's memory. Next, every chip is 'baked' for days at a temperature of 250º C and then retested. If non-performing chips are found, they are identified with a 'wafer map' prior to shipment to Impinj's inlay partners. One example of Impinj stringent quality process, the wafer map ensures that inlay partners assemble only the good die, resulting in tags with post-converted yields that exceed 99 percent."
HF RFID tags from Texas Instruments
Companies need to keep in mind the cost of testing, however. Das says that in addition to the direct costs associated with testing equipment and processes, the time delay also needs to be taken into account. "The cost of the tag will go up if you do a lot of testing. There's a balance to be found. You want to get the right amount of testing to maximize your yield," he says.
Although mandates, such as those from Wal-Mart and the US Department of Defense, were a driving force in the growth of RFID, most agree that in today's market mandates are not the only, or even main, motivation. Desmons says, "RFID deployments have moved beyond mandates with more companies now using RFID to improve their own internal processes."
White agrees. "The mandates were a catalyst and created awareness in companies but we are now seeing a large number of companies using or planning to use RFID for their own benefit."
Reynolds believes mandates were the driving force for RFID, but after 2006, that is no longer the case. He cites airline bag tagging and the Marks & Spencer deployments as reaching the levels of Wal-Mart's mandates. He says, "We certainly expect Wal-Mart to accelerate their deployment at some point, probably when their reader infrastructure is more completely deployed. But we would also expect these other burgeoning applications to multiply too."
Unified Barcode & RFID's Grudecki says, "Wal-Mart is a motivating factor, but not the main one in our business. We're uncovering RFID solutions in all different parts of business."
Others believe industry mandates are having a larger impact. TI RFID Systems' Kohnle says, "I think mandates are a stimulator and continue to be." He believes global standards and specification will help RFID adoption.
UPM Raflatac's Svoboda says, "The mandates continue to be the main motivation as they are the most publicized, however the real immediate opportunities are coming from other, less publicized verticals."
One issue many consumers see as a threat with RFID is their security. Breaches in RFID security have come to light, which makes some wary of using the technology. Those involved with RFID understand that consumers are concerned, but believe the technology is safe. Grudecki says, "What it boils down to is that an RFID tag is a license plate on a box similar to those on cars. If you don't know the background database, chances are it's no more than a bunch of numbers and letters."
Kohnle agrees. "RFID in general is a license plate, a product code. It's much like a bar code. There's no personal information on that particular device. Even on the payment side it's encrypted. I think you see a lot of overblown perspective. The concerns have to be addressed and people have to be informed, but if you go back 40 years, you'd probably see the same thing when bar codes were introduced."
White, of Motorola, points out that "oftentimes security breaches are a software or database issue. UHF RFID tags themselves contain a serial number that means nothing unless you can connect it to and gain access to the protected database."
AIM Global's Moore says that RFID can be secure or insecure depending on the tag's memory and security measures. He says, "Methods and techniques are in place to allow locking of data on a tag. However, tags that are designed to be read in open systems are readable by anyone with a suitable reader."
Motorola's RD5000 mobile RFID reader
Svoboda agrees that security is important. "RFID is still relatively new technology and security will continue to be a topic for quite some time just as it has been with wireless networks, Bluetooth devices, etc. Security is a serious topic and needs to be addressed by the industry head-on. RFID technology provides many benefits and there should be no concerns if used properly."
Although risks are present, those involved are still confident that the technology is safe. Moore says, "At this point, there are some security risks with nearly all forms of RFID but the likelihood of them being exploited to any real advantage is negligible. There are, however, some high risk applications such as access control, product authentication, financial transactions, and personal identity where additional measures can, and should, be taken to improve the security of the system."
Those involved with RFID are optimistic about its future. IDTechEx's Das says the company expects 1.71 billion RFID tags to be sold for a total of $4.96 billion in 2007. He predicts $1.1 billion of the total will be spent on RFID labels this year. By 2010, the company predicts $11.38 billion will be spent in total on RFID, $6.17 billion of that spent on labels.
White also believes growth is in the future. "RFID will continue to grow and new applications will evolve. RFID is beginning to expand to provide other sensory information such as condition and authentication. We are now seeing applications such as temperature sensing, product authentication and security cards."
Desmons, of Impinj, sees positive signs in the industry. "Several exciting business trends have emerged in recent months that provide a glimpse into the bright future of RFID. In addition to the benefits of item level tagging, a larger number of technology developments that facilitate global RFID deployments are underway. The recent acceptance of the EPCglobal Gen 2 standard by the International Standards Organization (ISO), for example, is a very positive step toward ensuring the reliability and interoperability of RFID products worldwide, and there are similar initiatives that specifically benefit European and Asian RFID implementers."
Moore thinks printed electronics will come into wider use. "In the next few years, printed RFID (organic polymers) will be used to create functional supply chain RFID tags on multi-stage conventional printing presses. Layers of conducting, semi-conducting and non-conducting ink will be printed to create the IC. Workable 13.56 MHz tags have already been produced (albeit with virtually no memory capacity)."
RFID growth is expected in Asia as well as the US and Europe. Avery Dennison's Reynolds says, "RFID will be huge in Asia for several reasons: government funding of RFID initiatives in Korea and Singapore; RFID-enabled bag tags at major Asia-Pacific airports; national identity cards in China; mass transit tickets and smart toll roads are already in place; and tagging for export to mandating retailers in North America and Europe. Asia (especially China) is the manufacturing center of the world. As RFID tagging gets pushed further back into the manufacturing value chain (towards the point of manufacture, not the point of regional distribution), Asia's RFID market will grow accordingly."
Grudecki believes RFID is part of an ever-evolving technology cycle. "I think the RFID future is bright. I think it continually grows on a day-to-day basis. Ultimately RFID is going to not replace the bar code, but enhance the ability of the bar code. Companies will continue to save money as they continue to integrate it. The technology will continue to improve until the next technology comes along, whatever that may be."