Five RFID Myths Exposed - Page 3

By Alex Goldman

January 06, 2004

Myth 3: The 5 cent tag
Sorry, but there is no 5 cent tag today. Tech Center estimates that a 5 cent tag is possible todayfor a single purchase order of between 700 billion and 1 trillion tags! In 2003, Tech Center was able to provide a price of just under $1 for an inquiry request of 25 million tags, which is (at present) a more common large order size.

Next year's biggest order could be the 200 million to 300 million tag inserts that will be "cured" into tires if automotive companies and tire vendors succeed in that quest. That order could produce tags at prices of $0.35 to $0.50. But that's not $0.05.

Lower prices will only be possible on larger orders. The good news is that larger applications are emerging.

Retail and government customers will soon want to label cardboard boxes, pallets, plastic containers, and even some individual items. In the case of cardboard boxes, it should be noted that market may be larger than you think.

Four of the largest U.S. manufacturers of cardboard boxes are Georgia Pacific, International Paper (which is already famous for a warehouse RFID deployment tracking its own inventory), Weyerhaeuser, and Smurfit-Stone. The industry produces between 15 billion and 20 billion cardboard boxes each week!

Larger orders will be more possible when international standards bodies complete the specification for a frequency agile UHF reader and tag, as described above.

Larger orders are necessary because of the economics of manufacturing tags:

  • RFID IC chips are made on wafers, and each wafer yields about 25,000 chips.
  • One wafer lot, consisting of 25 wafers, yields about 1.25 million chips.
  • A manufacturer may produce 50 to 70 million chips per day, about 48 wafer lots.
  • Therefore an order of 1.25 million chips could take about 2 hours to manufacture. An order that uses more of a plant's annual production will be cheaper.

Orders of millions of chips may seem large, but for today's chip makers, even millions of chips can requires only a minimal amount of time on the assembly line.

Manufacturers invest a great deal of money in each plant. A typical plant costs $1.5 billion to $2 billion. An order covering a significant portion of a years' production would garnish discounts. No orders are yet of that magnitude.

Myth 4: RFID is all proprietary
This used to be true, but it is no longer true. In fact, one reason large customers are becoming interested in the technology is that standards bodies have been working on open standards, which include the ISO 18000-6 standard, the proposed ePCglobal specification (which covers an item numbering application, not hardware), and the global frequency agile UHF tag.

Nevertheless, the major manufacturers, including Alien Technologies, Matrics, Intermec, Philips, and Texas Instruments, do still have their own proprietary air interface protocols. A universal tag reader using existing technology would have to be compatible with each, licensing protocols from many different vendors in much the way that dialup modems makers used to do.

As larger customers come to the RFID market, standards will evolve. Standards will drive product development, and product development will drive application development. For example, ANS AIAG B-11 is an application standard for tire and wheel identification, and ANS MH10.8.4 is an ANSI application standard for RFID on reusable plastic containers.

The RFID standards do more than the bar codes ever did. For example, ePCglobal is proposing a specification for an application method to identify individual product items with an ePC serial number to be carried on a RFID tag.

Where a Universal Product Code (UPC) might identify a product such as Coca-Cola or Coors Light, the Electronic Product Code (ePC) number would, when referenced in the appropriate database, identify Coors Light Bottle, serial #12334455, brewed on 12/1/2003, at the Denver brewery, batch 12, bottle filler 3.

ePCglobal is not a simple process. It is a joint venture between EAN International, creator of the European Article Number, and the Uniform Code Council, creator of the U.S. UPC. The ePCglobal venture acquired the previous work of the Auto ID Center and is creating the new specification.

Myth 5 (and our conclusion): RFID's not ready
RFID is ready now! It's been used for years. It's tracking animals in animal tags, it's collecting tolls, and it's been improving car assembly since the early 1980s.

Each industry and even each company will find a different opportunity. In general, retailers will reduce out of stock no sales, which cost billions of dollars each year. Manufacturers seem more interested in perfecting the production process, eliminating errors, and in making recalls easier and better focused.

Wal-Mart is already on board. On August 18, 2003, the RFID Journal reported Wal-Mart spokesman Tom Williams saying, "we have asked our 100 top suppliers to have product on pallets employing RFID chips and in cases with RFID chips. By 2006, we will roll it out with all suppliers."

But a much bigger customer, the U.S. government, is converting to RFID. In "The Tipping Point" published on October 6, 2003, Mark Roberti, editor of the RFID journal, said that the embrace of RFID by the Department of Defense (DoD) would have an even greater effect on the industry than Wal-Mart.

He noted that the DoD buys consumer goods such as cola and cakes in addition to expensive military hardware, and that manufacturers that sell to the federal government will have to embrace the technology. Their suppliers will then have to embrace the technology. Finally, America's allies, including NATO, will also have to embrace the technology. The ripple effect from the DoD endorsement will be huge. It starts now.

The RFID wave starts in 2004. The RFID wave will wash across America in 2006. Watch for it.

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