UHF RFID Reader Prices Must (and Will) Fall  ABI

Complexity, low volumes will keep costs high for short term; analyst sees price tags falling in late 2006, early 2007

Complexity, low volumes will keep costs high for short term; analyst sees price tags falling in late 2006, early 2007

Oyster Bay, NY — December 9, 2005 — Radio frequency identification (RFID) readers using the UHF band are among the most expensive purchases for companies complying with supply chain mandates from Wal-Mart and others. These companies consistently cite UHF reader costs as verging on the prohibitive. Why, and what will bring those prices down?

According to ABI Research analyst Sara Shah, the typical UHF reader today costs $2,500-3,000, a hefty price tag for any company planning a large-scale deployment. Unlike RFID label makers, says Shah, reader vendors are tight-lipped about the cost breakdown for a reader's components and production costs.

Lack of integrated circuit (IC) integration and low production volumes appear to be the main culprits in driving up prices. UHF readers are mainly used for supply chain management deployments. Today manufacturers buy off-the-shelf components and assemble circuit boards themselves. That's an expensive proposition, especially as these readers can be very complex.

First-mover Advantage

And that's why UHF reader prices are expected to fall dramatically in the medium-term. Reader designers believe that when integrated chipsets become available, prices will fall. According to information obtained by ABI Research, that is likely to occur late in 2006 or early in 2007, as semiconductor vendors become confident enough to make the large required investments in manufacturing plant.

When more RFID activities grow from small-scale trials to full-scale deployment, greater reader production volumes should drive prices down. Considering the number of companies being affected by these mandates, volumes will rise dramatically.

"At this point," says Shah, "everybody agrees: 'volume is coming,' but nobody knows when, so they don't want to move prematurely. Will first-movers have an advantage? Yes, but as prices fall, it may be short-lived."

A new ABI Research study, "The Market for RFID Readers", discusses product offerings as well as market trends across the globe including standards development breakdowns, software, network and integration concerns and in-depth profiles of RFID reader manufacturers.

Additional Articles of Interest

— RFID technology has the potential to change the way supply chains are managed, but in order to be effective businesses need to take a holistic look at the deployment. Read more in the SDCExec.com article "Time for RFID: Applying RFID in the Supply Chain."

— For a contrary view of the future of the RFID market, see the article "The O'RFID Factor: A 'No Spin' Look at Where Radio Frequency Identification Is Headed," in the October/November 2004 issue of Supply & Demand Chain Executive.

— For more information on trends relating to radio frequency identification (RFID), follow this link for an extensive listing of SDCExec.com articles, featuring the latest research findings on the RFID, including adoption, return on investment and barriers to implementation.