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.
"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 can't have [a lot of] $2,000 readers. Stores will go bankrupt with that."
The current silicon chip approach simply won't work for the long term, the report said.
"IDTechEx doubts that the necessary one-cent tags needed for tagging everything in the supermarket - the largest volume potential for RFID - will be profitably achieved with silicon chips within 10 years, if ever," the report said.
IDTechEx "believes that giants such as IBM, Xerox, Dai Nippon Printing and Samsung that are developing chipless alternatives, such as polymer transistor circuits and Surface Acoustic Wave SAW devices, may be on a better tack for the long term."
The much-anticipated item-level tagging has already started to surface, more so in Europe than in the United States, though.
Raghu Das, a managing director for IDTechEx, predicts a lot more item-level tagging activity and it will happen more quickly than most retail IT executives predict.
"Item level is happening sooner than most think, but that doesn't mean tagging everything right now, and it is not confined to supermarkets.
"If we look at the largest orders last year, they were for item-level tagging - 120 million tags for baggage tagging, 10 million for books and CDs around the world, 5 million in laundry items, etc.," Das said.
"These dwarf the figures of tags bought for use on pallets and cases. Michelin, Pirellia and others are item-level tagging their tires.
"Even in retail, pharma companies have committed this year to rolling out tagged individual drugs such as Viagra, which are high-value and prone to counterfeiting and theft."
Das argues that while pallets and cases are intended to do little more than reduce cost, item-level tagging has the potential to both boost sales and add value for the consumer.
"Tesco's in the U.K. reported a 4 percent increase in sales by ensuring DVDs were on the shelf - which means preventing stockouts - with RFID," Das said in an interview.
"Similarly, Marks & Spencer in the U.K. item-level tagged men's suits to ensure good stock availability to customers. Item-level tagging is happening much faster than people realize and at both 13.56MHz and UHF."
One concern not addressed in the IDTechEx report is chip accuracy, which has concerned many retailers who have been testing RFID.
Patrick McQuown, a Georgetown University technology instructor, sees those high error rates as being more of a stumbling block than the report might have anticipated.
"I do not agree with the report that item-level tagging, particularly of drugs, is imminent," McQuown said.
"My research has led me to conclude that while the pharmaceutical companies have a clear need for item-level tagging—for things like counterfeiting prevention—the actual success rates of RFID along the supply chain does not match with what was seen in the lab."
Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.
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