17 October 2005 | Anusha Bradley
Radio frequency identification (RFID) manufacturers are starting to sell tags below cost price to increase the rate of adoption, according to ABI research.
Last month, Alien Technologies reduced the price of its tag by 44 per cent to 12.9 US cents (7p) and Avery Dennison is offering the antenna inlays - the main part of the tag - at 7.9 cents (4p) each.
Erik Michielsen, RFID research director at ABI Research, told SM: "At low volumes these prices may not be profitable."
However, he said the aim was to encourage firms to buy in larger quantities and to persuade others not yet using them to give them a try.
Raghu Das, managing director at analyst firm IDTechEx, said recent price cuts are good news for purchasers looking to set up or roll-out a trial. But he added cheaper prices would most likely only be available to customers who buy in very large numbers.
"One of the big problems for adoption in the past five years is that RFID has been too expensive. Lower prices will increase the uptake but we don't believe that the tipping point for adoption will be reached until late 2006-2007," he said.
Michielsen said price cuts, new easy-to-use products and the recent introduction of a new global RFID standard - EPC Gen 2 - will help improve demand. "For now, it is about relationships and commitment. In the future it will be about volume-driven low-cost efficiencies and profitability," he added.
René de Sousa, CIPS procurement specialist, speaking at the eWorld Purchasing & Supply conference in London last month, said RFID would not become truly affordable until prices drop to at least 5 cents (3p) per tag.