These and other passive UHF Gen 2 tag players have adjusted their near-term strategies to focus more on ‘specialty’ tag form factors and non-retail supply chain compliance applications.  But ABI Research, while acknowledging that passive label markets have grown more slowly than hoped, has reiterated that they will ultimately reward those who have patience.

Why has the development of this retail supply chain market been slower than expected?  Michael Liard, the firm’s research director for RFID says, “End-to-end deployments based on passive UHF RFID tags do involve technological and physical challenges.  Price, too, has always been an issue despite significant reductions in recent years.  Shipment volumes are rising: eventually they will trigger further price drops, although at the moment many vendors are running on slim margins.”

ABI Research believes that to reach volumes in the billions, further label cost reductions must be achieved, particularly for low-cost retail item tagging, where tag price points remain too high for many products to justify the cost of RFID.

Outside the retail CPG market, however, end-users are finding strong value positions for high-volume passive UHF item-level tagging at current price points.  This includes item-level pilots and limited deployments within pharmaceuticals, fashion apparel, consumer electronics, and asset pooling/management markets.  The tagged objects in these application scenarios are often high-risk, high-value items that provide a strong ROI at present price points.

How is cost being driven out of commodity-like passive labels?  “In both the passive HF and UHF label markets, we see innovation in terms of IC size reduction, new antenna materials and designs, and manufacturing processes,” Liard says.  “But we do not expect migration to some of the newer materials and methods in the immediate future.”