ABI Research says UHF RFID Reader Prices Must (and Will) Fall

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 US$2500-3000: a hefty pricetag 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 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.

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 money and manufacturing plant.

When more RFID activities grow from small-scale trials to full-scale deployment, greater reader production volumes should have the same effect that they do everywhere, of driving 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.

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