RSI announced an unprecedented 14.9-cent price for its finished RFID labels, which are ready to be printed then slapped on boxes of goods. The labels measure 4 inches by 6 inches and comply with the EPCglobal Gen 2 specification, which expected to be ratified as the first global RFID standard by the International Standards Organization early next year.
The sub-15 cent price is only for bulk orders of one million or more units. Though difficult to pinpoint, the average price of comparable labels ordered in volume is roughly 15 cents to 20 cents.
A couple of other vendors also recently slashed RFID hardware prices. Avery Dennison RFID last week said it would sell its new Gen 2 inlays, which are a component of RFID labels, for just 7.9 cents, also in one million unit shipments, which is the cheapest on the market.
There’s a general sense in the industry that RSI and Avery as well are attempting to really get the industry jumpstarted because it’s been fairly quiet in terms of compliance mandates, said Mike Sanzone, RFID product specialist at a rival RFID label maker and technology vendor MPI Label Systems.
Despite RFID mandates for suppliers to retailers, including the world’s biggest, Wal-Mart, the consensus forecast from US RFID tech suppliers was that orders this year were going to be ramping up at a faster rate than what’s been experienced, Sanzone said.
High RFID tag prices often have been cited as a barrier to adoption, particularly for companies that do not have to deal with usage mandates. The magic price point for widespread adoption is sometimes thought to be 5 cents per tag. (The one-cent tag, though mythical, would be a sure tipping point). RSI’s sub-15 cent tags seem to have come the closest.
However, by far and away, the bulk of RFID label orders are in the tens of thousands unit range — not the one million or more needed to get the price break. When ordering just tens of thousands of units, the price more than doubles.
RSI pricing for Gen 2 labels in 10,000-unit quantities are in high-30s to mid-40s cents, the company said.
It’s an interesting time right now because everybody’s talking about forecasts in terms of millions, said Sanzone with MPI, but the reality is in tens of thousands. That’s a huge disparity when you’re talking about price.
Still, it could be a chicken-or-egg scenario. Tawnya Clark, RSI VP of sales and marketing, said the company has not received a label order for one million or more units, but since announcing its 14.9-cent price has fielded a number of enquiries for volume orders.
There are opportunities out there for volume orders, she said. Clearly, RSI is targeting companies that have moved beyond the pilot stage and are already implementing RFID systems.
To reach its price point, Clark said RSI did not scrimp on materials, manufacturing processes or testing. She said the Gen 2 labels are of the same quality as those the company already sells (RSI began production of its Gen 2 labels just late last month).
Chula Vista, California-based RSI can afford to sell at basement prices because it also manufactures components of the RFID label, including antennas and inlays. (RSI buys its silicon from Impinj Inc). This means RSI does not pay mark-ups for most of its label components, Clark said.
RSI also announced it plans to charge fewer than 10 cents per Gen 2 label by December 2006, for customers that commit to at least a years’ worth of volume orders.
This company of 52 employees is betting that through its aggressive pricing it would secure a foothold in the emerging RFID market. Currently, RSI has about 200 customers.
But at this early stage of the RFID supply-chain market, only one thing’s for sure: RSI has stirred the US label industry into at least taking a second look at their own pricing.
We’ll be sitting down Monday to address all the latest [pricing announcements], said Sanzone with MPI, which is based in Sebring, Ohio. Obviously, we need to take a look at these [announcements] and the impact on our forecast and business model and see what we need to do, if anything, to react to it.
