Radio frequency identification (RFID) and similar types of smart labels are predicted to create a massive new market for both printers and ink makers. The big question is how long will it take to arrive.
At a recent conference at Cambridge, England, on RFID and smart labels, attendees heard forecasts of a rapid growth in demand for the new low-cost technology.
IDTechEx, the Cambridge-based consultants who organized the meeting, expects the world market for smart labels to be worth $4 billion in 2007 and $10 billion in 2013.
In terms of volume, sales will increase from approximately 1.5 billion in mid-2003 to several billion in 2007, to at least 50 billion six years later.
What remains unclear is that once demand has reached the levels of tens of billions of units, what proportion of smart labels will be manufactured by printers using electronic inks on existing printing equipment.
Much could depend on how successful suppliers of microprocessors and electronic materials are in the development of plastic chips, which are likely to be the most viable low-cost alternative to silicon semiconductors.
Conductive polymers should provide the flexibility and processability needed to make printing a feasible method of large-scale, cheap production of smart labels and related items.
Even if the numerous technological challenges facing the development of conductive polymers are overcome, there are doubts whether they will be sold at a sufficiently low price because of the need to recuperate R&D costs.
At the same time, existing producers of RFID tags and smart labels are planning to become major players in the market when annual output levels reach billions. They are working on reel-to-reel manufacturing methods which are similar to printing systems.
Opportunities for Printers
Still, printers will be well positioned to be highly competitive operators in an era of low-cost electronics.
“There is a limit to how far existing producers of RFID tags can lower their costs,” said Dan Lawrence, technology and commercialization director at Precisia, a newly formed subsidiary of Flint Ink, who was one of the speakers at the conference.
“Printing has the fundamental advantage of speed,” he explained. “It is up to 10 times faster than the processes used by RFID tag producers and so has considerably lower costs.”
Precisia has opened a new R&D center in Ann Arbor, MI. Its objective is not only to develop electronic inks but also processes for the manufacture of smart labels and related products.
“We have right now a number of projects in the area of RFID and smart packaging which could take up to two years to commercialize,” he added.
The area where printers could initially make the biggest inroads is electronic displays, where some companies are already introducing systems based on high-volume printing methods.
Adam Laubach, sales and marketing manager at Dow Chemical’s advanced electronic materials business, told the conference that his company had already successfully tested a display technology using a new generation of electrochromic inks on a greeting card distributed by U.K. retain chain Marks & Spencer.
Dow is now targeting the sector for numeric and iconic displays for smart cards and labels on which the inks change color when low power is applied.
The labels will initially be screen printed, but should eventually be produced by higher volume processes like flexo and gravure.
“At the moment we are envisaging low-scale production levels,” Mr. Laubach explained. “But once, in addition to the printed display, we have printed batteries and integrated circuits and we get up to a high speed continuous printing process, our costs will be considerably lower.”
The most valuable prize for printers and electronic ink makers will be the production of smart labels with a microprocessing capability of nearly 100 bits. This would be enough to provide data on a manufacturer, product and batch serial number, similar to what is provided at the moment by bar codes.
Once that amount of information can be provided by a smart label, RFID will begin to replace bar codes, at least on cases and pallets.
IDTechEx believes the use of RFID in logistics and transport worldwide amounted to approximately 500 million tags in mid-2003. Once RFID technology is applied to pallets and containers, the potential annual demand in this sector alone could be two billion tags. Another two billion would be required annually if smart labeling was extended to airline baggage.
Some retail chains and consumer product manufacturers with global brands already have plans to switch to RFID at the case and pallet level within the next few years.
Wal-Mart is conducting trials with smart label systems with the aim of introducing RFID in its stores in 2005, said Simon Langford, the company’s RFID strategy manager.
In two years, the chain’s 100 top suppliers will be expected to be compliant with the electronic product code (EPC) standard for RFID systems in cases and pallets, equivalent to a need for five billion tags. By the beginning of 2006, all suppliers will have to be able to provide on-line case tracking in Wal-Mart’s distribution network.
Some observers believe that the major force behind the global growth in RFID will be owners of megabrands such as Procter & Gamble, Gillette, Sara Lee, Unilever and Nestle.
Price Tag for RFID
The speed of expansion of RFID will be propelled by cost. Companies like Procter & Gamble and Coca Cola say that the cost per tag will have to drop from a current bottom level of 30 to 50 cents to 5 cents before all cases and pallets have smart labels.
This would be equivalent of an annual demand of tens of billions. It is also the sort of unit cost level which existing producers of RFID tags say they are already developing manufacturing systems to achieve.
Once tag prices are pushed down to 1 cent each, it would be economical to apply them to individual consumer items. “The first products with tags would include high shrinkage, expensive items like DVDs, CDs, batteries, perfume, cigarettes etc.,” said Raghu Das, IDTechEx’s business development manager. The consultancy expects that by 2015, up to 10 percent of products will carry smart labels.
However, a tag price of 1 cent or less would bring total demand into the trillions with the opening up of new applications such as bank notes, postage stamps, vouchers and the archiving of sheets of paper.
At this low-cost level, printing not only becomes a competitive production method but will also be necessary for mass-scale RFID systems to be feasible. “The advantage of printing is not only its speed and low production costs,” said Mr. Lawrence of Precisia. “It also requires little or no additional capital costs.”
Cost of Materials
The key issue for the future is how much of a gap emerges between the cost of the silicon chip at the core of all present RFIDs and the materials providing the integrated circuits in future electronic inks.
At the moment the silicon chip takes up the biggest proportion of the cost of smart labels. With the latest large-scale production equipment which has brought the unit price of tags down to E25 cents (30 cents), the chip accounts for 60 to 75 percent of the total unit cost, according to Thomas Betz, business development director of Muehlbauer, the German smart label equipment manufacturer.
“I don’t see even in the longer term the price of a silicon chip coming down below 2 cents,” said Eitan Avni, business development director at KSW Microtec, a German tag maker and process developer. “Probably the rest of the materials would cost 2.5 cents and the process costs would take up the remainder. Material costs would still comprise much of the total costs.”
He warned that materials presently used in electronic inks could become too expensive once billions of RFID tags are needed. The price of silver, currently the main component in ink-based RFID antennas, would become far too high for low-cost production of tags.
The commercial introduction of conductive polymers should theoretically help to bring down smart label costs to nearly 1 cent. But presently the cost of conductive polymers is extremely high.
Wolfgang Clemens, principal research scientist in innovative electronics at Siemens of Germany, said conductive polymer producers are charging as much as $200 per gram for their materials.
His company is currently making in its laboratories integrated plastic circuits with polymer electrodes, insulators and semiconductors using screen, gravure and flexo printing techniques.
“We have some university and industry partners with whom we are developing reel-to-reel techniques so that we can print electronics like a newspaper,” Mr. Clemens said.
Because of the cost of raw materials and a number of technological obstacles, Siemens plans to move ahead relatively slowly, focusing first on an anti-counterfeit brand production device with a capacity of up to 16 bits.
“We believe it is best to start with the simple things,” Mr. Clemens said. “We have to work very hard at getting this reel-to-reel process right for high volume production. We expect our first product will take approximately three years to reach the market. Maybe it will take us as long as 10 years to produce a RFID tag with a capacity of up to 96 bits.”
Siemens is considered to be one of the leaders in the development of printed plastic circuits. If it is taking its time, other companies are probably doing the same. Low-cost printed electronics look unlikely to come to the market on a large scale in a hurry.