Jan. 1, 2004—Back in 2001, the Auto-ID Center, a nonprofit research organization established at MIT, said it would create a prototype for an RFID tag that would cost 5 cents when manufactured in high volumes. That claim has been a source of great controversy within the RFID industry. Some analysts said the goal was unrealistic. Some established vendors said it was impossible.


Now that Wal-Mart and the U.S. Department of Defense (DOD) have announced plans to require RFID tags on pallets and cases shipped by suppliers beginning in January 2005, manufacturers who have to bear the cost of tagging their products are clamoring to know: Are 5-cent RFID tags really feasible? And, if so, when will they be available?

To answer these burning questions, rfid journal conducted a careful analysis of tag prices based on a detailed study of the RFID manufacturing industry conducted at MIT, the estimated number of cases handled by retailers likely to require tagging, and manufacturing innovations ready to come on-stream.

Of course, it’s important to understand that any price forecast, no matter how well grounded in fact, is by nature speculative. Many factors could influence tag prices. But our analysis will enable companies to make their own assessment of the market as they prepare a business case for investing in RFID. By understanding the likely future cost of tags, companies can design a phased-in approach: gradually moving from tracking pallets and reusable containers to tracking cases and high-value items to one day tracking millions of individual items.

It’s also important to note up front that the price of the tag is not critical to the success of an RFID deployment. Many applications will deliver a return on investment with tags that cost $1 or more. And there are many other critical cost issues to look at, including the cost of purchasing and installing RFID readers, integration with back-end systems and upgrading software applications. Companies need to consider all of these issues as they plan a deployment.