RFID Hardware Supply Struggles to Meet Demand

On the reader side of Impinj's business, the company is making efforts to meet the increasing market demand for RFID handheld and fixed readers. To that end, the firm is providing its Speedway family of interrogators and Indy reader chips, which many customers utilize in handheld and fixed readers.

"For both of these product families, we have maintained normal lead times and expect to continue to," Stelter says. "Based on historical trends in the semiconductor industry, and forecasts of foundry capacity, we expect that the temporary mismatch in supply and demand for tag chips will ease in the first half of 2011."

Ingram Micro, a distributor of supply chain management products, has also experienced an increased demand for RFID technology product this year, says Justin Scopaz, the general manager and VP of the company's data capture/POS division. Although RFID technology represents only one portion of the firm's business, Scopaz says he's seen RFID demand increase significantly in 2010 in the retail, manufacturing, logistics and federal government sectors. The growing need for various products requiring silicon chips has affected the supply of RFID products, he indicates, and as a result, the company's staff is staying in close communications with RFID hardware vendors—particularly reader manufacturers—to keep the orders filled, by alerting them on a daily and weekly basis in regard to which hardware they need, or will need, in the near future.

Assuming they have the components on hand, Scopaz says, RFID hardware manufacturers have two options regarding how to address the problem: either building out production lines to increase the capacity of manufacturing facilities, or running their existing operations at maximum capacity—which he finds to be the more common response. "The year 2009 wasn't a great one for RFID," he states, "and considering the drop-off in demand, there was a corresponding drop in supply." With the significant uptick in demand, orders for readers (and, to a lesser extent, printers) from integrators and end users are now falling behind. He adds, however, that RFID hardware manufacturers have assured Ingram Micro that orders will be fulfilled by the end of this year. Still, Scopaz notes, depending on the number of RFID hardware orders placed by integrators and end users in the next quarter, the shortage could continue into 2011.

"Everyone's taking this very seriously," Scopaz says. "I wish I could place an order and it would ship two weeks from now, which isn't the case. But manufacturers are crystal clear that this issue is getting their attention."

Kinsella advises allowing extra lead time when placing orders, and that companies plan those orders around expectations of delays until at least mid-2011.