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New RFID Chip Product Launch Imminent

The official launch of a Gen2 chip product is expected very soon. While no one would go on record with respect to the development, a number of sources have confirmed that in the coming weeks at least one silicon manufacturer will be announcing the availability of Gen2 chips in production quantities.
Jul 25, 2006This article was originally published by RFID Update.

July 25, 2006—The official launch of a Gen2 chip product is expected very soon. While no one would go on record with respect to the development, a number of sources have confirmed that in the coming weeks at least one silicon manufacturer will be announcing the availability of Gen2 chips in production quantities, ending the reign that Seattle-based Impinj has enjoyed for almost a year.

Not to be confused with an entire RFID tag, an RFID chip is the "brains" of the tag. Also referred to as silicon, integrated circuits, or ICs, the chips are sold to the likes of Alien, Avery Dennison, Omron, Symbol, and UPM Raflatac. Those companies attach each chip to an antenna on a substrate, thereby making an inlay that is sold to label makers and converters, who convert inlays into complete, usable RFID tags. End users ultimately buy RFID tags from label converters, not the silicon companies nor the inlay manufacturers. So while chips are not end-user facing, they are a fundamental component of the RFID value chain. Processors in personal computers are an apt analogy. Consumers don't buy Intel chips; they buy PCs with Intel chips inside. Similarly, Kimberly-Clark doesn't buy chips directly; it buys finished RFID tags that have Gen2 chips inside.

To date, there has been only one manufacturer of commercially available Gen2 silicon: Impinj. With the introduction of its Monza Gen2 chip last year (see Impinj Announces GEN 2 Solution), the company became the first chip supplier out of the gate with Gen2 product. Competitors were expected to quickly follow suit, but to the surprise of many, none did -- and a year later, none has. Consequently, Impinj has enjoyed a de facto monopoly on Gen2 silicon, and essentially every Gen2 tag thusfar deployed has an Impinj chip in it.

But that is about to change. Another manufacturer will soon offer Gen2 silicon in production quantities. Likely candidates include Infineon, Philips Semiconductors, STMicroelectronics, and Texas Instruments. All are multibillion semiconductor companies that have long been expected to enter the RFID chip market. (Alien too will eventually produce its own Gen2 chips, but probably not until fiscal 2007, according to this announcement.)

The effects of a new player in the Gen2 silicon market are not obvious. The intuitive guess is that the added competition will cause chip prices to fall, bringing tag prices with them. However this probably won't happen to a great extent because Impinj has been quite responsive to end-user price sensitivity, according to Drew Nathanson, director of the AIDC/RFID technologies practice at Venture Development Corporation. Instead of exploiting its unique position to charge high prices, Impinj has reportedly taken a longer view in the interest of stimulating RFID adoption. "Impinj is interested in pushing silicon. From their perspective, the more they sell the better. They're not trying to gouge the market," said Nathanson.

Reik Read, analyst with Robert W. Baird & Co., believes an entrant could provide a measure of comfort to end users that are slightly wary of dabbling too heavily in a technology for which, at a key link in the value chain, there is only one vendor. "End users like to see more choices within any industry, so the fact that you'll have more guys in the [Gen2 silicon] marketplace will make end users more comfortable," he said.

On the flipside, there is also the possibility that tag-reader interoperability "may actually take a small step backwards," said Read. Because all production Gen2 tags to date have used silicon from one vendor, it has been a relatively simple task to ensure good reader performance with the tags currently available on the market. Once silicon from other vendors appears in Gen2 tags, interoperability issues could arise.

Such hiccups would be short-term, however. The consensus is that more variety of Gen2 chip product on the market represents a positive -- and long-awaited -- development for the industry.
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