|Home||Internet of Things||Aerospace||Apparel||Energy||Defense||Health Care||Logistics||Manufacturing||Retail|
Motorola Taps Avery Dennison for RFID Tags
Avery Dennison and Motorola have announced a strategic relationship whereby Avery Dennison will supply RFID tags to Motorola. The deal represents a shift in focus by Motorola away from tag production, while also strengthening Avery Dennison's position as one of the industry's leading RFID inlay manufacturers.
May 01, 2007—This article was originally published by RFID Update.
May 1, 2007—Leading RFID hardware manufacturers Avery Dennison and Motorola have announced a strategic relationship whereby Avery Dennison will supply RFID tags to Motorola. The deal represents a shift in focus by Motorola away from tag production, while strengthening Avery Dennison's position as one of the industry's premier inlay manufacturers.
The relationship is structured around a two-part framework, according to George Reynolds, vice president of global sales and marketing for Avery Dennison RFID. The first part constitutes the tag supply agreement, where Avery Dennison will manufacture the inlays on behalf of Motorola for Motorola's RFID customers. It will also manage the conversion process of those inlays, delivering finished, usable tags to Motorola. "We believe that over a period of time we're going to be the majority of the tag supply for Motorola," said Reynolds. While he noted that Avery Dennison will have to win the favor of each Motorola customer individually, he affirmed his expectation that Avery Dennison's quality, price point, and reputation would ensure that outcome.
The other part of the relationship is a cooperative marketing agreement in which Avery Dennison and Motorola will pass client referrals back and forth, as well as work collaboratively on deployments. "We're going to extend best-in-class solutions around particular verticals," explained Reynolds, citing commercial aviation (luggage tagging) and healthcare as the two key prospects.
"There are end users and customers that are looking for a system-level solution," Reynolds said. "Think non-compliance. Think about companies that are actually changing their business models based on RFID. Avery Dennison and Motorola can go in and provide a high level of quality and cost reduction." By outsourcing tag production to Avery Dennison, Motorola can focus more on selling, designing, and deploying systems.
In one of the largest recent acquisitions to affect the RFID industry, Motorola bought Symbol Technologies last year for $3.9 billion (see What the Motorola-Symbol Deal Means for RFID and RFID Analysts Smile on Motorola-Symbol Deal). A leader in the automatic data capture industry, Symbol was slow to enter the RFID market, finally buying its way in through the $230 million acquisition of RFID hardware provider Matrics in 2004. At the time of the Motorola acquisition last year, Symbol was a provider of RFID readers (fixed and mobile), reader antennas, inlays, and tags.
Recently there had been speculation that Motorola might sell off its tag and inlay business altogether and focus only on manufacturing readers, which is better aligned with the company's core competencies and long-term goals (see Motorola Could Sell Symbol's RFID Tag Business). "The tag business has a little bit of a different operating model than readers," explained Reik Read, leading RFID industry financial analyst and author of RFID Monthly. "The RFID reader business fits in very well with Motorola's R&D capability, with its sales capability, and with its distribution channels. With tags, it might not be as core to their business."
While today's agreement between Avery Dennison and Motorola falls short of an acquisition, it is a clear indicator that Motorola is indeed moving away from tag and inlay manufacturing. When asked if Avery Dennison might eventually buy Motorola's tag business outright, Reynolds answered, "That's not the intent of the discussions we've had." Still, one can imagine that as Avery Dennison takes over more and more of Motorola's tag supply, the sale or closure of Motorola's tag business could be in the cards.
To those familiar with each company's RFID business, the pairing of Avery Dennison and Motorola might seem unlikely at first glance. Avery Dennison manufactures very high volumes of low-margin, commoditized goods, like Gen2 inlays. Motorola/Symbol's RFID focus has shifted away from compliance opportunities toward more specialized applications of RFID, like luggage tagging, where it is a leader. Reynolds explained that while the luggage tagging volumes will not ultimately be as big as compliance, "It is probably #2 after compliance, and it's a strong #2. We think that market's going to grow, and grow pretty dramatically." As for RFID applications with smaller volumes, Reynolds said that last year Avery Dennison repositioned its inlay manufacturing capabilities to be more flexible. "We're now able to address more specialized opportunities relatively quickly," he said.
In general, Reynolds was very upbeat on the outlook for RFID growth at Avery Dennison. Inlay sales are already up for 2007 versus 2006, and he believes the Motorola deal will only accelerate that trend. "I think [supplying Motorola tags] has every opportunity to be a very significant portion of our overall inlay volume," predicted Reynolds.
The two companies that stand to lose from the Avery Dennison-Motorola deal are Alien Technology and UPM Raflatac, which, along with Avery Dennison, are widely regarded as the leading UHF Gen2 inlay manufacturers in terms of volume. If supplying Motorola results in the volumes that Avery Dennison hopes it will, the company will have materially strengthened its position against its two primary competitors.
Login and post your comment!
Not a member?
Signup for an account now to access all of the features of RFIDJournal.com!
SEND IT YOUR WAY
RFID JOURNAL EVENTS
ASK THE EXPERTS
Simply enter a question for our experts.