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Mid South RFID Converts for Changing Market

The UHF RFID industry today is much different than the one Mid South RFID abruptly entered six years ago by filling a rush order for 1.2 million baggage tags. This installment of our company profile series tracks the company's evolution and future outlook.
May 06, 2009This article was originally published by RFID Update.

May 6, 2009—Label converter Mid South RFID took a much different path to the RFID industry than most. Rather than starting small and growing, Mid South started big and adjusted. The Franklin, Tennessee company, then known as Mid South Graphics, had absolutely no RFID infrastructure or experience when president Mark Davenport was contacted in 2003 by a former bar code label customer who had joined an RFID startup. The customer needed smart labels for a big airline baggage tracking pilot his company had just won, and it needed them quickly.

"I told him that I didn't think we could help, because we didn't have any RFID equipment or experience. But I knew he was a good guy, and must have believed in RFID since he had left a good company to join this startup. I'm always open to new ideas, so I said we could talk," Davenport recalled to RFID Update. "The next day he was in my lobby with two engineers, and a bag full of baggage tags. I introduced him to our plant operations manager and they got some things set up. About a week later he called to say 'You've got everything up and running, and you're converting labels in the right manner. Congratulations, you're in the RFID business now!'

"That was the Wednesday before Easter," Davenport continued. "Then he told me they needed 1.2 million airline baggage tags produced by the day after Easter. We filled the order, and it's been all downhill from there."

The startup that pulled Mid South into the RFID business based on a previous relationship with Davenport was Matrics, which became one of the highest-profile RFID vendors and was later acquired by Symbol Technologies (subsequently acquired by Motorola), and today represents the core of Motorola's RFID product line. Not long after the successful airline trial, Matrics won deals to provide baggage tracking systems for airports in Las Vegas and Hong Kong, and chose Mid South as its label provider.

Around the time Mid South was winning its high-volume airport contracts, there was also a lot of buzz about RFID supply chain applications, and Wal-Mart-driven supplier implementations were nearing their peak. Mid South became a leader in that market too.

Mid South's fast start didn't leave a lot of room to grow, but created plenty of opportunities to adapt. Neither the supply chain nor baggage tagging markets have grown as fast or as large as expected. Today, the most growth Mid South RFID sees is in competition. Davenport said there used to be five or six primary label suppliers he competed with, but now there are upwards of 25. "There's not enough volume in the UHF market for all of us," he said.

A few years ago when optimism was highest for UHF RFID technology, tag performance and cost were widely thought to be the biggest obstacles to rapid, widespread adoption. Tags have improved considerably on both fronts, but adoption hasn't followed.

"You can't say UHF RFID is immature anymore. Between 2005 the yields [percentage of usable inlays provided to label converters] went from the high sixties to the low nineties. It was a big jump. Today yields are 98 to 99 percent," said Davenport. "It can't get much better, but there will continue to be incremental improvement."

Now that reliability issues have largely been put to rest, Davenport believes it will take a drop in tag costs to trigger adoption. "In my opinion the only way this industry can get jump started is when you can get reliable tags for under a nickel apiece," Davenport said. Inlay prices are approaching this level, but the cost of converting inlays into tags and labels keeps end-user costs higher for the finished product. However, Davenport believes finished tags can and will get below the five-cent threshold.

"The price can get there, if the big chip companies make a commitment. It has to get there, or the ship will never leave the dock."

But prices aren't there yet, and neither are many high-volume consumer goods and supply chain opportunities for Mid South. Most of the business opportunities the company does see are for closed loop applications. Davenport says closed loop applications currently are consuming more tags and labels than the consumer goods and supply chain markets.

"If you're going to be successful in this business, you got to look for closed loop opportunities and focus on the vertical industries that have those opportunities," Davenport said. "There are some vertical markets with very good opportunities -- but I'm not going to tell you where they are. Companies will have to figure that out for themselves."

RFID opportunities continue to change quickly, a lesson Mid South learned the first day a visitor walked into its office to talk about converting RFID labels more than six years ago.
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