ABI Research of Oyster Bay, New York, yesterday announced the release of a report entitled The Market for RFID Readers. The analysis predicts that standard reader prices will fall dramatically in the next few years, but only after more volume materializes. RFID Update spoke with report author Sara Shah about her findings.

Readers still constitute one of the priciest parts of an RFID deployment, with typical UHF reader costs hovering around $2,000 to $3,000. (A notable exception is the sub-$1000 Gen2 reader announced by AWID in September.) The reason for the high cost, according to Shah, is the lack of chipset UHF reader technology. Reader manufacturers must currently build their product by purchasing and assembling disparate off-the-shelf components, which is expensive. A chipset, on the other hand, is one specialized component that performs all the reader functionality. On a large scale, using chipsets instead of assembled components is a cheaper option and would result in cheaper readers.

The hurdle, of course, is just that: scale. Potential manufacturers of such chipsets -- Philips, Texas Instruments, RF component makers -- do not want to invest in the development thereof until they are sure there will be significant volume. The realization of UHF reader chipsets will take a large commitment from those players, according to Shah, and they are wary. They all assume that volume is coming, but they don't want to be too aggressive given the overall market's slower-than-expected growth. "Things [in supply chain RFID] haven't evolved as quickly as everybody had hoped, so they're being cautious," she said.

When UHF readers chipsets do become available, maybe sometime around late 2006 or early 2007, reader prices will drop sharply, and the market will see significantly increased competition. "Things are going to be a lot more competitive going forward," said Shah. The leadership positions of seemingly entrenched players like Intermec, Symbol, and ADT/Tyco are not assured. These leaders know that, noted Shah, as is evident by their continued aggressive pursuit of deals. It is hard to predict what the reader landscape will look like in the years ahead. She noted last week's announcement from Omron, the $5.5 billion sensor manufacturer that will allocate $20 million in 2006 alone to growing its UHF RFID business. Siemens is another example of an enormous company who has recently ratcheted up its aggressiveness in the supply chain RFID market, with readers as a part of its offering portfolio.