We have talked a lot on this blog about RFID tag prices dropping. New production techniques as well as increased demand did their fine work, and resulted in lower tag prices -- especially in large volumes.

Now one research firm is predicting that prices will likewise fall for RFID readers that use the UHF band. According to ABI Research:

"RFID readers using the UHF band are among the most expensive purchases for companies complying with supply chain mandates from Wal-Mart and others. These companies consistently cite UHF reader costs as verging on the prohibitive. Why, and what will bring those prices down?

According to ABI Research analyst Sara Shah, the typical UHF reader today costs US$2500-3000: a hefty price tag for any company planning a large-scale deployment. Unlike RFID label makers, says Shah, reader vendors are tight-lipped about the cost breakdown for a reader's components and production costs.

Lack of IC integration and low production volumes appear to be the main culprits in driving up prices. UHF readers are mainly used for supply chain management deployments. Today manufacturers buy off-the-shelf components and assemble circuit boards themselves. That's an expensive proposition especially as these readers can be very complex.

And that's why UHF reader prices are expected to fall dramatically in the medium-term. Reader designers believe that when integrated chipsets become available, prices will fall. According to information obtained by ABI Research, that is likely to occur late in 2006 or early in 2007, as semiconductor vendors become confident enough to make the large required investments in money and manufacturing plant."

I do not think the ABI report is talking about so-called "dumb" readers, which already can be purchased for less than $2500. Also, note the part about reader prices falling "late in 2006 or early in 2007." Do not expect relief right away.

I wonder if Moore's Law will apply to RFID UHF readers: that they become more powerful every 24 months adjusted on a cost basis.