Sep 12, 2006This article was originally published by RFID Update.
September 12, 2006—Yesterday at the Labelexpo Americas show in Chicago, labeling giant Avery Dennison announced two new developments related to the company's RFID business. The first is the launch of a technology transfer program for its label converter customers. The second is the acquisition of startup RFID tag manufacturer RF IDentics.
The technology transfer program will allow label converters to license Avery Dennison's proprietary "strap attach" technology, which is a method of manufacturing RFID tags. With strap attach, the label converter receives a roll of "straps", which are essentially RFID chips with very small antennas. Each strap is a functioning RFID element -- it can send and receive radio frequency signals -- but because of its small antenna size and relatively unprocessed form factor, a label converting company must make it a fully functioning tag by attaching a larger antenna and converting it into a usable label.
Strap attach is an alternative to so-called "flip-chip", wherein RFID silicon chips are attached to antennas, forming RFID inlays. Because of the exacting complexities of dealing with silicon chips, flip-chip requires a skill set and equipment investment different from those of label converters. By contrast, "straps are something a normal label converter can fathom dealing with," Stan Drobac, vice president of RFID applications for Avery Dennison, told RFID Update. Flip-chip is therefore primarily the domain of inlay manufacturers like Alien, Raflatac, Symbol, and Avery Dennison itself. With the flip-chip manufacturing process, label converters receive finished inlays from such manufacturers and convert them into usable RFID tags.
The advantage of strap attach, according to Avery Dennison, is that it offers label converters greater flexibility and efficiency in producing tags for their clients. Straps are more customizable than inlays, allowing label converters to produce a wider range of form factors. Furthermore, using straps, label converters can make last-minute tweaks to tag designs, removing the need for them to maintain a large inventory of inlays. Lastly, the strap attach process is reportedly faster. Avery Dennison claims that label creation can happen ten times faster using strap attach versus alternative processes. "This is something that's seen of a lot of interest [from label converters] for a long time," said Drobac. (The company has posted Strap Attach Licensing FAQs on its website for interested converters.)
The strap attach technology is protected by Avery Dennison patents and, until now, the company had used the process to produce its own inlays. Making the technology available to label converters via licensing therefore marks a new strategy for the company. Given that Avery Dennison is one of the major inlay suppliers, it would seem that spreading the strap attach process -- which essentially removes inlays from the RFID tag production chain -- represents a cannibalization of its business. Drobac acknowledged that it could result in a loss of inlay sales, but said the company would make it up in other areas. First, the licensing fees from label converters will represent a compensating source of new revenue. Also, Avery Dennison sells many of the raw materials that label converters use in tag production (paper stock, adhesive, etc.), so offering them a technology that drives the production of more tags will indirectly spur demand for other Avery Dennison products.
Drobac also emphasized that the strap attach technology transfer program fits with its broader business plan for RFID. "It differentiates us from the other inlay guys," said Drobac. Furthermore, empowering label converters with enhanced tag production technology is consistent with the company's philosophy of being very converter-oriented. Lastly, and perhaps most important of all, Avery Dennison is eager to accelerate RFID adoption generally, and it believes strap attach technology will do that. "We think it's the right way to go," said Drobac.
The acquisition of RF IDentics is further testament to the company's strategy to empower label converters. According to Drobac, RF IDentics had developed tag production processes from the ground up, focusing on the creation of best practices rather than relying on conventional ones. As a result, the company owned advanced tag production intellectual property that impressed and attracted Avery Dennison, and complemented its technology transfer initiative. "The key was how well it fits into the other things we're doing," said Drobac, adding "we will take their technology and hand it to our converter customers."
Financial terms of the acquisition were not disclosed; the RF IDentics Acquisition FAQs says only that the purchase price was under $15 million. RF IDentics was founded in 2004 and is based in Grand Rapids, Michigan, where it will continue to operate as an independent subsidiary of Avery Dennison. It is a small company with less than ten employees. For more, see the company's fact sheet.
Read the announcement from Avery Dennison
