March 5, 2007
Radio days | The radio frequency identification market is booming. So why isn't Maine a bigger player?
By Kerry Elson
In January 2004, Gov. John Baldacci outlined an economic blueprint for Maine. It mentioned the usual suspects such as biotechnology, composites and forest products, and how Maine needed to support those industries. But it also placed high hopes on a technology called radio frequency identification, RFID for short, that transmits information over radio waves and, at the time, was hyped to be a replacement for bar codes.
"RFID presents significant potential for Maine," Baldacci said at the time. "Properly developed and supported, this industry could become a dominant force in the state."
Baldacci, Jack Cashman, at the time of the state's Department of Economic and Community Development, and the Maine International Trade Center scheduled a few trade missions to Europe, hoping to encourage RFID companies to set up manufacturing facilities in Maine. Baldacci scheduled meetings on ways to grow a cluster here with the handful of companies in Maine that already were pursuing lucrative RFID contracts.
In recent years, the market has grown by leaps and bounds. Wal-Mart in 2004 had required all its suppliers to ship goods in boxes labeled with RFID tags, and that same year, the Department of Defense did, too. Venture Development Corp., a Massachusetts-based technology consulting firm, estimates that the market will swell from $2.3 billion in 2006 to over $3 billion this year.
Since that initial flurry of activity in 2004, though, Augusta has been relatively silent about RFID. And for those working on RFID in Maine, the state's lack of action represents a lost opportunity to develop an environmentally-friendly industry that could offer high wages. They say Maine is ripe to take advantage of this growing market. The state's paper companies, for example, could be making the specialized paper products where electronic RFID antennas are printed. Others supporters say chipmakers like Fairchild Semiconductor could produce the circuitry for the tags, too.
Among state officials, however, it's not ignoring RFID so much as it is waiting for the industry to mature. "We've been trying to develop a cluster around [RFID] and it's problematic," says Cashman. "Trying to develop that has been difficult because the technology hasn't been perfected yet."
Opportunity knocks
While the state may be focusing on other industries, a handful of companies here are forging ahead with plans to meet growing demand for RFID products. One of Maine's RFID pioneers is John Kendall, owner of Chipco Inc. and its spin-off, EmbedTech Industries Inc., in Raymond. Kendall first embedded an RFID tag into a plastic poker chip back in 2002, and he's one of the few companies in the world to do so, according to Louis Bianchin, an analyst at Venture Development Corp.
Mainebiz wrote about Kendall in 2004, shortly after Baldacci outlined his economic plan. Back then, Kendall said he hoped the casino industry would soon begin using his chips, and that by the end of the year, he would hire 35 people at EmbedTech, which would embed RFID tags in products other than casino chips. He figured that by 2009 his company would post sales of $1 billion a year. "The RFID opportunity can change the manufacturing landscape in this state," he said at the time, "if we don't fumble the opportunity."
Kendall remains optimistic. But three years later, RFID still isn't quite the golden ticket he envisioned. Casinos have been slow to buy RFID-embedded casino chips, though his major customer, the Sands Casino in Macao, China, in the last few years has ordered a total of 20 million RFID-embedded chips. And though EmbedTech is creating RFID-embedded products for about 50 companies in the defense, agriculture and transportation industries, the company isn't yet profitable, says Kendall, because the manufacturing process is expensive.
This year, however, Kendall hopes to turn a profit and hire about 20 engineers and machinists. Several of his clients, some of them Fortune 500 companies, have completed test runs of his products and are ready to buy more. One company, he says, bought 300 parts last year, and this year has ordered an additional eight million ˆ an investment of $20 million. "The demand is there," Kendall says.
But Cashman says the state isn't ready to fully support an RFID cluster, largely because the technology is still emerging. The state is better off waiting until the technology is refined, he says, because it's still too expensive to manufacture RFID products. "The process needs to be developed," he says. "The product cost is not competitive."
Cashman has tried in recent years to lure some foreign manufacturers of RFID products, but the companies balked, saying the timing wasn't right. Cashman and Baldacci met with one French company, called ASK, during a 2004 trade mission and pitched them on building a manufacturing facility in Maine. "We offered [them] every state incentive to come to Maine, but frankly, I don't know if they're ready yet," says Cashman.
Funding dilemma
Since state funding isn't forthcoming, most RFID companies in Maine have had to dig deep to finance their own growth. One of those is Parco Merged Media, a six-year-old Portland company that develops RFID products for the healthcare industry. Parco CEO Scott Cohen has built his company largely without state assistance. He launched with a $12,000 grant from the Maine Technology Institute in 2002, but dipped into personal savings to fund roughly half of Parco's $4 million startup costs. He raised the bulk of the balance from an individual investor in Pennsylvania. "Maine has lofty ideals," Cohen says, "but no one's willing to write the check."
But Cohen's initial funding is starting to pay off. Parco recently finished installing more than 2,500 RFID tags on equipment like beds and wheelchairs at Washington Hospital Center in Washington, D.C. ˆ a $3 million project that's among the largest RFID hospital systems in the country. Cohen also plans on acquiring three or four competitors in the next couple months and expects to move to a new office in Scarborough that's roughly double the size of its 1,500-square-foot space in downtown Portland. To fuel that growth, Cohen hopes to have four to five dozen clients by the end of this year, most of them hospitals, nursing homes and shipping companies, and grow its annual sales, which last year were under $3 million, to $10 million by the end of the year.
Parco is heading in the right direction, according to Bianchin at Venture Development Corp. The company is using "active" RFID tags, meaning they contain a battery and can transmit information over longer distances than typical RFID tags ˆ up to 600 feet ˆ to a machine that reads the data. Customers are likely to buy active tags even though they cost more than a typical RFID tag ˆ $19 each vs. $2.60 for a tag like Kendall's ˆ because they have more capability, Bianchin notes. "These guys will survive," he says. "They have a fantastic technology."
But despite the lack of state funding, people like Scott Cohen and Mike Caron, the founder of Portland-based label-maker Lamtec, have opted to stay in Maine. Three years ago, Caron formed Tracktec, a separate company involved in developing RFID-embedded shipping labels.
Tracktec has only one employee ˆ Caron ˆ and a freelance consultant. Caron is using income from Lamtec to fund the new venture, adding that he's spending "more [money] than I want to" getting Tracktec off the ground. The project still is in development, and it will be another few years until it's on the market ˆ if it's successful at all. But if it is, he says, "it will have significantly broader applications than one company could use."
Caron says he could have developed this technology even more quickly had he received financial support at the state or federal level. As it is, the amount of money the state has invested in RFID development "could be put on a head of a pin," he says. "The opportunity is overlooked and underfunded."
"RFID presents significant potential for Maine," Baldacci said at the time. "Properly developed and supported, this industry could become a dominant force in the state."
Baldacci, Jack Cashman, at the time of the state's Department of Economic and Community Development, and the Maine International Trade Center scheduled a few trade missions to Europe, hoping to encourage RFID companies to set up manufacturing facilities in Maine. Baldacci scheduled meetings on ways to grow a cluster here with the handful of companies in Maine that already were pursuing lucrative RFID contracts.
In recent years, the market has grown by leaps and bounds. Wal-Mart in 2004 had required all its suppliers to ship goods in boxes labeled with RFID tags, and that same year, the Department of Defense did, too. Venture Development Corp., a Massachusetts-based technology consulting firm, estimates that the market will swell from $2.3 billion in 2006 to over $3 billion this year.
Since that initial flurry of activity in 2004, though, Augusta has been relatively silent about RFID. And for those working on RFID in Maine, the state's lack of action represents a lost opportunity to develop an environmentally-friendly industry that could offer high wages. They say Maine is ripe to take advantage of this growing market. The state's paper companies, for example, could be making the specialized paper products where electronic RFID antennas are printed. Others supporters say chipmakers like Fairchild Semiconductor could produce the circuitry for the tags, too.
Among state officials, however, it's not ignoring RFID so much as it is waiting for the industry to mature. "We've been trying to develop a cluster around [RFID] and it's problematic," says Cashman. "Trying to develop that has been difficult because the technology hasn't been perfected yet."
Opportunity knocks
While the state may be focusing on other industries, a handful of companies here are forging ahead with plans to meet growing demand for RFID products. One of Maine's RFID pioneers is John Kendall, owner of Chipco Inc. and its spin-off, EmbedTech Industries Inc., in Raymond. Kendall first embedded an RFID tag into a plastic poker chip back in 2002, and he's one of the few companies in the world to do so, according to Louis Bianchin, an analyst at Venture Development Corp.
Mainebiz wrote about Kendall in 2004, shortly after Baldacci outlined his economic plan. Back then, Kendall said he hoped the casino industry would soon begin using his chips, and that by the end of the year, he would hire 35 people at EmbedTech, which would embed RFID tags in products other than casino chips. He figured that by 2009 his company would post sales of $1 billion a year. "The RFID opportunity can change the manufacturing landscape in this state," he said at the time, "if we don't fumble the opportunity."
Kendall remains optimistic. But three years later, RFID still isn't quite the golden ticket he envisioned. Casinos have been slow to buy RFID-embedded casino chips, though his major customer, the Sands Casino in Macao, China, in the last few years has ordered a total of 20 million RFID-embedded chips. And though EmbedTech is creating RFID-embedded products for about 50 companies in the defense, agriculture and transportation industries, the company isn't yet profitable, says Kendall, because the manufacturing process is expensive.
This year, however, Kendall hopes to turn a profit and hire about 20 engineers and machinists. Several of his clients, some of them Fortune 500 companies, have completed test runs of his products and are ready to buy more. One company, he says, bought 300 parts last year, and this year has ordered an additional eight million ˆ an investment of $20 million. "The demand is there," Kendall says.
But Cashman says the state isn't ready to fully support an RFID cluster, largely because the technology is still emerging. The state is better off waiting until the technology is refined, he says, because it's still too expensive to manufacture RFID products. "The process needs to be developed," he says. "The product cost is not competitive."
Cashman has tried in recent years to lure some foreign manufacturers of RFID products, but the companies balked, saying the timing wasn't right. Cashman and Baldacci met with one French company, called ASK, during a 2004 trade mission and pitched them on building a manufacturing facility in Maine. "We offered [them] every state incentive to come to Maine, but frankly, I don't know if they're ready yet," says Cashman.
Funding dilemma
Since state funding isn't forthcoming, most RFID companies in Maine have had to dig deep to finance their own growth. One of those is Parco Merged Media, a six-year-old Portland company that develops RFID products for the healthcare industry. Parco CEO Scott Cohen has built his company largely without state assistance. He launched with a $12,000 grant from the Maine Technology Institute in 2002, but dipped into personal savings to fund roughly half of Parco's $4 million startup costs. He raised the bulk of the balance from an individual investor in Pennsylvania. "Maine has lofty ideals," Cohen says, "but no one's willing to write the check."
But Cohen's initial funding is starting to pay off. Parco recently finished installing more than 2,500 RFID tags on equipment like beds and wheelchairs at Washington Hospital Center in Washington, D.C. ˆ a $3 million project that's among the largest RFID hospital systems in the country. Cohen also plans on acquiring three or four competitors in the next couple months and expects to move to a new office in Scarborough that's roughly double the size of its 1,500-square-foot space in downtown Portland. To fuel that growth, Cohen hopes to have four to five dozen clients by the end of this year, most of them hospitals, nursing homes and shipping companies, and grow its annual sales, which last year were under $3 million, to $10 million by the end of the year.
Parco is heading in the right direction, according to Bianchin at Venture Development Corp. The company is using "active" RFID tags, meaning they contain a battery and can transmit information over longer distances than typical RFID tags ˆ up to 600 feet ˆ to a machine that reads the data. Customers are likely to buy active tags even though they cost more than a typical RFID tag ˆ $19 each vs. $2.60 for a tag like Kendall's ˆ because they have more capability, Bianchin notes. "These guys will survive," he says. "They have a fantastic technology."
But despite the lack of state funding, people like Scott Cohen and Mike Caron, the founder of Portland-based label-maker Lamtec, have opted to stay in Maine. Three years ago, Caron formed Tracktec, a separate company involved in developing RFID-embedded shipping labels.
Tracktec has only one employee ˆ Caron ˆ and a freelance consultant. Caron is using income from Lamtec to fund the new venture, adding that he's spending "more [money] than I want to" getting Tracktec off the ground. The project still is in development, and it will be another few years until it's on the market ˆ if it's successful at all. But if it is, he says, "it will have significantly broader applications than one company could use."
Caron says he could have developed this technology even more quickly had he received financial support at the state or federal level. As it is, the amount of money the state has invested in RFID development "could be put on a head of a pin," he says. "The opportunity is overlooked and underfunded."
Most Recent
Most Recent
Comments