February 2, 2004
True believer | John Kendall has faith that the global RFID industry can resurrect manufacturing in Maine. But can he convert the rest of us?
By Michaela Cavallaro
John Kendall has a vision. From his office on Route 302 in Raymond, Kendall imagines Maine's economy five years from now, and this is what he sees: a new, "environmentally neutral" industry that will provide lucrative, high-tech manufacturing jobs in locations across the state, making products for a global market. His own company, EmbedTech, will make a billion dollars in 2009, he says, and other companies in Maine can do the same.
Kendall is banking on the potential of RFID, or radio frequency identification, a more-than-50-year-old technology that is being positioned to take the place of bar codes in applications ranging from retail to animal tracking to homeland security. If you doubt the signs of RFID's ascendancy, consider the fact that Wal-Mart recently mandated that its top 100 suppliers be RFID compliant by 2005. And in the industry that Wal-Mart's demands alone will create, Kendall sees a once-in-a-lifetime chance for Maine. "The RFID opportunity can change the manufacturing landscape in the state," he says, his tone intensifying as he finishes the sentence, "if we don't fumble the opportunity."
Whether Maine can create the RFID manufacturing cluster that Kendall envisions ˆ or if he can even entice other local companies to join the cause ˆ remains to be seen. Some of the companies that Kendall has identified as being critical to the cluster have said they have no plans to pursue RFID technology, like Fairchild Semiconductor. Others don't want to talk about the possibility publicly, like a southern Maine printing company whose president asked not to be identified for this story. Yet others don't even exist in the state, like the die-bonding operations Kendall envisions being operated by Maine's Indian tribes.
Even so, RFID technology is one of three sectors identified as "emerging industries" in the economic development strategy Gov. John Baldacci released late last month. "RFID presents significant potential for Maine," the governor's report said. "Properly developed and supported, this industry could become a dominant force in the state."
Kendall's role in the process has been that of an evangelist, patiently explaining the intricacies of radio frequencies, chip making and injection molding to anyone who will listen, then proselytizing about RFID's potential for Maine. He's drawn the attention of state government and Maine's congressional delegation; Sen. Olympia Snowe toured his operation in early January, and a spokesman says she found the cluster idea "a concept worth exploring."
Like the prospects for RFID technology itself, Kendall's profile in the industry can shift depending who you talk to. Douglas Bourque, director of sales for Texas Instruments RFID Systems in Dallas, describes Kendall as "quite well known" in RFID circles, while Mark Roberti, founder and editor of RFID Journal, a two-year-old industry newsletter, says he's never heard of Kendall or EmbedTech. Kendall and Bourque have worked together for the past few years to develop an RFID-enabled gaming chip that would allow casinos to track individual gamblers more closely. (Kendall's other company, Chipco, which is providing the capital and employees for EmbedTech's startup, designs and manufactures specialized gaming chips for the casino industry.) Bourque is convinced that EmbedTech's most recent trial, the third generation, is the one he'll be able to sell to casinos across the country.
Besides, he says of Kendall, "He's a positive person ˆ he's great for the industry."
Placing an RFID bet
Kendall, 55, an Auburn native, became interested in RFID about nine years ago. A serial entrepreneur whose first business was The Tennis Racket, a sports club in Portland now known as The Racket & Fitness Center, he bought Chipco in 1985. Kendall says the company, then known as Burt Co., was losing $30,000 a month at the time. "I had spent a few years in the venture capital community as a turnaround specialist, and I thought, at age 32, I was invincible, bulletproof," he says. "We turned a profit in 1988; it took three years and I had to invent a new product" ˆ a ceramic gaming chip ˆ "to do it."
Starting in the mid-1990s, Kendall says, his gaming industry customers started asking him to put an RFID inlay inside the poker chips he manufactures. Essentially a microchip with an antenna, an RFID "tag" beams unique information via radio waves to an interrogator, or reader, that passes the data on to a computer system. Unlike bar codes, which require proximity and a clear line of sight to be read, RFID tags can be read despite obstructions ˆ though there are still problems with the signal's durability through water and metal ˆ and from longer distances. According to Kendall, his casino customers were interested in tagging individual poker chips for a few reasons, including tracking the fortunes of individual players, eliminating employee theft and automating the exchange of chips for cash.
The problems, though, were significant: RFID tags themselves were somewhat bulky, with a copper antenna soldered to the microchip, and they were cost-prohibitive, at about $5 apiece. Over time, of course, the chips got smaller, and manufacturing processes evolved so that the antenna could be etched rather than soldered. (Today, Kendall says, the antennas can be printed with conductive ink on paper, a process that's easier, and has less of an environmental impact, than earlier methods.) From Kendall's perspective, the gains were a blessing and a curse; they made it more feasible to fit an RFID tag inside a poker chip, but the tag's fragility meant the process would be difficult.
Kendall relishes this part of his tale. He sets up the obstacles ˆ the RFID tag is 1/100 of an inch thick, "thinner than a piece a human hair," and melts at 300 degrees Fahrenheit, while Chipco injection molds its plastic chips at 500 degrees and at speeds of 200 miles an hour ˆ so that his company's solution to the problem, which it hit upon in a little more than six months, comes across as that much more heroic. Chipco, which has just 39 employees, figured out how to embed an RFID tag inside a poker chip in the spring of 2002, at a cost Kendall says he can't quantify. "We invested our time," he says. "I don't have a dollar figure."
What Kendall does have is a casino chip he carries around with him, made of clear plastic so the tiny RFID tag is visible. That's the product that Bourque of Texas Instruments is excited about. None have been sold yet, but with the latest generation Kendall and Bourque say they've gotten the cost down to about a dollar a chip, which they say is the threshold required by the casinos. "I think we'll see the casino community implement it in 2004," Kendall says.
The Finnish connection
EmbedTech, Chipco's sister company, was created in December 2000 to move into products beyond casino chips. The spinoff was necessary, Kendall says, due to the large amount of regulatory oversight Chipco is subject to since its products are used in casinos. "We didn't want the new enterprise of making security tags [and other RFID products] to be burdened by that regulation," he says.
Today, EmbedTech has no employees ˆ it borrows Chipco staff, though Kendall says he anticipates hiring 35 dedicated EmbedTech employees this year ˆ and "virtually no revenues," according to Kendall. All the test products the company has made have been free of charge. "People did not believe it could be done," Kendall says of his company's ability to encapsulate RFID tags in injection molded plastic. "We invested our time and money to convince them it could be done."
As Bourque observes, Kendall is relentlessly optimistic. In an interview in his Raymond office, Kendall emphasizes that EmbedTech is the only company in the world that's figured out how to encapsulate RFID in plastic, something he says he finds "astounding." However, Roberti, the RFID Journal editor, points out the existence of a Finnish company called Rafsec, which last April announced its ability to embed RFID tags in plastic containers using injection molding. When asked in a follow-up interview about Rafsec, Kendall says it's "a company that we know well, and they know us well ˆ they've been here a few times."
Kendall maintains that Rafsec's process involves an extra step ˆ laminating the RFID tag in vinyl before injection molding it ˆ that EmbedTech has been able to eliminate.
Furthermore, he says, Rafsec's core expertise is in laminated RFID tags, which can be laminated into adhesive labels and slapped onto a FedEx package or a pallet of paper towels in a Wal-Mart distribution center. That's a market that Kendall isn't interested in for himself, though industry observers say it will make up the majority of the RFID market. Instead, Kendall says there are label printing companies in Maine that could easily enter that line of business. As for Rafsec, Kendall says, "Our encapsulated product could be marketed with their laminated product, and that way we'd have one sales force" ˆ the Rafsec sales force ˆ "selling both companies' products. You would not be too far off to believe those types of discussions are taking place."
Kendall is similarly sanguine when asked about his plan for EmbedTech to be a billion dollar company in five years, given that a study released last month by IDC, a technology market research firm in Framingham, Mass., projects that spending on RFID in the retail supply chain ˆ i.e., the Wal-Mart mandate and its trickle-down effect ˆ will reach just $1.3 billion in 2008. "That estimate is nowhere near accurate," Kendall says amiably. "Wal-Mart alone estimates it will buy one billion tags at some fee in 2005. And they will tell you that in order to put in RFID, you not only have to buy tags, you have to buy readers, the hardware and the software ˆ so Wal-Mart itself in 2005 is looking at a multi-billion-dollar purchase."
But even Venture Development Corp., a Natick, Mass. technology market research firm whose analysis Kendall says he prefers, contradicts his numbers; according to the Boston Globe, the organization projects the entire RFID industry in 2005 will post annual revenues of $1.8 billion.
Still, Kendall sees a bright future ahead for EmbedTech, and for the state if business people and government officials move quickly. "A client met with us yesterday and wanted a production scaleup for putting [RFID tags] on chips ˆ it would scale up to a billion a week," Kendall says. "We're talking now about making encapsulated parts at 1,000 parts a minute ˆ it's a realistic goal for us to look at within the next 12 months."
Just how realistic is difficult to say, if you're not John Kendall, but what does seem like a reasonable assumption is that there will be money to be made in some kind of RFID boom in the next few years. And it's also reasonable to assume that Kendall will be there waiting for us, eager to lead us into the promised land. But only if we're willing to follow.
Kendall is banking on the potential of RFID, or radio frequency identification, a more-than-50-year-old technology that is being positioned to take the place of bar codes in applications ranging from retail to animal tracking to homeland security. If you doubt the signs of RFID's ascendancy, consider the fact that Wal-Mart recently mandated that its top 100 suppliers be RFID compliant by 2005. And in the industry that Wal-Mart's demands alone will create, Kendall sees a once-in-a-lifetime chance for Maine. "The RFID opportunity can change the manufacturing landscape in the state," he says, his tone intensifying as he finishes the sentence, "if we don't fumble the opportunity."
Whether Maine can create the RFID manufacturing cluster that Kendall envisions ˆ or if he can even entice other local companies to join the cause ˆ remains to be seen. Some of the companies that Kendall has identified as being critical to the cluster have said they have no plans to pursue RFID technology, like Fairchild Semiconductor. Others don't want to talk about the possibility publicly, like a southern Maine printing company whose president asked not to be identified for this story. Yet others don't even exist in the state, like the die-bonding operations Kendall envisions being operated by Maine's Indian tribes.
Even so, RFID technology is one of three sectors identified as "emerging industries" in the economic development strategy Gov. John Baldacci released late last month. "RFID presents significant potential for Maine," the governor's report said. "Properly developed and supported, this industry could become a dominant force in the state."
Kendall's role in the process has been that of an evangelist, patiently explaining the intricacies of radio frequencies, chip making and injection molding to anyone who will listen, then proselytizing about RFID's potential for Maine. He's drawn the attention of state government and Maine's congressional delegation; Sen. Olympia Snowe toured his operation in early January, and a spokesman says she found the cluster idea "a concept worth exploring."
Like the prospects for RFID technology itself, Kendall's profile in the industry can shift depending who you talk to. Douglas Bourque, director of sales for Texas Instruments RFID Systems in Dallas, describes Kendall as "quite well known" in RFID circles, while Mark Roberti, founder and editor of RFID Journal, a two-year-old industry newsletter, says he's never heard of Kendall or EmbedTech. Kendall and Bourque have worked together for the past few years to develop an RFID-enabled gaming chip that would allow casinos to track individual gamblers more closely. (Kendall's other company, Chipco, which is providing the capital and employees for EmbedTech's startup, designs and manufactures specialized gaming chips for the casino industry.) Bourque is convinced that EmbedTech's most recent trial, the third generation, is the one he'll be able to sell to casinos across the country.
Besides, he says of Kendall, "He's a positive person ˆ he's great for the industry."
Placing an RFID bet
Kendall, 55, an Auburn native, became interested in RFID about nine years ago. A serial entrepreneur whose first business was The Tennis Racket, a sports club in Portland now known as The Racket & Fitness Center, he bought Chipco in 1985. Kendall says the company, then known as Burt Co., was losing $30,000 a month at the time. "I had spent a few years in the venture capital community as a turnaround specialist, and I thought, at age 32, I was invincible, bulletproof," he says. "We turned a profit in 1988; it took three years and I had to invent a new product" ˆ a ceramic gaming chip ˆ "to do it."
Starting in the mid-1990s, Kendall says, his gaming industry customers started asking him to put an RFID inlay inside the poker chips he manufactures. Essentially a microchip with an antenna, an RFID "tag" beams unique information via radio waves to an interrogator, or reader, that passes the data on to a computer system. Unlike bar codes, which require proximity and a clear line of sight to be read, RFID tags can be read despite obstructions ˆ though there are still problems with the signal's durability through water and metal ˆ and from longer distances. According to Kendall, his casino customers were interested in tagging individual poker chips for a few reasons, including tracking the fortunes of individual players, eliminating employee theft and automating the exchange of chips for cash.
The problems, though, were significant: RFID tags themselves were somewhat bulky, with a copper antenna soldered to the microchip, and they were cost-prohibitive, at about $5 apiece. Over time, of course, the chips got smaller, and manufacturing processes evolved so that the antenna could be etched rather than soldered. (Today, Kendall says, the antennas can be printed with conductive ink on paper, a process that's easier, and has less of an environmental impact, than earlier methods.) From Kendall's perspective, the gains were a blessing and a curse; they made it more feasible to fit an RFID tag inside a poker chip, but the tag's fragility meant the process would be difficult.
Kendall relishes this part of his tale. He sets up the obstacles ˆ the RFID tag is 1/100 of an inch thick, "thinner than a piece a human hair," and melts at 300 degrees Fahrenheit, while Chipco injection molds its plastic chips at 500 degrees and at speeds of 200 miles an hour ˆ so that his company's solution to the problem, which it hit upon in a little more than six months, comes across as that much more heroic. Chipco, which has just 39 employees, figured out how to embed an RFID tag inside a poker chip in the spring of 2002, at a cost Kendall says he can't quantify. "We invested our time," he says. "I don't have a dollar figure."
What Kendall does have is a casino chip he carries around with him, made of clear plastic so the tiny RFID tag is visible. That's the product that Bourque of Texas Instruments is excited about. None have been sold yet, but with the latest generation Kendall and Bourque say they've gotten the cost down to about a dollar a chip, which they say is the threshold required by the casinos. "I think we'll see the casino community implement it in 2004," Kendall says.
The Finnish connection
EmbedTech, Chipco's sister company, was created in December 2000 to move into products beyond casino chips. The spinoff was necessary, Kendall says, due to the large amount of regulatory oversight Chipco is subject to since its products are used in casinos. "We didn't want the new enterprise of making security tags [and other RFID products] to be burdened by that regulation," he says.
Today, EmbedTech has no employees ˆ it borrows Chipco staff, though Kendall says he anticipates hiring 35 dedicated EmbedTech employees this year ˆ and "virtually no revenues," according to Kendall. All the test products the company has made have been free of charge. "People did not believe it could be done," Kendall says of his company's ability to encapsulate RFID tags in injection molded plastic. "We invested our time and money to convince them it could be done."
As Bourque observes, Kendall is relentlessly optimistic. In an interview in his Raymond office, Kendall emphasizes that EmbedTech is the only company in the world that's figured out how to encapsulate RFID in plastic, something he says he finds "astounding." However, Roberti, the RFID Journal editor, points out the existence of a Finnish company called Rafsec, which last April announced its ability to embed RFID tags in plastic containers using injection molding. When asked in a follow-up interview about Rafsec, Kendall says it's "a company that we know well, and they know us well ˆ they've been here a few times."
Kendall maintains that Rafsec's process involves an extra step ˆ laminating the RFID tag in vinyl before injection molding it ˆ that EmbedTech has been able to eliminate.
Furthermore, he says, Rafsec's core expertise is in laminated RFID tags, which can be laminated into adhesive labels and slapped onto a FedEx package or a pallet of paper towels in a Wal-Mart distribution center. That's a market that Kendall isn't interested in for himself, though industry observers say it will make up the majority of the RFID market. Instead, Kendall says there are label printing companies in Maine that could easily enter that line of business. As for Rafsec, Kendall says, "Our encapsulated product could be marketed with their laminated product, and that way we'd have one sales force" ˆ the Rafsec sales force ˆ "selling both companies' products. You would not be too far off to believe those types of discussions are taking place."
Kendall is similarly sanguine when asked about his plan for EmbedTech to be a billion dollar company in five years, given that a study released last month by IDC, a technology market research firm in Framingham, Mass., projects that spending on RFID in the retail supply chain ˆ i.e., the Wal-Mart mandate and its trickle-down effect ˆ will reach just $1.3 billion in 2008. "That estimate is nowhere near accurate," Kendall says amiably. "Wal-Mart alone estimates it will buy one billion tags at some fee in 2005. And they will tell you that in order to put in RFID, you not only have to buy tags, you have to buy readers, the hardware and the software ˆ so Wal-Mart itself in 2005 is looking at a multi-billion-dollar purchase."
But even Venture Development Corp., a Natick, Mass. technology market research firm whose analysis Kendall says he prefers, contradicts his numbers; according to the Boston Globe, the organization projects the entire RFID industry in 2005 will post annual revenues of $1.8 billion.
Still, Kendall sees a bright future ahead for EmbedTech, and for the state if business people and government officials move quickly. "A client met with us yesterday and wanted a production scaleup for putting [RFID tags] on chips ˆ it would scale up to a billion a week," Kendall says. "We're talking now about making encapsulated parts at 1,000 parts a minute ˆ it's a realistic goal for us to look at within the next 12 months."
Just how realistic is difficult to say, if you're not John Kendall, but what does seem like a reasonable assumption is that there will be money to be made in some kind of RFID boom in the next few years. And it's also reasonable to assume that Kendall will be there waiting for us, eager to lead us into the promised land. But only if we're willing to follow.
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