THE WALL STREET JOURNAL
By Don Clark
SAN FRANCISCO, CA
September 12, 2005

Alien Technology Corp. on Tuesday is announcing a 44% price cut on radio-frequency identification tags, hoping to lower a big barrier toward adoption of the technology.

The closely held company said it will begin offering some RFID tags at 12.9 cents each in quantities of a million units or more. Alien, which had been charging 23 cents each for the tags since the summer of 2004, attributed the reduction to improved manufacturing efficiency.

Pricing of RFID tags has been a closely watched issue for the technology, a more-capable successor to bar codes that allow identifying information on merchandise to be read from a distance. Wal-Mart Stores Inc. and others have been pushing suppliers to begin using the tags, but widespread acceptance has been limited by cost considerations.

Stavro E. Prodromou, Alien's chief executive officer, said the company believed its prior 23-cent pricing was the lowest on the market already. But the field is hotly competitive.

"I'm sure that there will be other price reductions announced because everybody's getting their volumes up," he said.

The price reductions are being offered on an Alien tag called Squiggle, which stores 96 bits of data and is categorized as a Class 1 tag--a low-end variety that is read passively by a radio-based sensing device. More expensive "active" varieties have their own batteries and can be read at a greater distance.

Many in the industry think sales volume for RFID tags will really take off when prices hit five cents each. "Everybody feels that is the knee of the curve when demand will really take off," Mr. Prodromou said. "We've always expected the 2007 or 2008 time frame we should get to the nickel tag."