NFC tags are too expensive

In our previous “barcode vs. NFC” post, we argued that NFC tags will never replace the barcode on product packaging  and we provided five reasons why. In today’s post, we’ll investigate one of those reasons in more detail: the high cost of NFC tags compared to barcodes.

An NFC tag is a miniature radio module. It comprises a small microchip, a coil and no battery – the microchip and coil are packaged into a label that is attached to the product. To communicate with an NFC tag, an NFC reader generates a time-varying magnetic field which induces a voltage across the coil of the NFC tag. The microchip of the NFC tag powers up after rectifying the voltage across the coil and starts communicating its unique ID to the NFC reader.

The different components of an NFC tag make it significantly more expensive than a barcode. The cost of the NFC microchip is driven by the area of the silicon in the microchip. The typical size of a NFC microchip is ~0.5 mm squared which means that the silicon microchip could become available in very large quantities for below 5 cents. When you add cost for the copper coil, the cost of attaching coil to the microchip, the cost of the label and the integration into the label, it becomes obvious that even in large volumes an NFC tag is unlikely to be available for under 10 US cents.

For a brand owner like Procter & Gamble, this means that replacing barcodes on the product packaging with NFC tags is an expensive exercise. Procter & Gamble sells 40 billion products a year with net sales of ~80 billion USD. An NFC tag on every product would thus cost Procter & Gamble 4 billion USD (!!!) – roughly 5% of its net sales. The barcode is a much cheaper solution: It is printed onto the product packaging during the packaging and it has thus no significant cost associated with it.

In the long-term the cost of NFC tags is unlikely to decrease significantly below the numbers listed above, which are already below the current cost of NFC tags. Polymer NFC tags, where the entire tag is printed with conductive inks, are unlikely to meet the performance requirements set in the NFC specs – they would thus be incompatible with NFC smartphones. Printed Silicon NFC tags are capable of meeting the NFC protocol requirements but they still require a separate coil and chip assembly and such NFC tags are unlikely to cost less than a couple of cents.

There are more reasons why NFC tags will not replace barcodes on product packaging any time soon. In the next post in our “barcode vs. NFC” series, we’ll investigate the impact on the design of product packaging.