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Message: Semiconductors and NCS - Geoff

Geoff,

Yup, we all certainly agree that "it's making the sale that counts".

I realize that there were a lot of different semiconductor applications that were considered, at least in discussion on this and other boards, and most don't seem to have found the light of day.

It seems, though, that Exypnotech/Tagstar has significantly penetrated the RFID market, as evidenced by the continually increasing sales reported in the last few 10-Q filings. Even the steadily increasing sales (as opposed to the rocket to the moon) is taking a lot longer than any of us expected, but in the grand scheme of things, RFID technology and manufacturing is still in its infancy.

The RFID component manufacturing and assembly process seems to be segmented, as indicated in the article below. Perhaps this is because of the efficiency of having different areas of specialization, or because individual segment manufacturers don't want to share their process with others. Whatever the reason for this evolution, it seems that Exypnotech is an active player, and that sales are occurring.

-zties

RFID: Strong Position of German Companies and Research
Peter Gabriel
9 January 2007

RFID (radio frequency identification) is a well-known and robust technology for communication between a transponder attached to a physical object and a stationary reader. Almost all analysts predict a strong market growth for RFID systems. The research company Frost & Sullivan forecasts a market volume of 11.8 billion US$ in 2008. While for traditional RFID market segments, security and access control, public transportation, animal tracking, and toll systems further growth will slow down, a boom is expected in the asset tracking segment. The driving forces will be retail logistics, manufacturing logistics, and, in the USA, military logistics.

A number of retailers have already started RFID pilot projects, in prominent place the German retailer Metro AG. The constant tracking shall reduce stocks, prevent sold-off shelves, and shall help to monitor the transport of perishable food. Additionally, the German high-volume automotive industry is interested in such systems, allowing a more decentralized production control.

Germany is not only one of the most active users of RFID technology. RFID technology is posted forward by a great number of German companies and research institutions.

Industrial Activities in Germany
The sub-segments of the RFID market are quite different from each other: While silicon chip production is dominated by a few large semiconductor manufacturers, manufacturing machines, inlays and readers are produced by a large number of small and medium enterprises. German enterprises have strong positions in most of these sub-segments. Moreover, as in mechanical engineering, German SMEs are often at the forefront of RFID technology development. A prominent example is Microsensys GmbH, which developed a coil-on-chip design for smallsized transponders.

In the Germanspeaking countries Infineon AG is the only manufacturer of smart label chips. The company operates the "RFID solution excellence centre and system lab" in Graz (Austria). A small number of German companies - some of them subsidiaries of US-based firms - provide smart label inlays, among others: Checkpoint Systems GmbH, ExypnoTech GmbH, Fleischhauer Datenträger GmbH, and X-ident technology GmbH. Germany has a very strong position in smart label manufacturing machines: Besides the market leader Mühlbauer AG, suppliers like bielomatik Leuze GmbH & Co. KG, F&K Delvotec Bondtechnik GmbH, and Robert Bürkle GmbH are active. Adhesives are most important materials for smart labels since they connect the chip to the antenna. Important German vendors in this sector are the US-based 3M Deutschland GmbH and DELO Industrie Klebstoffe GmbH & Co. KG.

RFID readers are provided by many medium-sized companies, often with a background in industrial automation. Typical vendors are Leuze electronic GmbH & Co. KG, Baumer Ident GmbH, Balluf GmbH & Co., ICT Integrated Control Technology GmbH, EUCHNER GmbH & Co. KG, and Pepperl+Fuchs GmbH. However, there is no clear distinction between equipment manufacturers and system integrators, since some equipment manufacturers also implement complete identification systems for their customers. The RFID system integrators originate at least from three different branches: vendors of process automation like MOBA Mobile Automation AG, providers of logistics systems like the Schreiner Group GmbH & Co. KG, and IT consulting firms like SAP AG. Although there are over ten German label printer manufacturers, only Feinwerk- und Drucktechnik GmbH has established itself as a vendor of smart label printers.

Scientific Activities in Germany
Overall, German scientific institutions are among the European top players in smart label development. Very many disciplines of microsystem technologies contribute to the development of smart labels: among others, packaging, sensor technology, autonomous power supply, and the integration of electronics in textiles and flexible substrates. Therefore, a great number of well-known microsystems technology research institutes therefore are involved.The basic research project AVM (autarkic distributed microsystems), supported by the German Federal Ministry of Education and Research (BMBF) and coordinated by Fraunhofer IZM, aims to provide the technological foundations for the nextgeneration RFID systems, the sensor networks.
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