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Saturday, July 10, 2004 - Page updated at 12:00 AM

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Impinj pitches its chips for radio tags; retailers eager

Times Eastside business reporter

Seattle-based Impinj has been tinkering with semiconductors for four years to create a way for devices to be smaller, faster and consume less power.

Now, it has identified a market for its technology, called radio frequency identification (RFID), which has received considerable hype recently since retailers like Wal-Mart and Target have showed support.

The promise is for RFID to make shipping products faster and cheaper. Instead of warehouse workers breaking down each box to scan barcodes on toothpaste tubes and mayonnaise jars, a tag will be attached to each item so it can be identified when passing through a reader — even when buried inside a cardboard box.

To that end, Impinj has raised $22 million in venture capital, to move from development into manufacturing. Mobius Venture Capital participated along with previous investors ARCH Venture Partners, Madrona Venture Group and Polaris Venture Partners.

Unilever Technology Ventures and UPS Strategic Enterprise Fund also contributed as strategic investors. In addition to contributing cash, they are expected to lend their industry expertise and could eventually be customers. Unilever Technology Ventures is the investing arm of the food and soap maker. UPS Strategic is part of the worldwide packaging and shipping company.

The company has raised about $50 million in three rounds. With the completion of this round, it will start producing the chips and increasing its marketing.

Overseas contractors will make the chips, which will be watched closely by employees in Seattle and Orange County, Calif., Chief Executive Bill Colleran said. Impinj has 50 employees in Seattle and 10 in California, and each office is hiring one or two employees a month, Colleran said.

Founded in 2000, Impinj started building a chip that had analog and digital components, while also making them nonvolatile — meaning the chip could store small amounts of information without power. When the research was completed, the company needed to find a business, Colleran said.

Two years ago, it decided on RFID.

Since then, major retailers have endorsed the technology and mandated that their suppliers start using the chips as soon as in the upcoming year.

"It's looking like we made a pretty good choice," Colleran said. "It's a hot area with a lot of growth."

Patrick Ennis, a venture capitalist at Arch Venture Partners who serves on the Impinj board, said the company could have gone in a number of ways.

"As time went on, the stars were aligning in terms of broad industry momentum for RFID products," he said.

Predictions are for the market to grow quickly. In the U.S., RFID spending is expected to grow from $91.5 million in 2003 to $1.3 billion in 2008, research firm IDC says. That would translate into selling billions of tags, priced around 50 cents each today although the price is expected to hit less than 20 cents each, Colleran said.

Impinj has well-known competition: Philips, the large electronics manufacturer, makes chips, and Texas Instruments and Everett-based Intermec, among others, are building chip readers or developing the packaging for the tags.

Impinj has not received any orders, but a few companies are trying out its tags in trials. Sales could come shortly, Colleran said. Some retailers have told suppliers they must install the tags by January, he said.

Still, analysts are concerned with how easy the technology will be to roll out. The price must fall before it becomes cheaper than the methods already out there; the tags don't read well through liquids or metal yet; and they generate a lot of information that companies have to learn how to deal with, said Tom Ryan, vice president of value chain research for the Aberdeen Group.

"I would not want to be a beer or soda manufacturer," he said. They have two things against them, he said: Their products are liquid and they are encased in metal.

But Colleran said the bugs won't stop implementing the technology.

"A lot of details have to be ironed out, but those are details," Colleran said. "The big picture is here."

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

Copyright © 2004 The Seattle Times Company

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