UPM RFID sells NFC tag and RFID tag to SMARTRAC closes in Q1 2012

UPM RFID sells NFC tag and RFID tag to SMARTRAC closes in Q1 2012

The news UPM RFID is selling its NFC tag and RFID inlay business to SMARTRAC hit early this morning. Since then, we have been wondering about the industry impacts this sale could have. SMARTRAC manufactures RFID inlays for electronic passports (e-passports) and contactless credit cards (e-payment) as well as for RFID transponders for public transportation applications. This year has been an acquisition year for SMARTRAC, who has also purchased Neology Inc. and KSW Microtec AG.

What is odd about this particular acquisition is that UPM RFID employs 24,500 people in all of their different business units and SMARTRAC is substantially smaller, employing 3,300 employees. We are not sure how many UPM RFID team members work on the RFID and NFC tag side of the business, but we bet it is way more than the current size of SMARTRAC.

Details of the deal have not been released as yet, but the deal is expected to close within the first quarter of 2012. For its part, UPM gets a 10.6% share in the new SMARTRAC firm through one of its subsidiaries, OEP Technologie B.V.

“UPM has been developing and investing in its RFID inlay business for a number of years. The business unit has evolved from a small venture to a sizeable business and is now recognised as the market leader in its field. Combining the business unit with a company with the industry’s widest RFID business portfolio, [will] give it new leverage to continue to develop successfully. We see significant value increase potential in this new combination. Therefore we are pleased to become an indirect shareholder of SMARTRAC,” says Jussi Vanhanen, President of Engineered Materials at UPM.

Why did UPM choose now to sell its NFC tag and RFID business to SMARTRAC?

NFC tags are happening now while RFID is expected to transfer into the consumer domain within the next year as it is integrated into smartphones. UPM RFID have arguably been the most visible NFC tag firm in the business. Their ties go deep within the NFC ecosystem and their impressive client and partner list is unmatched even by larger firms like Avery Dennison. We must admit we are a little puzzled by the decision to sell UPM RFID’s RFID and NFC tag business.

Next year will see massive growth in the NFC tag business as ubiquity takes another step forward. ABI just projected that the business is set to be worth over $300 million by 2016 and we thought that sounded low. That would mean the firm would grow in value. From another perspective, UPM has invested massively in the NFC tag business and was just about to see dividends from that investment, so it seems odd that the firm would choose to sell out. We guess it must have been an offer that just couldn’t be refused from the Dutch firm, SMARTRAC.

So, what does that mean for the UPM RFID team here in the United States? Well, we reached out to Jan Svoboda, who is UPM RFID’s Director of Sales and Marketing. He told us, “For us it’s business as usual, and due to our strengths and capabilities in America, we should be positioned to greatly contribute to the growth of Smartrac.”

That’s great news because the team over here in the US are probably one of the most experienced and capable group of people in the NFC tag business anywhere.

“Becoming part of the leading player in the RFID industry opens up totally new possibilities for us. I am convinced that this new setup will be a strong player in the growing RFID market place, ready to offer support and solutions to customers around the world,” says Marcus Vaenerberg, Senior Vice President at UPM RFID.

“UPM RFID is a true pioneer in the global RFID tags and inlay business. We are delighted to add such an experienced and capable crew to our global team. The transaction will provide us with a strong product offering for NFC and UHF RFID tags and inlays and will furnish us with favourable additional manufacturing capacities in strategically important markets. The combination of SMARTRAC and UPM RFID will significantly accelerate our momentum as a developer and supplier of passive RFID tags and inlays for all relevant application fields of today and tomorrow”, said Dr. Christian Fischer, CEO of SMARTRAC.

So, it appears UPM has gone Dutch, and now they line up with NXP, which is also a Dutch firm. It’s business as usual over in the US for UPM RFID and their NFC tag side of the business. We are still waiting to hear what is happening in Europe, but considering the staffing size of SMARTRAC compared with UPM, we have to believe that the talent and connections within the UPM team is one of the main assets that SMARTRAC would need to succeed. As we hear more about the SMARTRAC acquisition of UPM RFID, we’ll be sure to update you.