The RFID reader chip was developed by Intel's New Business Initiatives incubator unit. Financial terms were not disclosed.

Last year, Intel unveiled the R1000, an ASIC device that combines 90 percent of the discrete components in a passive UHF RFID reader transceiver on one chip. The R1000 handles the radio communications for EPC Gen 2 RFID tags. It requires less power to function because the discrete components are combined on one chip.

Impinj said it will license the patents through Intel to expand its chip portfolio. Based on the R1000, the company has begun work on a product roadmap to improve performance, lower deployment costs, expand functionality and allow engineers to create a smaller device.

Impinj is expected to release spinoffs of the Indy R1000. The first should be ready in the next few months, according William Colleran, the company's president and CEO. "We now own 100 percent market share of the reader chip business, and our customers need to know their investments in new products based on the Indy R1000 have long legs," Colleran said. Talks with Intel had been ongoing for months, he added, but "got serious about two months ago."

Through the deal, Impinj gains the product line and more than 40 customers, including Alien Technology, CAEN RFID, deister, Kinetics, ThingMagic, Unitech and Sirit. They embed the R1000 into devices. About 20 customers have introduced products based on the Indy R1000, including handheld modules and portable devices.

While many RFID readers are about the size of a hard-bound book, those built on the Indy R1000 chip are much smaller, some the size of a PC card. Analysts suggest the chip's superior performance in a compact size has prompted design engineers to look past conventional applications into embedded modules.

Companies have already begun looking into adding RFID readers based on the Indy R1000 into video game consoles and toys. "In Nintendo's Wii, there are sensors that know the orientation of the joystick. But there are other things you can interact with, such as nearby objects in the room, as opposed to just those on the screen," he said.

The RFID chip could jump-start industry adoption by enabling a variety of applications, according to Michael Liard, research director for RFID and contactless at ABI Research. "Impinj has always known the importance of owning the air interface, the communication link, and early on identified the importance of owning the silicon, not only for tags, but readers, too," Liard said.