It is often said that the smaller the tag, the shorter the read range. Could somebody explain more technically in terms of radio engineering? For instance: why the Hitachi's U chip cannot achieve a reading range greater than few millimeters? Maybe we can increase the amount of power of the reader? Is there some real physical limitation caused by the size of tag or of its antenna that even smartest solutions cannot resolve?
The answer lies in Friis' Equation that describes that relationship between power density and reception. In passively-powered RFID tags, the charge pumps are the limiting factor as you need enough voltage to get them started. This is why there's a balance between antenna size and power required to get the charge pumps started.
Regarding the specifics of the read range, because the interrogator provides a coherent clock, you have a read range that is effectively unlimited if you give the tag unlimited power. The caveat is that you need enough power at the tag to power it up.
In UHF frequencies of 920 MHz, the Hitachi RFID is much smaller 4mm than the <30cm wavelength at this frequency. So there is in effect an aperture in which the antenna only sees this small percentage ratio of the signal wavelength.
It is almost like opening the aperture of a camera which is effective up to 1/2 wavelength.
If the antenna was much larger than the gap, the loss is linear with a gap, x.
If the antenna is much smaller than the wavelength, the loss factor is x² (Friis Loss)
There are many examples on Hitachi's website to extend the aperture size and boost the range of the chip.