RFID started out as a technology with predominantly defense uses but has expanded to include a wide range of applications. RFID technology offers users more granular, accurate information and provides a means to automate previous manual processes. The future radio frequency identification looks very bright.
More RFID tags are expected to be sold in the year 2005 than in the previous 60 years since their invention. This is primarily because retailers and military forces are beginning to demand that suppliers fit RFID tags to pallets and cases to save cost and improve service. Other applications using RFID are also expected to grow very rapidly.
A number of companies have already seen significant RFID systems plus tag sales.Currently, leaders in smart labels are each shipping 60 to 120 million chip tags per year – that is, a value of around $100 million each for the tags alone. Philips, the largest supplier of RFID chips, says global consumption for smart labels was around 1.9 billion units in 2004.In the same year, Transcore reached $350 million in sales and Savi Technology reached $65 million in sales.
|RFID Market Sectors by the Percent of Total Revenues of 2004
|62.6 (including RFID in automotive keys)
|Animals (sheep, cows, dogs, etc.)
|Note: Due to rounding, table does not total 100%Source: In-Stat
Other companies are not waiting, either. Among them include: Global and Indian IT software and services companies have begun to enter the RFID market. Oracle and other IT vendors are building supply chain and warehouse management applications that work with RFID data. Sun Microsystems is currently building middleware based on standard specifications for RFID, while SAP has released middleware products linking RFID readers to back-end applications and monitoring business-process expectations.
RFID technology market forecasts vary between key analysts, however.IDC, the technology market research and advisory firm, forecasts the market for RFID technology in the U.S. retail supply chain will rise from $91.5 million in 2003 to $1.3 billion in 2008. The majority of this $1.3 billion market is expected to come from RFID hardware (like: tags, readers, and antennas), servers that run the readers, and network equipment that handles data. The remainder will come from middleware and services. Business consulting firm Frost and Sullivan’s report on the World RFID-based Applications market reveals that the industry, generated US $1.7 billion in 2003, is expected to grow to US $11.7 billion by 2010.
Frost and Sullivan also predicts a $10 billion global market for RFID and EAS systems as early as in 2005. Datamonitor, a premium business information company, forecasts a $5-20 billion European and UK market for intelligent tags and their equipment in the year 2005. Global research conducted by RFID knowledge based company IDTechEx predicts that by 2013 the RFID market will be worth US $10 billion, with 50 percent of that revenue coming from hardware (tags, readers, and antennas) and the rest by software, services, and infrastructure.
|IDTechEx RFID Forecast:
|Total Annual RFID Revenues
|Ratio of Hardware to Services
|Ratio of Chip Based to Chipless
|Total Annual RFID Tag Shipments
|Total Revenue From Chip Based RFID
|60% hardware; 40% services
|80% chip-based; 20% chipless
|12 Billion tags
|50% hardware; 50% services
|70% chip-based; 30% chipless*
|50 Billion tags
|*Assumes introduction of plastic film and silicon film transistor circuits to replace portions of chip-based businessCourtesy of IDTechEx
Dr. Peter Harrop, Chairman of IDTechEx, believes that the value of the total RFID market will exponentially increase from $2.32 billion in 2005 to $26.9 billion in 2015. In fact, Walmart Stores Incorporated, the world’s largest retailer, is driving the radio-frequency identification tag market through its mandate that top suppliers use RFID technology.
Target Corp., Albertsons Inc., and the U.S. Department of Defense also have similar mandates or initiatives. These are the current driving forces that will help create a vast and potentially rewarding market in the future.
Some market analysts have expressed cautions: Premier global market intelligence and advisory firm IDC predicts RFID’s growth will be similar to the PC bubble. Christopher Boone, a program manager for IDC, states “There was a PC bubble in the early 1980s. It crashed and then the real wave of growth began. The market today for PCs is obviously so much larger than it was in the 1980s. That’s the trend we are going to see repeated with RFID—bubble, burst, boom.”
A growth spurt is expected in 2005 when large suppliers initiate deploying RFID technology to meet customer needs, while midsize suppliers will await the outcome before their own initiation. “Costs will have started to come down, and there will be enough information out there about lessons learned and business cases that worked or didn’t work that you will see another wave of investment in 2007,” Boone says. “There will be growth in 2006, but it won’t be a nice neat exponential curve.” RFID spending is expected to decrease in 2008, but not after companies have already deployed RFID-ready systems in their infrastructures. The cost of RFID tags will gradually decrease but not to the levels of using RFID for individual item tracking and store shelves until the RFID bubble burst, Boone predicts.
After an initial bubble and burst cycle, if it does occur, the RFID growth is then expected to begin in the item-level tagging and asset-tracking applications industry, with a total addressable market of several billion tags. These applications include linen tracking in industrial laundries, library books, LPG gas cylinders, parcel tracking, airline baggage handling, retail point of sale, bank note security, personal medical security, and supply chain management.
RFID technology is targeted not only to large volume, but also niche markets. An example of future large orders is the rollout of the $6 billion national ID card system in China. Except high volume, other niche markets of at least one billion dollars potential are emerging. These opportunities include those for prison and on parole uses, passports, livestock and food traceability, various containers, healthcare, and ubiquitous sensor networks. Benefits of these RFID market developments will be realized via cost reduction, increased sales efficiency, improved accuracy and safety, and improved customer service – hence, higher customer satisfaction.
It is inevitable that the growth of RFID will be largely dependant on the cost of tags and the implementation of standards. In-Stat, a leading provider of actionable research, assessments, and market forecasts of semiconductors and advanced communications equipment and services, believes a widespread adoption of RFID technology is still a couple years away because of the expensive cost of tags. For example, the current cost of tags ranges from 15 cents to as high as over $100. Another reason for this slow adoption is the issue of privacy. Courts and governments around the world are still in the process of sorting out the legal issues that will enable businesses to use the technology without violating people’s privacy rights.
|Annual RFID Potentials in Tag Volumes:
|RFID Tag Price
|Resulting Annual Volumes
|Vehicle Access; Access Control; Reusable Transport Cards; Pallet Tracking
|Hundreds of Millions
|Electronic Toys; Securing Valuable Documents; Baggage Handling; Case Tracking
|Disposable Smart Tickets; Case Tracking; Higher End Item Tracking
|Tens of Billions
|Item Level Tracking
|Barcode Replacement; Postage Stamps
|*Courtest of IDTechEx
RFID is here today, and is finding a place in numerous applications. It is our belief that, sooner than later, RFID will be an essential technology evolution that will enhance today’s system operations and future global business infrastructures. More businesses will be willing to explore the many opportunities that RFID technology brings today, and start planning the implementation of the technology in years to come.