MIXED PICTURE FOR RFID MARKET

Logistics Insight Asia, 1/5/2009

In 2009, the value of the entire RFID market will be US$5.56 billion, up from $5.25 billion in 2008, according to a new report out from IDTechEx. This includes tags, readers and software/ services for RFID cards, labels, fobs and all other form factors.

The overall RFID market is growing and a large amount of this value is due to governmentled schemes, such as those for transportation, national ID (contactless cards and passports), military and animal tagging. The majority of the spend is on RFID cards and their associated services – totaling just under $3 billion.

However, the tagging of pallets and cases appears to be a failure, according to IDTechEx, with only 225 million passive UHF tags used for this application in 2009. This is a far cry from the 35 billion tags that one consumer goods company alone predicted that it would be buying in 2009, when they presented at an event in 2003.

The main reasons for this have been technical failures (poor read rates with high moisture content and metal products), lack of infrastructure and a lack of mutuality of benefit between retailers and the rest of the supply chain.

Looking at the range of applications, the biggest projects tend to be government led and are usually profitable for suppliers involved. This trend is unlikely to reverse. For example, governments will not stop tagging passports or cattle to save money. Governments do not need a fast return on investment (ROI). They seek error prevention, improved customer service and efficiency and greater security.

Industry however, usually seeks rapid ROI. RFID is being applied where it can demonstrate a fairly rapid return on investment – such as apparel tracking, manufacturing, asset tracking, book tagging, etc. Those intending to supply the highest volumes of tags for open markets have had to diversify into closedloop applications.

The tagging of apparel by companies such as Marks & Spencer and American Apparel is now in roll-out phase with 200 million RFID labels being used (including laundry) globally in 2009. The tagging of animals (such as pigs and sheep) is growing as it becomes a legal requirement in more territories, with 105 million tags being used for this sector in 2009.

The leading frequency in 2008 remained HF (13.56MHz), with HF RFID working at the ISO14443 specifi cation being responsible for more than five times the expenditure on RFID to any other specifi cation, with large applications added for applications such as passports and RFID-enabled phones. Other applications include supply chain, library and secure access RFID in the ISO15693 specification at HF.

The largest RFID companies or company divisions that are profitable are still those predominately in HF, active RFID, or systems integration, says the report. Meanwhile, the biggest and most successful vertically aligned companies (solution providers) are focused on no more than two industry segments (such as secure access and ID from Assa Abloy; military and heavy logistics from Lockheed Martin/Savi, and animal tagging from AllFlex).

By value, $2.23 billion was spent on tags alone in 2008, an average of price of $1.13 per tag. With the launch of printed RFID later this year for transit ticketing and other applications, and the increasing use of RFID labels rather than cards, that average will fall to US$0.22 in 2014, says IDTechEx. Meanwhile, RFID manufacturing capacity in Asia has been increasing over the last 12 months, and many companies in the west have formed alliances or joint ventures with companies in the east.