The value of the entire radio frequency identification market (RFID) will increase this year despite the global economic slowdown, according to a new report from IDTechEx titled RFID Forecasts, Players and Opportunities 2009-2019.

According to the report, the entire RFID market will be valued at $5.56 billion in 2009, up from $5.25 billion in 2008. This includes tags, readers and software/services for RFID cards, labels, fobs and all other form factors.

RFID cards will account for the majority of the market, totaling $2.99 billion for 2009. This segment will be driven mainly by government-led schemes such as those for transportation, national identification programs like passports and contactless cards, military and animal tagging.

The overall rise in the RFID market will be driven by government schemes rather than industry, as governments do not need a fast return on investment (ROI), the industry analyst says in a statement.

"[Governments] seek error prevention, improved customer service and efficiency and greater security," IDTechEx CEO Raghu Das explains. "For example, governments will not stop tagging passports or cattle to save money. More and more cities around the world are migrating to using RFID cards and eventually RFID tickets and RFID enabled cellphones for transit. The U.S. military recently awarded an order involving RFID approaching half a billion dollars."

Approximately 105 million tags will be used for animal tagging in 2009, mostly in China and Australia, and 350 million RFID tickets will be sold this year for transit schemes around the world, the report adds.

RFID suppliers involved in government-led schemes are usually profitable, Das says.

Those involved in industry, however, face a different scenario. According to the report, RFID tagging of pallets and cases as demanded by retailers mostly in the U.S. continue to move slower than initially expected. Only 225 million passive ultrahigh-frequency (UHF) tags are to be used for this application in 2009 — "a far cry from the 35 billion tags that one consumer goods company alone predicted it would be buying in 2009, when they presented at an event in 2003," Das notes.

The unsuccessful rollout of pallet and case tagging is mainly due to technical failures such as low read rates with high moisture content and metal products, lack of infrastructure and lack of mutual benefit between retailers and the rest of the supply chain, IDTechEx explains. Companies continue to work on ameliorating these problems.

On the shop floor, item-level tagging has seen greater success. This year, companies such as Marks & Spencer in the U.K. and American Apparel are rolling out 200 million RFID labels for apparel globally. According to the report, 2.35 billion tags in total will be sold in 2009 versus 1.97 billion in 2008, 1.74 billion in 2006 and 1.02 billion in 2005.

Apparel tracking, manufacturing, asset tracking, book tagging and the like are the sectors in industry that can actually demonstrate a fairly rapid ROI, Das says. "However, it is still very rare for any one customer to buy more than 5 million RFID labels in any one implementation."

As such, suppliers involved in industry have had to diversify into many closed-loop applications. Moreover, RFID buyers and suppliers have had to delay RFID projects due to limited funds brought by the economic downturn, the report adds.

By value, IDTechEx found that $2.23 billion was spent on tags alone in 2008, an average of price of $1.13 per tag. With the advent of printed RFID for transit ticketing expected later this year and the increased use of RFID labels rather than cards, the consulting group anticipates the price to fall to $0.22 by 2014.

IDTechEx also sees Asia taking a larger role in the manufacture of RFID. According to the report, there has been an increase of RFID manufacture capacity installed in Asia over the last 12 months. "In particular, after delivery of almost 1 billion RFID cards at [high frequency], China now has a large HF tag manufacture capacity," Das adds. "Many companies in the West have formed alliances or joint ventures with companies in the East."

Globally, companies predominantly in HF, active RFID or systems integration sectors have been the most profitable. The biggest and most successful solutions providers focused on no more than two industry segments, IDTechEx concludes.

Resources

RFID Market Forecasts 2009-2019
by Raghu Das
IDTechEx, April 21, 2009

RFID Forecasts, Players and Opportunities 2009-2019
by Raghu Das and Peter Harrop
IDTechEx, 2009