RFID Forecasts, Players & Opportunities 2007-2017
Fév 14, 2007 Raghu Das
What really happened in 2006?
At the start of 2007, the cumulative number of RFID tags sold over the last 60 years is 3.752 billion. 27% of that number were sold in 2006 and 19% in 2005, showing how sales have showed a very robust increase. However, the sale of 1.02 billion RFID tags in 2006 (35% of those being RFID cards) has been disappointing to those expecting higher volume sales of versions in the form of labels.
The following chart shows the number of tags sold by application in 2006 and the total tag value.
What missed forecasts in 2006
Despite the progressive mandates by retailers in the US, consumer packaged goods companies have yet to realise any significant benefits let alone payback. The benefit has flowed rapidly to the retailer from the RFID solution providers who significantly funded development for this sector. Only 200 million tags were sold into this sector in 2006. That's an average of a few hundred thousand tags that each mandated Wal-Mart supplier bought for the whole year. Technical problems (the need to read 100% of cases and pallets despite metal/fluid contained in them and nearby) persist although users are pleased with the significantly improved performance from Gen 2. Infrastructure is still threadbare. Sub 10 cents tag prices announced by suppliers in late 2005 were intended to trigger hundreds of millions to billions of tags being ordered. The volumes never came in 2006 and there is over capacity. Indeed, IDTechEx now hear of some major tag producers looking to get out of the business or at least outsource tag production. In 2007, IDTechEx now forecasts that the demand for tags for pallet and cases worldwide will be 420 million units, rising to more than 1 billion per year by 2009. However, the end game will probably happen broadly as anticipated, which means the tagging of most pallets and cases (about 35 billion globally each year) ten years from now. Adoption will not be linear but "hockey stick" eventually.
Steadily taking 4.5million tags every year since 1999, AstraZeneca continue to use a chipless RFID tag on syringes of their anaesthetic Diprivan. Encouraged in 2005 by the FDA urging drug companies to use RFID on virtually all drug packages in the USA by the end of 2007, many RFID suppliers were disappointed when, in late 2006, the FDA faltered and backed down. Despite a high profile and significant work by the industry tagging drugs such as Viagra (Pfizer used about 5 million 2006) and products of GSK, Purdue Pharma and others, adoption in 2007 will still be low. This is partly because the industry has yet to agree on a frequency - indeed it may never do so (think of anti-theft tags) and the FDA needs to lay down the law on what should be used rather as IATA did with baggage tags and ICAO did with passport tags, triggering major new RFID applications. For drugs, HF was preferred but near field UHF - pushed in mid 2006 - is promised to be just as good when it is finally tested in volume. It also operates at the frequency that Wal-Mart wants. Without significant infrastructure - i.e. a kick start from the regulator - the business case for item level tagging of drugs purely for anti-counterfeiting may be weak.
In 2006, 25 million tags were used for baggage tagging. Airports and airlines have been hampered by technical problems at the chosen UHF global standard frequency for baggage. Airports have deal with this by increasing the separation distances between bags or by shielding each one in a metallised "curtain" to create a Faraday cage. Both solutions look suboptimal and not acceptable to the industry for mass rollout. However, in late 2006, Paul Foster of San Francisco International Airport reported at the IDTechEx RFID Smart Labels Europe conference that working with Quatrotec (owned by Alien Technology), they had overcome this problem by using focussed beams. Andrew Price of IATA, who will be presenting at RFID Smart Labels USA in Boston on Feb 21-22, reports, "In the next few years, the air industry will be tagging an ever higher proportion of its two billion bags yearly and it will use RFID in other new applications as well." Korean airports have placed orders with Symbol Technologies and others are following.
Retail apparel, item level
UK-based retailer Marks & Spencer continues to extend its successful item-level RFID tagging from 42 to 120 stores by spring 2007, on the way to tagging all 350 million items of apparel yearly. M&S has seen a sales uplift by being able to have close visibility of stock availability. M&S are not using EPC tags but a 64 bit identification number on each tag, saying this is much cheaper than EPC RFID, which is ironic as this was the original concept of EPC. Others doing similar item level work have reported excellent results, such as Tesco and Best Buy, tagging DVDs and computer video games respectively, both reporting a sales uplift of these items by 5 to 20%, though not necessarily a payback. The tags are applied to each item so when stock on each shelf gets low staff are informed and can replenish the shelf, rather than losing sales due to empty shelves. M&S have charged ahead because they only sell their own branded goods. The others have not despite the payback because they were hand applying the tags to the items at each store in the pilot which is not scalable. They need the item to arrive with the tags applied, but unless enough stores have the infrastructure they won't get the payback and packaging companies we spoke to were therefore reluctant. Despite this, Tokyo Shirt, Mitsukoshi and Hankyu Sores and others in East Asia are moving forward with everything from tagged suits, shoes, jewellery and knives to sushi meals.
At IDTechEx, we see this sector as being one of the fastest growth areas of RFID in retail - the business case is sound and many other "closed" systems exist like Marks and Spencer. Even the big supermarkets now have massive own brand business. In 2006 the Dutch bookseller BGN tagged all books in one Selexyz store and is now rolling it to all others because the paybacks are so compelling. BGN are using Gen 2 tags at UHF because the suppliers are "discounting the tag prices" (presumably due to over supply) but they are not using the EPC numbering the system as the book numbering standard is entrenched.
RFID card and tickets
RFID card orders are sharply increasing from many quarters. ERG of Australia, with over US$100 million in sales of RFID card systems has just announced two major orders totaling US$40 million, one being in Manila in the Philippines and the other being in Italy. They involve card payment systems for mass transit but also the newly popular use of transport Stored Value Cards SVC for a general cash replacement in shops, vending and so on. In 2007 China will supply the peak number of RFID cards for their national ID scheme - the largest RFID project in the world. This has a dramatic effect on the total RFID market value in 2007 as the RFID card portion accounts for 60.3% of the total RFID market value (including tags, systems and services) in 2007, dropping to 17.2% in 2012.
In 2006 70 million tags were used to tag animals. This will rise to 90 million in 2007. Those that are the supplying the systems are few but sizeable and (we expect) profitable. Allflex, for example, are based in Australia and focus on tagging animals. They are Texas Instruments' "largest volume RFID customer". Legislation around the world is driving RFID roll outs in this sector, often subsidized by governments. For example, New Zealand brought in a law in 2006 to tag dogs. Beyond that, the pickings are still rich. Digital Angel has just landed an order for "up to $10 million" to tag fish for the US Army Corps of Engineers. This involves counting populations and monitoring migration patterns.
Niches in labelling
On the other hand, label and packaging converters continue to enter the RFID business to meet their customers' demands. "Previously, label printers offering RFID were large corporations with ties to major supermarkets," says one manufacturer of RFID label converting equipment. "Now, smaller label printers have entered into the fold, supplying much lower volumes to satisfy niche markets." Many converters that IDTechEx has spoken to are supplying relatively small numbers of labels (tens of thousands to hundreds of thousands) but are able to quickly change design (frequency, etc) as required by their customers and supply into closed loop markets such as asset tracking, libraries, components etc. One example in 2006 was Hyan Label delivering ten million RFID stickers to the Chinese Government to issue to students so they could obtain discounts when traveling by rail. XinTag, also in China, has been commissioned to make 125 million RFID rail tickets. Since the Chinese national rail system uses at least three billion tickets yearly that is an interesting beginning.
Outlook for 2007
In 2007 IDTechEx expect that 1.71 billion tags will be sold. The total RFID market value (including all hardware, systems, integration etc) across all countries will be $4.96 Billion. By far the biggest segment of this is RFID cards. For those not involved in that sector, the 2007 market value for non card RFID (e.g. RFID labels, fobs, tickets etc) will be $1.97 Billion. Excluding cards, 58.4% of the market in 2007 will be in the US and 33% in Europe. Consequently, although China, for the first time, dominates the total RFID business - virtually without exporting - the USA dominates everything beyond the card part. The market will rise to $27.88 Billion in 2017. This includes many new markets that are being created, such as the market for Real Time Locating Systems using active RFID, which will itself be more than $6 Billion in 2017.
To see detailed market analysis by frequency, application, territory, year, tag type and all other major parameters, buy the fully comprehensive, best selling IDTechEx report "RFID Forecasts, Players & Opportunities 2007-2017" - extensively researched by global experts in RFID. It will save you significant time and give you the insight that any RFID business has to have. See www.idtechex.com/forecasts for more information.
The report also includes the RFID league table - company size by revenues (actual and IDTechEx estimated) and covers over 200 companies.