Lessons from 1400 RFID case studies
IDTechEx has recently celebrated reaching 1400 case studies of RFID in action. This is more than ten times the number of case studies amassed by any other company and it lists technical detail as well as giving extensive commentary and analysis where possible. It spans 68 countries and the activities of 1529 organisations at the time of writing. However, our team are adding case studies at a rapid rate while continuously updating the existing studies. By the time of Smart Labels USA in Baltimore in June there will be 1500 case studies. So what are the lessons?
Paybacks – no surprises
Some aspects are not changing. For example, paybacks are still most commonly found in the one to two year range, though many of the case studies cover trials and rollouts where paybacks are uncertain. It is still true that retailing and consumer goods involves the largest number of RFID projects, but, although deliveries of tags to this sector have now risen to the region of 10 million per month that is far from being the most important sector in term of value or number of tags or value of infrastructure. The RFID business remains a smart card/ payment key fob business in value of tags and infrastructure. The largest projects have not involved EPC tags and they include the $6 billion China national ID card scheme and the delivery last year of 50 million RFID tickets for Osaka World Fair by Toppan Printing using Hitachi Mu Solutions RFID inlets.
EPC is not yet the big market
The ICAO RFID passport scheme involves around 30 countries and 300 passports working at High Frequency HF. It has got off to a slow start but it will rise in importance in the next three years perhaps reaching 20 million yearly. That may not seem much but, like most RFID smart cards, these labels and inserts cost 15 times as much as a retailer's EPC tag - the chip alone costs two dollars in a passport because of the large memory, sophisticated security and use of a microprocessor. RFID smart cards also have sophisticated security and microprocessors. The China ID card is an exception as it has hard wired logic and no microprocessor but it still costs $1.25, 6.25 times the cost of today's retailer's EPC tag and the gap will widen as EPC tags sell in larger numbers and their costs tumble further.
Animal tagging by law means expensive tags
It may be that the high unit price of animal tags will, together with legislation in many countries mandating their use on livestock, lead to this being the second largest market for RFID tags by value this year but, although we note suppliers of these Low Frequency LF tags with necessarily sophisticated encapsulation for ruggedness, biocompatibility etc are doubling and trebling output that may or may not be enough for demand and case studies of the tags in action are difficult to obtain.
Changes in the listing of most important countries
The countries that are most important for RFID in numbers of projects are changing. As the histogram below shows, China and Japan are now more important than when we last reported, jumping up the league table to number three and number five. We expect to report unusually large activity in Korea as well and China will rise to the top in number of case studies, number of tags and by many other criteria. Japan will probably overtake the UK in number of case studies soon. However, the bigger surprise is how slowly RFID is moving in continental Europe, leaving the UK well ahead of the rest of Europe in number of case studies. Where is the continental equivalent of the $1.6 billion London bus/ train RFID order, the Tesco purchase of 4000 interrogators for $8 million or so or Marks and Spencer's rollout of apparel tagging? Which continental military organisation is matching UK spend on military RFID?
We are very surprised by this. The German economy and population is much larger than that of the UK. When IDTechEx moved its Smart Labels Europe conference from the UK to the South of France last year, it was still mainly Americans and British attending and we now realise that it was because, in the West, the UK and US remains where the action is. French companies in RFID tell us they sell most of their product outside France. In continental Europe, only the Netherlands has high RFID spend per head but Finland will start to qualify with RFID in a large proportion of Nokia's new cellphones. In manufacture of RFID tags and systems there is a very different picture again with UPM Rafsec of Finland in the first division globally for library and pallet/ case tags and many French and German companies with world class output.
With passport tagging, nearly all the projects represent foreigners getting the orders - Oberthur of France got Belgium, Setec of Finland got Sweden and the US granting trials to Israeli and European companies among others. Explanations on a postcard please.
To view the charts containing the data, click here.
Analysing applications is fraught with difficulty because everyone has different definitions and one has to decide, for example, whether to report every marathon where a tag is behind the runners number (eg from UPM Rafsec) or in the runner's shoe (eg Texas Instruments) or do one case study for all of them. Some applications fall into two categories. We take a middle road and some truths emerge.
Leisure applications are largely one offs like marathons and venue events. There are a large number of case studies in this category but more money is being spent, for now, in Retail/ consumers goods, in land and sea logistics/ postal, and, above all, financial/ security/ safety, with this latter sector being boosted by Visa and MasterCard starting a serious move to RFID credit and debit cards this year. Passenger Transport/ automotive at number two has even more cases and the car clicker and intermodal transport card still represent some of the largest and most lucrative projects in RFID for both tags and systems.
Surprisingly, of the smaller RFID sectors, Books/ libraries/ archiving seems to be moving forward faster than the application of RFID in Manufacturing as measured by number of case studies and anecdotal evidence of the size of the projects, possibly because there are more paybacks. The small number of laundries using RFID is increasing slowly but they still absorb double the number of tags used in libraries.
To view the charts containing the data, clickhere.
HF still the dominant frequency
Obviously numbers of case studies is only one criterion for what is going on. Indeed, when we look at frequency, we see HF still in the lead, as it is on any criterion, but UHF coming up fast. However, the uses of UHF are nearly all trials and rollouts with, as yet, modest numbers of tags and spend on infrastructure. We all know that will change and UHF may even be the most popular frequency next year and for a few years later but with a high probability of reversion to HF being dominant as the largest applications of all - item level - grow with HF as the preferred, though not the only frequency. That is the lesson of somewhat problematic trials of UHF on drugs for example, and drug companies seeming to prefer HF on current experience. A major supplier of both UHF and HF tags has recently confirmed this view when we visited them.
The most popular shapes are changing
The most popular tag shapes include "buttons" and "bullets" for animals, manufacturing parts and so on but it is now cards by gross value, labels by numbers and rapidly trending to labels by any criterion. This largely reflects the largest or most prevalent applications over the years but there has been some move to labels caused by cost reduction of tags that were previously moulded in plastic for certain applications such as road tolling and logistics. For active tags - 15% of our case studies and 23% of all tags ever sold, we now see button batteries as by far the most common power source, not the AA and customised batteries of times past. That means active tags are smaller, with matchbox and disc shapes replacing boxes of electronics and large plastic mouldings. Smart active labels - basically active RFID in the form of labels with printed batteries no more than 0.5 mm thick - are not selling in more than millions yearly nor are there many SAL projects to report. This is despite the excellent efforts of the Smart Active Labels Consortium but their time will come.
RFID paybacks are still mainly in the acceptable range of one to two years. The shortest paybacks claimed involve changes to working practices as a result of the new visibility. Paybacks are commonly believed to revolve around cost reduction and our 1400 studies bear this out. However, customer service improvement is not far behind, from smart cards you can use when wet to reducing empty shelves in shops and queues in libraries. In the military that translates into the ability to mount operations that would be impossible previously. Most can be quantified.
The size of the projects varies from a few thousand dollars to six billion dollars. That means that the largest reported RFID project in the world is more than three times the size of the largest five years ago and ten times the size of the largest ten years ago. The larger figures involve system integration and sometimes facilities management. Projects costing millions and tens of millions of dollars are increasingly commonplace.
The number of tags involved in a given project varies from under ten units to one billion units and we expect larger projects to be reported soon. Procter and Gamble has 2.5 billion pallets and cases at any one time for example and they must be tagged as soon as the physics is conquered. Marks and Spencer in the UK is moving rapidly towards tagging 350 million items of apparel yearly and Metro Germany may tag even more produce if it starts to move as fast. Metro's systematic commissioning of different applications one at a time is proving sound.
Of course, the value of the IDTechEx Knowledgebase of over 1400 case studies of RFID in action goes beyond statistical analysis of trends. Manufacturers use it to find new markets and to track competition. Users check out suppliers and their clients' opinions of them. All can benchmark best practice and lessons of failures such as the US school that tagged all pupils without consultation and withdrew the scheme in the face of energetic protest from both students and their parents. However, other schools have spotted the potential for saving lives and increasing efficiency and intend to do it properly. Benetton of Italy pulled out of apparel tagging seeing no payback and facing privacy protests: companies in Japan and elsewhere are going ahead with it as fast as they reasonably can. The evolving case studies will track who was right.
To view the charts containing the data, click here
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