And What Kind of

By Renee Boucher Ferguson  |  Posted 2006-12-29 Print this article Print

Growth Is Expected?"> In his report, RFID for Manufacturers, McBeath predicts a healthy increase in spending on RFID–more than doubling between 2005 and 2007, with the biggest percentage increase from 2006 to 2007. In 2005 manufacturers spent around $600 thousand on RFID pilots and implementations, and about $810 thousand in 2006. That number is expected to jump to more than $1.3 million in 2007.

The pattern of mandate-driven activity–led by RFID tagging edicts from Wal-Mart and the Department of Defense–is slowly changing, according to McBeath, with small and large businesses looking to process improvements as a driver for RFID in the coming year. Of 275 manufacturers surveyed this year, 34 percent were adopting RFID because of mandates, while just over 41 percent were looking for process improvements. About one quarter of the respondents were implementing RFID because of a mandate, but were also looking for process improvements.
Click here to read more about RFID trials results.
"When vendors complain that the market is not meeting their expectations, it is due to unrealistic expectations, not a weak market," writes McBeath, who points to plummeting tag prices as a sign that RFID adoption will increase in the coming year. McBeath found that of the manufacturers surveyed, 10 percent had already implemented RFID, 16 percent were in the process of implementing and 41 percent were planning to implement RFID. However, just over 32 percent of respondents had no plans to implement RFID at all. Raghu Das, CEO of research company IDTechEx, suggests that 2007 will be, much like 2006, a year of extremes with RFID suppliers licking their wounds while for others, RFID business is booming. In a preview of his upcoming report, RFID Forecasts, Players & Opportunities 2007-2017 to be released in January, Das summarizes some of his RFID research findings. His main supposition: While IDTechEx forecasts that eventually retail will be the biggest market by far for RFID, consumer goods companies are yet to see sustainable payback. "The real opportunity for them is item level tagging. However, it is vulnerable to rapid design change," writes Das. "Like antitheft tags, there are three incompatible options here–Near Field UHF [ultra-high frequency], Far Field UHF and HF [high frequency]." Click here to read more about RFIDs use in e-passports and ID cards. Speaking to consumer goods manufacturers for the upcoming report, IDTechEx found "considerable foot dragging" that resulted in pallet and case tag purchases to be as little as 250 to 300 million tags in 2006–at the heavy loss making price of around 10 to 15 cents each. Readers too are also being sold at a heavy loss. And while some manufacturers have found benefits in implementing RFID, "these benefits are not necessarily paybacks and companies are not saying they are sustainable," writes Das. In September 2006 the DoD–a critical proponent of the use of RFID in the supply chain–issued what amounted to a slow-down in its RFID implementation plans for 2007. In its original policy announcement in 2004 the DoD planned for Phase III to begin Jan. 1, 2007, which meant that everything shipped to any DoD location must be identified with RFID transponders–including individual units. To read more about IBMs RFID WebSphere Information Center, click here. "The DoD will not require suppliers to apply passive RFID tags to the packaging of UID items during the 2007 calendar year. The Department will continue to evaluate the appropriate time frame to begin tagging at the packaging level and will promulgate this requirement in advance of future requirements," according to a Passive Tagging Update posted on the DoDs Web site. There are also rumblings that Wal-Mart might slow down its implementation plans as well. ChainLinks McBeath said he doesnt believe a slow from either mandater is an indication that RFID just doesnt work, but is rather a reality check. "Both the DoD and Wal-Mart set fairly ambitious goals in terms of time frames [for RFID tagging along their supply chains]. So if at some point they have to adjust some of those plans to meet reality, to me it doesnt mean any sort of reduction to commitment," said McBeath. "At some point [Wal-Mart] may formalize some sort of reality that it just takes some time to get everything running." On the flip side, some RFID industry sectors are booming, with expected rapid growth in the coming year. Those industries include transportation, aerospace and defense, and animal tagging. The biggest RFID market, according to IDTechEx: Contactless smart cards whereby an RFID chip is implanted in plastic credit or identification cards. Click here to read more about smart cards. "The China National ID card and system is the biggest RFID rollout [to date], but an even larger budget of at least $15 billion is planned for the UK National ID card," writes Das. "Then there is continued growth in secure access applications and the start of the process of converting over 3 billion financial cards from Visa, MasterCard, American Express and JCB to RFID." In the United States alone, 150,000 readers have been installed for the RFID-chipped credit cards, tickets and cell phones, according to Das. That said, contactless smart cards are coming under fire from industry groups and legislators, a fact that could have an impact in 2007 on large scale issuances. Despite similar push-backs and privacy concerns around RFID-tagged passports, that trend will continue aggressively in the coming year. "On a global scale, ePassports are going to move forward," said ABIs Liard. Check out eWEEK.coms for the latest news, reviews and analysis on mobile and wireless computing.


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