RFID business booms in 2010

By Dr Peter Harrop, Chairman, IDTechEx.

There is money in RFID. Alanco Technologies, which provides RFID-based inmate tracking systems, announced sales increased 42 percent to US$19 million for the fiscal year ended June 30, 2009. The US Army continues to place the world's largest RFID contracts at around $500 million each and many smaller orders that are still substantial. For instance, in October 2009, Savi, a Lockheed Martin company, was awarded orders totaling $6.6 million for RFID systems under the U.S. Department of Defense's RFID III procurement contract. The RFID tags, which are affixed to cargo containers and other supply chain assets, comply with the ISO 18000-7 standard (also called DASH7), enabling near real-time supply visibility and interoperability with allied defense forces and government organizations. All these activities involve active RFID, the type that is growing sales fastest, increasing its share of the RFID market. This can be seen from the world's largest database of RFID projects, the IDTechEx RFID Knowledgebase which has over 4000 case studies in 111 countries. Roughly speaking, active RFID has risen to about 24% of projects and a little less in terms of money spent - double its penetration a few years ago. These tags are mainly plastic moldings.

There are three types of active RFID system. First Generation is one tag per reader, the battery and chip in the tag usually enhancing range and/or managing sensors. Second Generation is Real Time Locating Systems (RTLS) as particularly seen in US hospitals and car production lines in the last few years for locating people and assets. Usually several interrogators read each tag to give position in 3D. Finally, Third Generation is Wireless Sensor Networks (WSN) which are self organising, self healing tag networks rather like the internet with every tag doubling as a reader. WSN sales (military, process industries etc.) have recently overtaken RTLS sales.

Passive RFID success
Passive RFID also makes the financiers pleased. It is usually in the form of labels and cards these days. For example, contactless (ie RFID smart cards) are commonly used for storing notional value that is then spent down by the user. The London Oyster card is the largest such project in the West, though it a fraction of the size of the Suica scheme in Japan or various Chinese city cards, each of which is two to four times as big.

Nearly 30 million GBP is lying unused on pre-pay Oyster cards, transport chiefs have revealed. Financial rules will allow this to be gradually taken to profit. The money is on cards lost, broken, stolen or simply no longer needed by tourists who have left the country. About 16.5 million cards sat idle from April 2009 to May 2010. The average remaining on each was 1.80 GBP . In 2009, 31,000 Oyster cards were issued and topped up but never used, even though they held 246,000 GBP worth of travel, according to information obtained by the BBC. About seven million are now in use and pay for 57 million trips a week on the subway, buses and trains.

Toughest market
The toughest market for passive RFID has been UHF labels for consumer goods suppliers to put on pallet loads and cases at the behest of the retailers but this business has largely collapsed because of technical and payback problems. Indeed, with RFID suppliers and consumer goods companies taking hundreds of millions of dollars of losses on this work over the last five years it has seemed more like a death wish than a market. There never was a prospect of payback for the CPG companies because having a silicon chip in the tags ensured that they could never drop to the necessary one cent or less in price. However, printed RFID tags with no silicon chip are now appearing in passive RFID tags initially in the form of contactless smart tickets.

Where the chip is needed in a UHF passive tag, price rises of around 10% have been accepted recently, partly because item level tagging is booming, notably of apparel for both civil and military purposes. These UHF labels have little water or metal to contend with, that upsets the signal, and the relatively high value of apparel means that paybacks are easily obtained.

In the case of retailing that means reducing stockouts though many other benefits also accrue. For example, over 100 retail chains now require suppliers to tag apparel and both they and their suppliers benefit from this, resulting in hundreds of millions of RFID labels being used yearly for such purposes. Just one Army base in the USA, Lackland Airforce base in Philadelphia, is processing about five million items of tagged apparel yearly.

Leading countries
Of course, some countries are adopting RFID faster than others. The IDTechEx RFID Knowledgebase shows the top countries as shown below.

Top ten countries using RFID by number of projects recorded.

United States - 1352
United Kingdom - 394
China - 299
Germany - 219
Japan - 189
France - 170
Australia - 112
Canada - 98
Netherlands - 89
Italy - 86

(Source IDTechEx Knowledgebase)

However, most RFID projects in China are kept secret. Today, China probably has more RFID cases than the UK though not as many as the USA. Indeed, although the UK Government was planning to place the world's largest RFID order - for a $5-15 billion national ID card scheme, this has now been cancelled. In market value, China rivals the USA because it has many large projects. For example, it installs more library tags than the rest of the world combined. In some years, China rivals the USA in money spent on RFID, depending on which major project is kicking in at the time. For example, with 150 million pet dogs and 1.2 billion pigs slaughtered yearly, new laws in such areas will have a big impact on the RFID market.

As always, local and national government initiatives drive most of the RFID market. Governments create new laws, such passport tagging and the recent requirement that all dogs in New Zealand be tagged. This year, the European Commission required that sheep and goats -about 110 million of them - be tagged in Europe. In two years, European and probably New Zealand cattle must be tagged as well, copying the situation in Canada, Australia and elsewhere. In all these cases it has to do with disease control but efficiency improves as well. On the other hand, governments usually fund military, prison and library tagging and some city cards and mass transit and airport tagging.

Growth by diversity
The RFID market is also growing by diversity. At the time of writing, the recent entries into the RFID Knowledgebase have been very different applications in Morocco, India, Brazil, Colombia and Australia. Those cases include tagging people in hospital, vehicles for non-stop road tolling, assets in a mosque and public transport ticketing. Other recent projects include trees in Hawaii (conservation), vehicle number plates in Mexico (tax evasion, theft) and railway wagons in Italy (efficiency, theft). There is increasing diversity. It now looks highly likely that the three billion disposable tickets issued yearly by the Chinese National Railway System will become RFID for reducing queues and fraud. However, for now, projects with even tens of millions of tags yearly are rare. That results in average spend on the systems exceeding average spend on the tag. Only huge numbers of tags per reader will reverse that situation - think letters in the post, all prescribed pharmaceuticals or everything in the supermarket but all of those applications remain distant dreams.

Events
IDTechEx is hosting a number of events that cover RFID in various aspects. RFID Europe, being held in September in Cambridge, UK, provides a vital global communication forum for end users, system integrators and manufacturers. This conference and exhibition covers active and passive RFID and all the applications, full details can be found at www.IDTechEx.com/RFIDeurope.

In November, IDTechEx will be hosting the Energy Harvesting & Storage USA and Wireless Sensor Networks & RTLS Summit 2010.  A two day conference and exhibition, this event focuses on the uses, potential users and market forecasts as well as giving the latest technology developments and trends, is the meeting place for users, investors, suppliers, developers, system integrators and government representatives.