Datamonitor predicts that RFID technology including hardware, software and services across all verticals, will be a $6.1 billion market by 2010, three times that of today. Some 43% of revenues will be derived from North America, 33% from Europe, the Middle East and Africa (EMEA) and 21% from Asia Pacific (APAC). Central and Latin America will account for 3% of global expenditure.
The recent mandates being issued to manufacturers by Wal-Mart and the US Department of Defense have pushed RFID technology into the minds of many businesses. In the US, pharmaceutical manufacturers are also moving to respond to mandates issued by the US Food and Drug Administration. In Japan, Toyota and others’ cutting edge use of RFID applications in manufacturing processes, along with radical retail stores, has given it good profile. In Europe, the relatively early low-level adoption by multiple companies like Tesco (UK) and Metro (Germany) has seen a greater interest develop in their respective countries.
Datamonitor’s research confirms that the cost of RFID tags, which accounted for 25% of total global RFID expenditure in 2004, was a significant inhibitor to the uptake of RFID. However, by 2010, Datamonitor estimates the RFID tag share of the total market will decrease to 19%, reflecting a lower tag price due to economies of scale experienced by RFID chip manufacturers, in turn generated by a higher demand and resultant output.
Expenditure on readers, which in 2004 represented 29% of global hardware spend, is expected to grow to 32% of hardware expenditure by 2010 as RFID networks become more widespread and the number of features onboard each reader grows.
RFID middleware, the layer of software between the RFID readers and enterprise applications, such as enterprise resource planning (ERP), will be the key to unlocking financial, process and efficiency benefits from RFID deployments.
RFID is all about making the data work for you. Managing the information flowing from RFID tags and readers into a cohesive format that integrates with enterprise applications is a challenge that many software vendors such as SAP, Oracle and Vizional are focusing on.
Germany and the UK are expected to be the dominant European countries for RFID from 2004 to 2010 and, probably into the future. In APAC, Japan’s historic strength in manufacturing and its upbeat approach to manufacturing and the use of technology therein means it will be a key country in the adoption of RFID. While its market share is currently twice that of China, after 2009 the latter will take over with a superior share of 33% compared to Japan’s 28%, equating to an extra $57 million revenue opportunity.
The three manufacturing industries that will drive RFID expenditure over the next three years are pharmaceutical, consumer packaged goods (CPG) and automotive.
We are only just leaving an early-adopter phase in the RFID technology lifecycle. Most manufacturing RFID projects in 2005 will be pilots where an implementation is limited to one location, production line or single product type. Once manufacturers are able to recognize a return on investment generated by the data flowing from the plant floor, RFID adoption should grow at a faster rate.
Datamonitor expects that by the second half of 2006, this trend will start to see more companies expanding on their initial pilots resulting in total expenditure for the year reaching a touch over $3 billion worldwide.
