Survey: RFID transponder use surges

09/07/2006


Global market for RFID (radio frequency identification) transponders reached an estimated $750 million in 2005, according to Venture Development Corp .'s RFID Business Planning Service. The company anticipates the market to show a compound annual growth rate (CAGR) of nearly 26% through 2010, with revenue shipments projected to exceed $2.3 billion within five years.

VDC lists current and future global shipments of RFID tansponders segmented by distribution channel (millions of dollars) at:
2005 Direct: 371.4 Indirect: 375.7
2010 Direct: 1091.1 Indirect: 1254.9

In 2005, the distribution of RFID transponder revenues was equally split between direct and indirect channels, with the greatest concentration of revenues being derived from direct-to-end-user (32%) and VAR/SI (36%) sales. Many vendors continue to employ direct-to-end-user strategies for system implementation. However, the proliferation of RFID in the retail and pharmaceutical supply chains is leading an influx of "solution" providers. In addition, increasing educational efforts, training programs, and partnership programs have shifted the market toward VAR/SI channels, which are expected to grow more rapidly than other distribution channels over the next five years.

Important considerations for the distribution of RFID transponders include:

  • OEM/private label channels are more widely used for shipments across regional markets, with larger RFID manufacturers shipping their products to partners for further packaging and customization; however, shipments through VAR/SI channels are expected to seize the largest market share over the long term due to software and services revenues;

  • Dealer/distributor channels account for the smallest share of hardware revenues, largely due to the low value-add offerings of dealer/distributors and their interest in moving boxes (which is difficult with non-standardized, non-off-the-shelf products). Dealer/distributor channels are widely being used for transponder shipments to support animal identification, security/access control cards, automobile immobilization, and other applications;

  • A primary issue currently facing the RFID industry is a general lack of qualified RFID resellers and integrators that can effectively market, sell, and implement EPC (electronic product code) supply chain solutions; however, vast channels exist for closed-loop, traditional application markets such as security/access control, contactless smartcards, library systems, fixed-asset tracking in specialized sectors (like health care), etc.

According to Shan shan Chu, an analyst in VDC's RFID Practice, "To succeed with regional and vertical markets, suppliers, regardless of their size, must continue to make strides in building their distribution channel networks. After all, total solutions and prompt customer service are among end-user top selection requirements. The development of competent and effective distribution channels for RFID systems has been, and should continue to be, a major strategic initiative for suppliers of RFID technology and solutions."

The RFID transponder market discussed here by VDC is part of its 2005-2006 RFID Business Planning Service.

-- Edited by Charlie Masi ,
senior editor , Control Engineering





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