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Report: Smart Cards Lead RFID Tag Consumption

New conclusions from research firm IDTechEx suggest that the market for RFID may currently be very different than what is assumed by many in the industry: tagging of cases and pallets for supply chain visibility remains a surprisingly small contributor to the overall consumption of RFID tags.
May 24, 2005This article was originally published by RFID Update.

May 24, 2005—New conclusions from research firm IDTechEx suggest that the market for RFID may currently be very different than what is assumed by many in the industry: tagging of cases and pallets for supply chain visibility remains a surprisingly small contributor to the overall consumption of RFID tags. While there will certainly be enormous growth in 2005, that growth will not necessarily live up to expectations. Indeed, what appears to be phenomenal growth this year over previous years is slightly misleading; the aggregate number of tags sold over the last sixty years is only about 1.8 billion, a negligible amount compared with the production levels coming in the years ahead. "The much publicised new applications such as tagging pallets and cases will be a disappointment, though their potential remains huge," says the report.

Predictions for 2005 tag sales range in value from as little as $500 million to as much as $1 billion, a very large swing that is due to a number of factors. First, the deadline for the Chinese initiative to issue national ID cards to every adult has been pushed forward from 2010 to 2008, just in time for the Beijing Olympics. Second, the animal tagging industry is subject to new laws affecting its technology. That industry's ability to comply with the new regulations will determine its 2005 purchase of RFID tags. Finally, the supply chain space remains a very big question mark. The amount of activity there will be determined by familiar factors like performance, pricing, and ROI.

The biggest contributor to RFID tag consumption in 2005, according to IDTechEx, will be smart cards and payment key fobs. Smart cards for bus and subway system access around the world is helping drive the demand, as are national ID card programs like the aforementioned in China. Also, the increasing deployments of contactless credit cards by major players Visa and MasterCard will have a major near-term impact on the amount of RFID tags demanded worldwide.

While the conclusions by IDTechEx might not square with the amount of media attention heaped on supply chain deployments, they are consistent with a trend that many RFID Update readers have communicated time and again: while the potential of RFID to transform the supply chain, logistics, and retail is real, it is still a few years from becoming reality. In the meantime, RFID is being successfully applied in other, less widely reported situations that will continue to be leading drivers of demand for the technology.

Read more on the IDTechEx research here
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