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Strong RFID Optimism from ABI Research

After what was by all accounts a disappointing year in 2005, the RFID market has seen meaningful progress already in 2006, and that progress is only expected to accelerate. Upon completion of a market overview report, ABI Research's Erik Michielsen spoke with RFID Update about his optimism for the rest of this year and beyond.
Apr 10, 2006This article was originally published by RFID Update.

April 10, 2006—ABI Research of Oyster Bay, New York, last week announced the release of a new study on RFID. Entitled RFID Annual Market Overview: Vertical Market and Application Market Overviews for Tags, Readers, Software and Services, the 111-page report is designed as a "general outline of the broad RFID market" that also provides a detailed look at specific vertical markets, applications, and vendors. Shipment and revenue forecasts are included as well. RFID Update spoke with Erik Michielsen, ABI's director of RFID and M2M research, about his perspective on RFID and where the market is headed.

Michielsen's overall assessment can be encapsulated in one word: optimism. After what was by all accounts a disappointing year in 2005, the RFID market has seen meaningful progress already in 2006, and that progress is only expected to accelerate. "We see growth happening at many levels, and collectively this represents a fantastic, continued evolution from a marketplace perspective." The challenges of last year caused many to "go back to the drawing board," Michielsen said. The end result is an industry that is more standardized, multisourced, and solutions-driven. Such virtuous characteristics position the market for sustainable growth.

Michielsen cited hard evidence of the progress, including pricing and end user-driven demand. "Tags were 35 cents a year ago, and in the teens now. That's a pretty big drop if you ask me." Furthermore, he said, "Demand is being created, reinforced by Gen2." There are reportedly multiple outstanding RFPs for RFID readers in five-figure quantities. (Quick math: 10,000 readers by $1,500 per reader equals contract values in the $15 million range.) Michielsen said that the second half of 2006 could prove monumental for the market. It is important to note, however, that the RFID industry will not see hockey-stick growth, in which demand explodes seemingly overnight. Instead, the ramp will be strong and steady. "Sales cycles are going to be increased," said Michielsen, "so patience will be a virtue."

There are three industry trends that Michielsen highlighted: demand from the automotive industry, item-level tagging, and South Korea's emergence as a regional RFID leader. The automotive industry has historically been perceived to be a relatively low-growth driver of RFID demand. "That's just not the case," asserted Michielsen. "Automotive is very dynamic." Item-level tagging, as readers of RFID Update know, has unexpectedly become one of the most talked-about developments this year. "Item-level RFID is really advancing," said Michielsen. Demand from end users has led technology providers to come out with solutions tailored specifically to the item level. Recall that Impinj recently announced Gen2 item-level technology (see Impinj Launches UHF Tech for Item-Level Tags), and EPCglobal last month held a technology demonstration aimed at evaluating various item-level technologies (see EPCglobal Tracks Item-Level RFID). Lastly, activity in RFID continues to heat up in South Korea. "We're seeing tremendous traction in the Korean RFID space," said Michielsen. "This really is fantastic because it's opening another market [for RFID vendors]."

Michielsen's upbeat outlook for RFID, both near- and long-term, echo that of Manufacturing Insights' director of demand management strategies Michael Witty, who last week wrote a column in RFID Update about the "renewed buzz" around RFID. Let us hope that the momentum continues unabated, yielding the robust, high-growth market so long predicted for RFID.
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