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Robust Demand for RFID from Heavy Manufacturers

Research firm Frost & Sullivan recently evaluated the RFID market in the North American aerospace, automotive, and industial manufacturing verticals. The firms pegs the collective market value at $71.3 million last year, and predicts that it will grow at a rate of 17.9% through 2012, when it reaches $225.7 million.
Sep 11, 2006This article was originally published by RFID Update.

September 11, 2006—Research firm Frost & Sullivan will announce tomorrow findings from its recent evaluation of the RFID market in the North American aerospace, automotive, and industrial manufacturing verticals. The firms pegs the collective market value at $71.3 million last year, and predicts that it will grow at a rate of 17.9% through 2012, when it reaches $225.7 million.

Aerospace demand for RFID will grow the fastest of the three verticals, at 23.1% annually. Automotive will come next, at 18.8%. Industrial manufacturing, which refers to sectors like heavy equipment and machinery, electronics, oil and gas, and maintenance, repair, and overhaul (MRO), will grow at 13.3%.

Considered collectively, the three categories together are doing far better than other verticals, such as CPG, Frost & Sullivan research analyst Priyanka Gouthaman told RFID Update. "Given the overall market for RFID in 2005, which was not too good, these three markets have actually done quite well." She noted that the high growth projected for aerospace is still a couple years away. Currently, automotive and industrial manufacturing are far larger consumers of RFID than aerospace.

Vendors that stand to benefit from the growth in RFID demand from aerospace, automotive, and industrial manufacturing are those that narrowly target a chosen vertical. Gouthaman cited Intelleflex for aerospace and WhereNet for automotive. The highly fragmented industrial manufacturing vertical is trickier to target, composed as it is of various subsectors.

One of the primary contributing factors to RFID adoption in the aerospace, automotive, and industrial manufacturing sectors is the increasing decentralization of their manufacturing processes. "If you look at these manufacturing intensive markets, a lot of the activities are being outsourced, resulting in highly disjointed processes," said Gouthaman. The visibility provided by RFID can serve to integrate these processes, allowing centralized monitoring of a decentralized manufacturing chain. "RFID is an enabling technology that provides complete visibility at each phase of the manufacturing process," whether the phase occurs in Asia, North America, Europe, or elsewhere. "It enables tracking and identification of inventory (inbound as well as outbound), work-in-progress (WIP), critical assets, spares, tools, and high-value components, thereby providing real-time operational visibility across the length of the value chain."

Another adoption driver will be government regulatory efforts. Specifically, the US Federal Aviation Administration (FAA) is expected to introduce regulations regarding the tracking and tracing of cargo and aircraft components, and the Automotive Industry Action Group (AIAG) and EPCglobal have been working to unify an existing tire identification standard with an EPCglobal RFID standard.

Gouthaman noted that the RFID technologies used in the aerospace, automotive, and industrial manufacturing verticals will be varied. Unlike the adoption of RFID in the retail supply chain, where deployments will be primarily high-volume, low-cost passive EPC RFID, adoption in these manufacturing verticals will be see a stronger mix of active RFID alongside passive RFID.
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