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Analyst on the Growing Market for WiFi-based RTLS

ABI Research a few days ago released findings that the market for RTLS based on WiFi technology is positioned for an impressive annual growth rate of more than 70 percent over the next few years. RFID Update spoke with ABI analyst Stan Schatt, who shared additional trends affecting the market and what to expect going forward.
Jul 26, 2007This article was originally published by RFID Update.

July 26, 2007—ABI Research a few days ago released findings on the market for real-time location systems (RTLS) based on WiFi technology (see Analyst: Strong Growth Ahead for WiFi-based RTLS). In addition to highlighting WiFi's growing share of the RTLS market relative to RFID-based solutions, ABI found that the market is positioned for an impressive annual growth rate of more than 70 percent over the next few years. RFID Update spoke with ABI analyst Stan Schatt, who shared additional trends affecting the market and what to expect going forward.

Schatt named AeroScout, Ekahau, and the lesser known Newbury Networks as leading vendors in the space. He said that according to the number of RTLS tags deployed, AeroScout is the clear market share leader, echoing a finding recently published by research firm In-Stat. (In-Stat is similarly bullish on the WiFi-based RTLS market; see WiFi Tag Market to Grow 100% Per Year Through 2010.) Schatt caveated AeroScout's large tag footprint with the fact that the market is only in its earliest stages, and that existing vendor positions are far from entrenched. "I think market share is largely irrelevant at this stage," he said. "It's a very small market right now, at probably between $50 and $80 million. It's going to become a $800+ million market by 2012."

What will help determine the future success of WiFi RTLS vendors is the companies with whom they partner, because key partners can become robust sales channels that bear fruit for years. "There are only a small number of resellers, so it becomes a battle to see which WiFi RTLS vendor gets the right resellers in the right verticals." This has played out in similar industries, like bar codes. According to Weeden & Co. senior analyst Kevin Starke, both Intermec and Symbol staked out claims early on by establishing relationships with resellers in key verticals -- Intermec in manufacturing, and Symbol in retail. Those relationships ended up being very strategic, since the resellers' loyalty proved a defensible barrier to entry against competing auto ID manufacturers that tried to break into those verticals.

Schatt also explained that traditional RFID-based RTLS solutions are threatened by the growth in WiFi-based solutions. RFID-based solutions will not likely go away altogether, but they will be increasingly confined to niche applications that require capabilities WiFi cannot offer. "It's not going to eliminate the [RFID-based solution vendors], but it will push them into vertical subsegment markets that require the accuracy or mobility of an RFID solution. It lowers their total available market numbers in terms of their potential market growth." He added, "I wouldn't be surprised to see some of them move into the WiFi-based RTLS arena." As evidence, WhereNet, which historically offered RFID-based RTLS, just recently introduced a dual-mode tag that supports both RFID and WiFi (see New RTLS Tag Supports Both ISO and WiFi Standards).

Schatt also predicted that the market's youth means that acquisitions are not imminent. This is counter to the predictions of other observers, who believe the pure-play, WiFi-based RTLS start-ups would make likely acquisition targets for large hardware manufacturers that want to enter the market. AeroScout-Cisco is an oft-mentioned pairing because of the two companies' close relationship.

Another point on which Schatt disagreed with the conventional view is the rate at which WiFi tag prices will decline. When G2 Microsystems announced the new smaller, cheaper, and more efficient chipset designed specially for WiFi tags, many predicted very rapid price improvements. However, Schatt cautioned that "it's going to take a while," noting the market price for a single WiFi tag remains around $50. He predicted pricing in the $30 range by 2012.

Regardless, Schatt's bullishness on WiFi-based RTLS is undeterred. He puts the value of the 2007 market at $59 million, growing to $839 million in 2012.
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