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RFID Chip Market to Grow 63% Annually Through 2011

IC Insights has published a report that makes predictions for the worldwide market for RFID chips, which the research firm projects will grow at an impressive annual rate of 63 percent through 2011, when revenues reach $2.3 billion and units 26.1 billion.
Feb 07, 2008This article was originally published by RFID Update.

February 7, 2008—Research firm IC Insights has published a report that makes predictions for the market for RFID chips, also called integrated circuits or ICs. Recall that ICs are the "brains" of an RFID tag, the little silicon component that responds to reader commands and stores data. Focusing on ICs alone is a little unusual for RFID market reports, which typically look at components like readers and tags, or market categories like supply chain and retail.

Note that ICs are present in every sort of RFID tag form factor, from smart labels to key fobs to gambling chips to electronic passports to automated car toll payment devices. So the market numbers listed below encompass all those many applications, not just the familiar type of tag used in supply chain. Among IC Insights' key predictions:
  • For the five years 2006 through 2011, the annual rate of worldwide growth in the number of ICs produced will be a very impressive 63 percent. In 2011, 26.1 billion units will be sold.
  • In terms of dollars, total market revenue will reach $2.3 billion in 2011, up from $790 million last year, representing compound annual growth of 32 percent. (Note that the reason for the large discrepancy between unit growth and revenue growth is that silicon manufacturing exhibits strong economies of scale; as the number of units produced increases, the manufacturing cost -- and therefore sale price -- per unit decreases considerably. So revenues grow more slowly than the number of chips sold.)
  • The worldwide market for RFID ICs will cross the $1 billion threshold in 2009.
According to IC Insights, such strong IC market growth in the years ahead is attributable to commensurate growth in familiar RFID adoption categories: supply chain, logistics, and e-passports. Electronic passports in particular is an area of high growth, with IC Insights pointing out that more than 50 national governments are pursuing electronic passport and identification card programs. That market alone could grow to $500 million by 2011.

So who are the chip companies (or semiconductor manufacturers, as they're more commonly referred to) that will benefit from all this projected growth? RFID names closely associated with Gen2 like Impinj and Alien will certainly benefit from growth in whatever applications demand Gen2 technology. There are many more semiconductor manufacturers for whom RFID is but one offering in a vast portfolio of chip products. Some of the most well-known include Texas Instruments, NXP, and STMicroelectronics. Many more exist in Asia.

Expect the silicon manufacturers to be selective about the market opportunities they pursue. Impinj and Alien, for example, are focused on the Gen2 market. Texas Instruments has years of experience producing millions of RFID key fobs. Others compete only in the smart card market, and still others in the electronic passport and identification market. This multitude of product categories should be kept in mind when considering IC Insights' predictions for the RFID IC market, which, while large in the aggregate, is quite segmented across applications, technologies, and even geographies.

Read the release from IC Insights
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