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IDTechEx on Where Profit Exists in RFID

Research firm IDTechEx this week released a provocative article about the profit potential for vendors of RFID technology. This article lists the article's key points, some of which IDTechEx acknowledges are "contentious" and will stir debate.
Tags: Defense
Mar 16, 2006This article was originally published by RFID Update.

March 16, 2006—Research firm IDTechEx of Cambridge this week released a provocative article about the profit potential for vendors of RFID technology. The firm considers the subject an industry taboo, presumably due to the uncomfortable reality that, despite widespread projections of staggering market growth, many RFID vendors are struggling financially. Listed below are key points from the article, some of which IDTechEx acknowledges are "contentious" and will stir debate:
  • There are too many RFID suppliers, with the number growing all the time. Rather than be confronted with a fragmented market of numerous small providers, major customers of RFID want to choose from a small group of experienced, global firms with unquestionably sound resource availability. IDTechEx cites Assa Abloy as a company that has successfully consolidated offerings through a string of acquisitions and now offers its customers one-stop RFID shopping.
  • Vertical integration is an important step for any maturing industry, and it is -- appropriately -- happening in RFID. The example of Assa Abloy and others demonstrates that many of the links in the RFID value chain are fusing.
  • There has been the undue perception that case- and pallet-level tracking is the opportunity for RFID vendors given the mandated use of the technology from retailers, the US DoD, etc. While the ultimate market size may indeed be very large, vendor "profitability is not linked to size of market." IDTechEx ominously predicts that with respect to the compliance-driven market, "Some will succeed, but only a very few."
  • Some of the most profitable sectors for RFID vendors have been low-profile and unglamorous. Inmate-tagging by Alanco Technologies and cattle- and swine-tagging by Allflex are examples, says the article.
  • Along the same lines, large niches can be attractive opportunities. Alanco pegs the market for its services in US high-security prisons at $1 billion. And Savi Technology has established itself as a dominant supplier of active RFID almost exclusively serving the US and other militaries. IDTechEx notes last month's award of a $424.5 million contract to Savi, which it calls "the largest in the history of RFID".

Read the article from IDTechEx
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