Home Internet of Things Aerospace Apparel Energy Defense Health Care Logistics Manufacturing Retail

Prediction: 300m Gen2 RFID Tags Ship This Year

Analysts and industry watchers have long considered the number of RFID tags sold to be a key metric of the overall industry's size. The question is, with the industry supposedly crawling out of the trough of disillusionment, how many tags are actually being manufactured now, half-way through 2006.
Aug 02, 2006This article was originally published by RFID Update.

August 2, 2006—Analysts and industry watchers have long considered the number of passive RFID tags sold to be a key metric of the overall market size. Among the hype-infused RFID industry growth predictions of '03 and '04, there were projections for the near-term manufacture of billions and even trillions of tags. While those projections turned out to be wrong, most agree that the timeline was simply too aggressive, and that such volumes will eventually be realized. The question is, with the industry supposedly crawling out of the "trough of disillusionment", how many Gen2 tags are actually being manufactured now, half-way through 2006.

One needn't look far to answer this question. Because Impinj has been the sole supplier of Gen2 RFID chips up until this week (see New RFID Chip Product Launch Imminent and Texas Instruments Announces Gen2 RFID Chips), the number of such chips sold by Impinj essentially equals the number of Gen2 tags on the market. (Recall the value chain: Impinj sells Gen2 chips to inlay manufacturers like Alien, Raflatac, and Avery Dennison, who sell the inlays to label converters, that then produce and sell the final RFID tags to end users like Wal-Mart and DoD suppliers.)

So, how many Gen2 chips has Impinj shipped since beginning production last year? According to Drew Nathanson, director of the AIDC/RFID technologies practice at Venture Development Corporation, the answer is between roughly 125 and 175 million since September 2005. Subtracting the 50 million chips that Impinj publicly stated it had shipped before the end of last year, calendar 2006 shipments probably fall in the 75 to 125 million range.

Reik Read, analyst with Robert W. Baird & Co., expects that to ramp over the remainder of the year, with the final 2006 tally reaching 350 to 400 million chips. While Impinj does not publicly report exact shipment numbers, CEO Bill Colleran told RFID Update the company's own estimates are higher. Colleran spoke at a Bear Stearns technology conference in early June. "At that time, we were looking at 400 to 500 units for the year," he said. "Our view of the market hasn't changed since."

Note that there is a lag between when a chip is shipped and when the resulting tag is produced and ready for deployment. Thus, the number of shipped chips does not equal the number of actual tags in a given year. Assuming the 400 to 500 million shipped chips projected by Impinj, the likely number of Gen2 tags for 2006 will be in the 250 to 300 million range. While 300 million may seem like a big number, it suggests quite a small dollar amount for a technology market. Assuming a Gen2 tag price of $0.15, the entire tag market for 2006 would come to only $45 million.

2007 and Beyond

But of course, everyone already realizes that because the Gen2 RFID market is only in its infancy that the figures are still relatively small. What about next year, then? How much will those figures grow?

According to Colleran, a lot depends on item-level tagging, which has been the big -- and pleasant -- surprise of 2006. "We are seeing people coming out of the woodwork for item-level," he said, noting that tagging at the item level may soon surpass tagging at the case and pallet levels. If this interest in item-level continues, the tag market could go up by a factor of three, four, or five next year. "When you look at apparel and pharmaceutical usage," Colleran said, referring to two sectors actively pursuing item-level tagging, "the unit volumes there are very very high. You start to get into the multiple billions quickly."

VDC's Nathanson concurred that growth is only accelerating, saying "The market's going to be growing significantly. As Gen2 starts to really infiltrate retail and supply chain applications, you're going to see that pick up." Baird's Read is also bullish, asserting that the real growth hasn't really begun. "The opportunity lies above us," he said, noting that many end users are still only in pilot mode and that some remain skeptical of Gen2 hardware because it is so new. But such factors are to be expected and will work themselves out in the near term, giving way to a very sizable opportunity. "I see a good five to ten years worth of very strong growth for the overall industry."
  • Previous Page
  • 1
  • Next Page

Login and post your comment!

Not a member?

Signup for an account now to access all of the features of RFIDJournal.com!

Case Studies Features Best Practices How-Tos
Live Events Virtual Events Webinars
Simply enter a question for our experts.
RFID Journal LIVE! RFID in Health Care LIVE! LatAm LIVE! Brasil LIVE! Europe RFID Connect Virtual Events RFID Journal Awards Webinars Presentations