Five Predictions for ’06

By Kevin Ashton

What's in store for the RFID industry? Executives can count on another good year.

"Predictions are usually wrong, especially about the future." This quotation has been credited to Confucius, Einstein, Churchill and even Dan Quayle, among others. Whoever said it must have been thinking of RFID, where the future is especially unclear.

Fortunately, precise predictions are not essential in business. Executive predictions must be better than a horoscope, but they don't have to be perfect. Only two things really matter: being "right enough" and adjusting quickly. Right enough means seeing the big picture in order to take sensible action. A 1999 prediction that "supply chain RFID is going to be important soon" was right enough—especially compared with the counter-prediction that "RFID will never take off." The details, such as whether "soon" means five years or 10, are where adjustments matter—having the sense and spine to change as reality unfolds.

Here are my five big-picture executive predictions for 2006.

1. The RFID market grows, and nicely.

There won't be a boom in RFID next year, or any other year. Instead, expect healthy growth over a long period. RFID is too complicated to happen instantly. And that's not a bad thing: Big change comes from sustained growth, not sudden step changes.

2. EPC Generation 2 cleans up in UHF.

Generation 1 will persist until June, but in dwindling amounts. Systems based on ISO 18000-6A and -6B will last longer, but by the end of the year it will be clear that these, too, will be replaced by Gen 2, possibly under the pseudonym ISO 18000-6C. This is a good thing—not because Gen 2 is inherently better, but because increased competition among tag vendors will drive quality and innovation and reduce tag prices. The 5-cent tag won't come this year, but it will get closer. There won't be much action on Gen 3 or higher classes of EPC tag. Both will come, just not in the next 12 months.

3. The mandated find their business case.

Remember how you hated vegetables when your mom made you eat them? Then you grew up, left home and discovered that you liked something that is good for you. Similarly, some companies using RFID because of customer mandates will find internal business cases in 2006, with applications such as improving availability while reducing inventory.

4. China, Japan and Korea all move forward.

These countries will make progress setting regulations and adopting EPC standards—they don't want to miss out on the next big thing. But there will be compromises: Frequencies may be different, regulatory compliance will have its own flavor, and there may be protocol extensions or omissions.

5. Big technology gets serious.

Most large public technology companies have been watching RFID from the sidelines, issuing more press releases than products. That's about to change. Expect to see familiar brands on parts of your RFID system. These companies will build market confidence. As more public companies enter, some private ones will fail. This is market-driven natural selection, not the beginning of the end for RFID.

So, 2006 will be another good year. There will be problems, but 12 months from now, we will look back and see that, once again, we have come a surprisingly long way.

Kevin Ashton was cofounder and executive director of the Auto-ID Center. He is the author of a soon-to-be published book about RFID.