The Impact of the Financial Crisis

By Mark Roberti

It's unlikely the current turmoil on Wall Street will have a huge impact on the RFID industry, but it could hurt some startups.


Last Monday, I dropped off some documents at our accountant’s office in New York City, then walked toward Penn Station to take the train home. On my way, I passed the Lehman Brothers headquarters. The company had just filed for bankruptcy, and tourists and reporters with news cameras were gathered on the busy sidewalk. As I passed, a woman exited the building, glared at the gaggle of reporters with utter contempt and walked quickly away. It reminded me that the turmoil we’ve been seeing on Wall Street for the past few months has had a real impact on people’s lives.

So far, I haven’t seen much impact on the companies employing radio frequency identification technologies, or the vendors that make them. With the exception of Wal-Mart in the United States, Airbus and Metro Group in Europe, and a few other firms, most companies do not view RFID as a broad strategic effort. Rather, they see it as a tactical opportunity to cut costs, solve a business problem or improve a business process. They’re not borrowing funds to pay for these targeted efforts, so the credit squeeze is unlikely to impact their deployments. In fact, Wal-Mart has said it would not increase capital spending for RFID, but that the effort would come out of existing budgets.

If anything, I think companies might increase their spending on RFID—not in a big way, but radio frequency identification is clearly a technology that can help them reduce costs. If companies can spend $50,000 now and save $100,000 by the end of next year, then $150,000 in subsequent years, many will likely do so. Higher fuel and raw materials costs are forcing many firms to seek new ways to reduce costs and boost efficiencies.

Even with the bail out of AIG, most experts agree that the financial crisis is not yet over. More banks are expected to go under, and those that survive will curtail lending. That could have an impact on startups requiring a temporary cash infusion as they take their products to market—a bridge between money raised to develop products, and cash flow from having such products in the market. We’re already seeing some consolidation in the industry, and it could accelerate as companies run out of cash and get snubbed by their banks.

The overall impact of some small companies failing to survive will not be that significant. There’s a lot of innovation going on in the market—some of it coming from small companies such as Verayo, which just launched an “unclonable” chip that will enable companies to employ RFID for anti-counterfeiting applications (see PUF Technology Catches Clones), and some from large companies, such as ADT, Avery Dennison and Motorola.

We’ll have to wait and see just how much damage the financial storm inflicts on the global economy. I hope the worst is behind us, and that reporters will not continue to camp out in front of buildings in New York City, looking for a quote from someone who has just had their life turned upside down.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark’s opinions, visit the RFID Journal Blog or click here.