RFID Sales Fell Short in ‘06, VDC Says

NATICK, Massachusetts—2006 was a challenging year for the RFID industry. Sales expectations fell short, a high-profile IPO did not materialize, and the market continued to be “commoditized before it is commercialized,” according to the Venture Development Corporation’s 2005-2006 RFID Year-End Overview.

Nevertheless, investment in RFID remained strong and the industry made significant strides toward resolving standards-related issues. According to the report, the worldwide market for RFID systems exceeded $2.3 billion in 2006, with hardware accounting for nearly 59 percent of the total market. VDC anticipates nearly 35 percent growth (CAGR) through 2008, with total global revenues projected to exceed $3 billion by the end of this year.

North America continued to represent the majority of RFID-related activity, however, the Asia-Pacific region maintained its position as a “lead adopter” as seen in its continued integration of the technology for public infrastructure applications (i.e. ticketing, access control, etc). As the “manufacturing capital of the world” and one of the largest markets for technology, China will be a major driver for the growth of RFID in this region–as long as it is able to develop a set of interoperable national RFID standards.

EPC UHF tag volumes were well below expectations in 2006; however, VDC predicts that this market will grow by nearly 88 percent through 2009.

Although most of the RFID revenues generated throughout 2006 were derived from the transportation, automotive, and government verticals, significant growth is expected from the pharmaceutical, CPG, and health care markets, especially when item-level tracking (ILT) applications become more pervasive in 2008/2009. VDC predicts that the pharmaceutical industry will pave the way for high-volume, item-level tracking applications in regulated industries.