Datamonitor: Germany, UK expected to be dominant European countries for RFID into the future
New York — May 27, 2005 — Independent market analyst Datamonitor predicts that radio frequency identification (RFID) technology, including hardware, software and services across all verticals, will be a $6.1 billion market by 2010, three times that of today.
In its report "RFID in Manufacturing: The race to radio-tag is heating up in manufacturing," the firm predicts 43 percent of revenues will be derived from North America; 33 percent from Europe, the Middle East and Africa (EMEA); and 21 percent from Asia Pacific (APAC). Central and Latin America will account for 3 percent of global expenditure ($185 million).
"With EPCGlobal acting as an industry led standards body, and cheaper hardware becoming available, the manufacturing industry is starting to re-evaluate its position on RFID technology," said Adam Jura, Datamonitor analyst and author of the report. "Previously, the associated high cost and lack of internationally accepted standards saw many put strategies on the backburner."
The mandates issued to manufacturers by Wal-Mart and the U.S. Department of Defense have pushed RFID technology into the minds of many businesses, according to Jura. In the United States, pharmaceutical manufacturers are also moving to respond to mandates issued by the U.S. Food and Drug Administration.
In Japan, Jura said, Toyota and other manufacturers' RFID applications for manufacturing processes have also raised the technology's profile. In Europe, the relatively early low-level adoption by multiple companies like Tesco (UK) and Metro (Germany) has developed interest inside their respective countries.
Datamonitor's report looks at RFID technology, its application in manufacturing, challenges to its wider adoption, and implementation options available to manufacturers. The report also provides an analysis of the RFID technology stack (tags, readers, middleware, applications and others).
The report confirms that the cost of RFID tags, which accounted for 25 percent of total global RFID expenditure in 2004, was a significant inhibitor to the uptake of RFID. However, by 2010 Datamonitor estimates the RFID tag share of the total market will decrease to 19 percent, reflecting a lower tag price due to economies of scale experienced by RFID chip manufacturers, in turn generated by a higher demand and resultant output.
Expenditure on RFID readers, which in 2004 represented 29 percent of global hardware spend, is expected to grow to 32 percent of hardware expenditure by 2010 as RFID networks become more widespread and the number of features onboard each reader grows.
RFID middleware, the layer of software between the RFID readers and enterprise applications, such as enterprise resource planning (ERP), will be the key to unlocking financial, process and efficiency benefits from RFID deployments, according to Jura.
"RFID is all about making the data work for you," Jura said. "Managing the information flowing from RFID tags and readers into a cohesive format that integrates with enterprise applications is a challenge that many software vendors such as SAP, Oracle and Vizional are focusing on."
Germany and the United Kingdom are expected to be the dominant European countries for RFID from 2004 to 2010 and, likely, into the future. In APAC, Japan's historic strength in manufacturing, its upbeat approach to manufacturing and the use of technology therein means it will be a key country in the adoption of RFID. While Japan's market share is currently twice that of China, China is expected to take over with a superior share of 33 percent after 2009, compared to Japan's 28 percent, equating to an extra $57 million revenue opportunity.
The three manufacturing industries that will drive RFID expenditure over the next three years are pharmaceutical, consumer packaged goods (CPG) and automotive.
"We're only just leaving an early-adopter phase in RFID technology's lifecycle. It is Datamonitor's view that most manufacturing RFID projects in 2005 will be pilots where an implementation is limited to one location, production line or single product type. Once manufacturers are able to recognize a return on investment (ROI) generated by the data flowing from the plant floor, we'll start to see RFID adoption grow at a faster rate," commented Jura.
Datamonitor expects that by the second half of 2006 this trend will see more companies expanding on their initial pilots, resulting in total expenditure for the year reaching a touch over $3 billion worldwide.