RFID Printer/Encoder Sales Seen Booming in Next Five Years

Pharmaceutical market seen driving strongest growth, VDC reports; shipments in CPG sector plateau as compliance mandates are met

Pharmaceutical market seen driving strongest growth, VDC reports; shipments in CPG sector plateau as compliance mandates are met

Natick, MA — July 26, 2006 — The global market for radio frequency identification (RFID) printer/encoders and applicators reached an estimated $11 million in 2005, but the market is set for significant growth and could exceed $200 million within five years, according to new research by Venture Development Corporation.

According to the recently released volume of VDC's annual "RFID Business Planning Service," unit shipments of RFID printer/encoders and applicators approached 4,000 last year and are expected to exceed 90,000 by 2010. VDC anticipates a compound annual growth rate (CAGR) of nearly 80 percent through 2010.

VDC reported that current and future global shipments of the printer/encoders and applicators, segmented by vertical market and expressed as percent of dollars, include:

Consumer Package Goods (CPG): 67.2 percent
Government: 12.7 percent
Pharmaceutical: 1.9 percent
Health Care: 16.4 percent
Transportation: 0.0 percent
Other: 1.8 percent

CPG: 56.7 percent
Government: 6.8 percent
Pharmaceutical: 9.1 percent
Health Care: 10.3 percent
Transportation: 0.2 percent
Other: 16.9 percent

Over 96 percent of the total RFID printer/encoder market is derived from three verticals markets: CPG, health care and government. Although these verticals represent the vast majority of RFID printer/encoder sales, VDC anticipates the strongest growth from the pharmaceutical market. Key considerations for this market include:

  • Large U.S. pharmaceutical manufacturers purchased units in early Q1 2005 to meet compliance requirements. Orders placed in mid- to late 2005 were small in volume (one to two "additional" units per customer);

  • The majority of current shipments are desktop units supporting manual slap-and-ship installations. However, applicator shipments are expected to grow rapidly as the number of mandated SKUs increases — suppliers will need to automate as manual slap-and-ship systems will no longer be sufficient;

  • VDC believes the growth of high-frequency (HF) printer/encoders and applicators will be directly tied to the rate of adoption and deployment of HF item-tagging solutions; and,

  • Printer/encoder and applicator shipments to support item-level tracking applications are limited. Many current pilots and installations require customized transponders such as RFID-enabled bottle caps and specialty labels that include RFID, 2D symbologies and anti-counterfeiting features.
"CPG is currently the largest vertical market for consumption of RFID printer/encoders," said Drew Nathanson, director of VDC's AIDC/RFID Practice. "However, adoption of RFID printer/encoders and applicators in the CPG vertical was slower than expected in 2005. There was a ramp-up of activity in the early part of the year as CPG manufacturers raced to comply with Wal-Mart's mandate, but shipments began to plateau soon after. Gen2 firmware upgrades, not Gen1 replacement hardware, will continue to be a defining market characteristic over then next one to two years."

The health care market is another traditional user of RFID printer/encoders. Initial product introductions focused on 13.56 MHz HF devices for printing smart labels and smart wristbands for hospitals and other HCOs to support patient/newborn tracking, document tracking, and asset management.

However, unlike the CPG, government and pharmaceutical supply chains, UHF EPC is not mandated for tracking medical supplies. The health care vertical represented nearly 17 percent of the total RFID printer/encoder market in 2005 and is expected to grow nearly 64 percent annually throughout the next 5 years.

Additional Articles of Interest

— Got warehouses? Got manual processes? Read the case for thoughtful automation in the fulfillment center in "Optimization is a Four-letter Word," the Final Thoughts column in the June/July 2006 issue of Supply & Demand Chain Executive.

— For the latest facts, figures and benchmarking data from the supply chain industry, read the "Running the Numbers column in the June/July 2006 issue of Supply & Demand Chain Executive.