Frost: Standardization, Technology Optimization Trigger Growth in Asia-Pacific RFID Inlays Market
August 18, 2008 // Published as a news service by IHS
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The market for radio frequency identification (RFID) tags is set to see considerable growth, according to Frost & Sullivan, gaining traction with increasing deployment in various verticals.
Analysts said the RFID inlays segment is a vital part of the larger RFID spectrum and determines the effectiveness and performance of the finished RFID passive tag.
In 2007, the market growth rate in the Asia-Pacific RFID inlays market was nearly 18.0%. By 2009, analysts said rising demand is expected to step up the growth rate to 20.0%, annually translating to a compound annual growth rate (CAGR) exceeding 27.9% between 2007 and 2014.
Recent analysis from Frost & Sullivan of the Asia-Pacific RFID inlays markets found earned revenues exceeding $150 million in 2007, with estimates to reach $852 million in 2014.
"Compared to the early 2000s when there was a lack of standards to govern RFID, the industry has since then seen tremendous progress in the ratification of standards to aid in making this technology more effective," said Frost & Sullivan research analyst Richard Sebastian.
"Significant milestones have been achieved in the past few years to ensure the various segments of the RFID industry, including the passive tags segment, are more standards-centric, directly benefiting the inlays market as well."
The ratification of electronic product code (EPC) Generation 2 standards has delivered a positive impact on the market and led to more end-user buy-in, analysts said, with the elimination of interoperability issues. Most importantly, it has paved the way for greater security, allaying end-users' fears over safety. As the pace of innovations in the RFID inlays segment steps up and the technology matures, demand is expected to strengthen considerably.
Alternate tracing and tracking methods cannot achieve the levels of visibility offered by RFID technology. Though these benefits were apparent to a large cross section of end-users, analysts said the cost factor remains a major concern, preventing large-scale adoption.
While technology providers are committed to achieving cost reductions, quality can be adversely impacted, including in the performance of inlays. Although price is mainly dependent on the quantity ordered, analysts said other factors such as the type of integrated circuit (IC) used, antenna size, antenna composite materials, manufacturing method, amount of testing and whether it is a wet or dry inlay also affects the overall price.
While the cost of inlays is dropping at a rate of 3% to 10% annually, ensuring competitive pricing will reduce the total cost of ownership for end-users, thus guaranteeing greater buy-in of RFID technology.
"However, end-users will also need to look at RFID deployment from a more strategic and holistic perspective and not solely from the cost angle," said Sebastian. "RFID offers enterprises the opportunity to save millions of dollars in operational costs apart from optimizing the safety and security of tagged resources."
Taking into account the benefits offered, the cost of inlays can be considered negligible. Analysts said a thorough cost-benefit study should be conducted when deliberating adoption to understand the return on investment (ROI) that can eventually be achieved.
Ultimately, the demand for enhanced visibility and manageability of resources in small, medium and large enterprises will play a decisive role in shaping the trends sweeping the RFID inlays market.
Analysts said the RFID market is relatively nascent, and though some impediments such as cost still exist, the technology has the potential to become more pervasive with increased deployments. The RFID inlays market will benefit from this trend, and sustained growth is ensured in the long term.
Source: Frost & Sullivan.