Park Ridge, Ill. - Embraced by Wal-Mart and others, radio frequency identification technology will more than double its market size in five years, a study predicts.
The RFID market will jump from $1.4 billion annually this year to as much as $3.8 billion in 2008, according to a study by Allied Business Intelligence Inc. ABI contends that major announcements of RFID adoption by Wal-Mart Stores Inc., U.K.-based retailer Tesco plc and the U.S. Defense Department signal that the technology is not a passing fad.
"There's been a lot of talk about RFID in the past three or four years, but not much has happened," said Edward Rerisi, director of research at ABI (Oyster Bay, N.Y.). "But with the Department of Defense, Tesco and Wal-Mart getting in, we expect to see more traction behind it now."
In June, Wal-Mart directed its top 100 vendors to put RFID tags on cases and pallets of delivered goods by Jan. 1, 2005. The retailing giant wants the remainder of its 80,000-plus vendors to adopt the technology by Jan. 1, 2006.
In addition to increasing the sales of tags, Rerisi said, Wal-Mart's strategy will benefit the RFID industry's effort to standardize its technology. The retailer has put its weight behind the Electronic Product Code (EPC) Network standard, which has been promoted as the foundation for a global network linking computers to trillions of everyday objects. EPC, which emerged from an academic/industry consortium at the Massachusetts Institute of Technology, is built on a vision of a world in which computers are able to identify any object, anywhere, instantly.
"Wal-Mart is behind the EPC, so expect to see other suppliers get behind it, as well," Rerisi said.
ABI's study also suggests that some suppliers of RFID tags and software could fail to survive an industry shakeout in the next few years, unable to meet Wal-Mart's demands for system accuracy, performance and production volume. Companies like Intermec Tech-
nologies Corp. and Texas Instruments Inc., with experience in delivering millions of tags, have a far better chance of survival than those that have never delivered in high volume, the study said.
"If you're going to deliver in volume, there's a host of production changes that need to be made," Rerisi said. "The most important one is your ability to keep defect rates down when volume goes up. Companies with a history of deploying millions of tags will have a better chance of doing that."