The Prosperous World of RFID
By Dr. Peter Harrop
As the $5 billion RFID market moves strongly to over $25 billion in 10 years, advances are on a broad front and billion dollar suppliers will be created. Several companies will hit the half billion figure within three years. Let's look at some recent examples of success.
High profits
Highly profitable RFID companies are increasingly common. For example, Belgravium (www.belgravium.com) in the UK, linked to SIRIT and Ubisense in increasing the RFID proportion of its business, made over 16% profit on gross sales value up 101% last year, those profits being up 88%. Savi Technology tripled sales in three years while being consistently profitable and it is now headed for over $200 million in gross sales value, having been bought by Lockheed Martin.
Huge supply chain orders
In item and conveyance tagging, Unisys has recently landed an extension order from the U.S. Department of Defense worth $28 million yearly and up to $112 million if three further planned extensions are granted. Not to be confused with the DoD's highly publicized new passive RFID mandate initiative involving billions of tags, or the $425 million Lockheed Martin military order for active RFID, the Unisys project uses active RFID technology to track 125,000 shipments every week — ammunition, rations, medical supplies, vehicles, and vehicle parts.
RFID cards are an even larger business
RFID cards are seeing even bigger commitments (for RFID labels and plastic moldings and their systems) than these massive logistics orders. China is spending $2 billion on RFID this year, mainly directed towards the national ID cards for 900 million people and the city payment card schemes for up to 16 million people at a time. By contrast, a $66 million order for a non-military U.S. government access card system has recently gone to EDS. And just one extension of the Washington WMATA transport card scheme has recently put $11.58 million in the hands of Cubic Transportation Systems.
Financial RFID cards take off
Financial RFID cards are on the move at last. Recently, MasterCard claimed global leadership of contactless payments, with 40% of the market to Visa's 21% and American Express's 17%. In the first quarter of 2007 this represented 14 million cards/devices issued in 15 countries, with 51,000 merchant acceptance locations. As of November 2006, 19 million contactless financial cards had been issued in the U.S. Welcome Real Time (www.welcome-rt.com) projects 25 million financial RFID cards will be issued in the U.S. in 2007. Of the $1.4 trillion spent annually in the U.S., contactless represents around 1% of the total. By 2011, this is expected to increase to 15%. By the end of 2008, MasterCard expects to see 5 million cards issued in the UK, and 100,000 acceptance terminals. ViVOtech is the leader in such terminals, now making hundreds of thousands of them every year.
Everyone wins
MasterCard states that RFID payment has the potential to offer benefits for all stakeholders. For banks, it displaces cash and cheques, increases card usage, provides new issuance opportunities, reactivates dormant accounts, and establishes an innovative reputation that helps to get to the "top of the wallet". For merchants, it expands where cardholders can use cards, the spend per account in the U.S. has shown an increase of between 28-42%, ticket sales are up 40% because they are no longer constrained by cash at hand, payment is faster, and the cost of cash handling is lower. For consumers, waiting time is reduced by 15-20% (40% at drive-throughs), and average transaction times are down 10-40%, compared to cash or traditional cards.
Bullish forecasts for active RFID
In January 2007, Aberdeen Group reported that whereas only 8% of manufacturers had recently adopted active RFID — where performance is enhanced by a battery in the tag — a remarkable 48% planned to adopt it. Most of those were jumping straight to active RFID without experience of passive RFID. IDTechEx reported that the percentage of RFID expenditure related to active types was about to rise from about 15% to 25%. A segmentation of the market in 2017 is shown below.
Huge orders for active RFID
On cue, 2007 has seen huge orders for active RFID even beyond the success of Unisys and Savi Technology. For example, Navis obtained a $15 million management project to install active RFID on over 7,500 trucks at Georgia Port Authority's Garden City Terminal in Savannah, GA, where a huge WhereNet active tag system, worth at least $10 million, already orchestrates the positioning of intermodal containers. Zebra Technologies, in passive RFID, pulled off a coup when it recently bought WhereNet, a consistently profitable company in active RFID.
RTLS is now a hot topic
Real Time Location Systems (RTLS), a form of active RFID, have been installed in 100 hospitals in the last year, in addition to the WhereNet activity in dockyards. VDC forecasts 40% yearly growth in RTLS to 2010 and IDTechEx sees active RFID as a whole reaching $7.2 billion in 2017, partly due to a booming RTLS sector. Aeroscout, in RTLS, has found it easy to raise $21 million in 2007 to fund its rapid expansion.
RFID enabled phones sweep Japan
Using your mobile phone to buy things and to use the mass transit system involves an active RFID reader in the phone that can emulate both an active and a passive RFID tag. The largest adoption of these to date is in Japan, in a scheme run by the huge mobile operator NTT DoCoMo. By the end of 2006, there were 21 million RFID enabled phones in use in Japan, from none just a few years earlier, and 100,000 payment locations serving them.
Repositioning
Of course, RFID is not a license to print money regardless of product or sector. Only the system integrators reliably make money in the supply of UHF tag systems for pallets and cases to the retail sector. Those making these chips, labels, and readers tend to make eye watering losses mainly caused by imprudent price cutting that did not create extra sales. Motorola now has its UHF tags made by others as it concentrates on superlative supply of complete systems, leveraging its dominance of the barcode systems business. Trierenberg Holdings has sold its X-ident RFID business which makes football and train tickets to Schreiner GmbH and seems to be leaving the RFID business. However, a change of course for one company can be an opportunity for another.
Assa Abloy — non stop acquisitions
Without straying far beyond secure access and personal identification with its RFID businesses, Assa Abloy has now made acquisitions including Metget, Sokymat, HID, Indala, Card Manufacturing Center of Excellence, ACG Identification Technology, Omnikey, Fargo Electronics, Schwab and Partner Group, Novocard do Brasil, and Aontec Teoranta. From Ireland to the U.S. and Brazil, this gives its "Privacy and Security Business" increasingly global reach in RFID. We estimate it now has at least $350 million in RFID sales, rivalling the size of the largest RFID card system integrators in China.
Strong funding programs
Beyond this ongoing acquisition program, the financial investment houses are now providing hundreds of millions of dollars to support fund raising by RFID companies. Alien Technology, TAGSYS, and Impinj each raising USD $35-$55 million was only the beginning.
 For more information please contact the author Dr. Peter Harrop on p.harrop@IDTechEx.com or +44 1256 862163.
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