VDC Research: RFID, Barcode, Retail Automation & Self-Service Market Blog

RFID Market Development to Date in 2011: The Treats/The Tricks (Part II)

Happy Halloween from VDC Research!  As a follow-up to Part I posted on Friday, VDC Research is continuing its brief take on the RFID market to date in 2011.  In the spirit of Halloween, this time we highlight a few of the “RFID tricks” we have come across so far this year.    

RFID Tricks:

• NFC: Is it a hype or ripe market?  We have been talking about NFC for more than a decade. Over the course of that period, we have experienced a few hype cycles.  We do agree there is a lot of hype, and the hype can be likened to what we saw in 2000 – albeit a bit more practical in its implementation today. But something useful will come out of it in the short term. Most of the hype surrounding NFC is about payments. The core issue is that this proposition only works when there is a critical mass of contactless terminals in place, and this is not happening at a break-neck pace, or if the terminals are there, then they do not seem to be used much, especially for NFC. VDC Research, however, believes that what will turn NFC from promise to reality in the short-term is real-time personal marketing, merchandising and loyalty (aka “smart marketing”). We advise industry observers to stop thinking “mobile payments” alone when you hear NFC, because payments are just the tip of the iceberg. Start thinking about a totally new medium and different paradigm – NFC-enabled mobile advertising, shopping, infotainment, loyalty and verification/access platforms for mobile devices. Then you will understand why NFC is here and happening.
• Wal-Mart retail apparel tagging slowed after a strong start in 2010.  The world’s largest retailer captured lots of headlines last year when it declared it would begin tagging several lines of apparel with RFID. Tag volumes in the billions were cited, along with aggressive timelines that have become all too familiar when it comes to Wal-Mart and RFID (recall the case and pallet tagging program volumes and timelines?). At this point Wal-Mart’s retail apparel “push” is being delayed to at least mid-2012, but this is not a big surprise to VDC Research and somewhat expected given the massive undertaking. And, Wal-Mart’s RFID stutter-steps have not deterred scores of retailers from moving forward with RFID tagging of apparel items (see Macy’s, Bloomingdale’s, JC Penney, American Apparel and others). Some would argue that the “trick” from Wal-Mart is a “treat” for other retailers who are now capturing the headlines today.
• The economy: enough said. The weakened economy is a “trick” for most industries today and the RFID market has not been immune. However, the RFID market is not contracting and VDC Research argues that the forecasted flat-to-slight growth in RFID markets is better than a decline, especially in down economy. Like many, we wish the economy would provide more treats than tricks in more sectors these days, including the RFID market.

RFID Market Development to Date in 2011: The Treats/The Tricks

In the spirit of Halloween, it is time to ask ourselves: “Is the RFID market in 2011 full of tricks or treats?”  With the market racing toward the end of 2011, we are already being asked to give our take on the RFID market this year. There are still two full months left for action, but if I look into my analyst bag of goodies this Halloween, I see lots of RFID treats, but there are a few “tricks,” too.  Part I will look at the “RFID treats,” while Monday’s Part II will highlight a few “RFID tricks.”

RFID Treats:

• The RFID market continues to penetrate a broad range of application areas and industries.  There are the RFID stalwart applications such as access control, electronic toll collection (ETC), contactless ticketing, e-ID, library management and others that continue to generate solid revenues and opportunities for vendors and solutions providers targeting those markets.  Then there are the burgeoning areas of RFID in application areas such as supply chain management (e.g., item-level tracking in fashion apparel as well as anti-counterfeiting and brand protection in pharmaceuticals), asset management (most notably using passive UHF), RF-enabled sensing and monitoring (e.g., food safety and traceability, biologics) and electronic vehicle registration (EVR) as an extension of AVI (automatic vehicle identification) to name a few. 
• Innovation continues unabated in the industry. From new NFC inlays/tags to new passive UHF RFID readers, chipsets and modules to new RFID tag ICs to new software packages (including cloud-based solutions), many innovative products and solutions have been introduced in 2011.  Avery Dennison, Identive NFC, UPM RFID and others launched new lines of NFC inlays and tags. Alien Technology, Motorola, Nordic ID and others unveiled new finished, dedicated reader offerings.  New passive UHF EPC ICs from Impinj (Monza 5), Alien Technology (Higgs-4), NXP (UCODE I2C), Tego (TegoChip 2000), and CEITEC (CTC 13000) have also been released.  New cloud-based software and services from IGear, InSync, Queralt, RFID Global Solution, Terso and others were also announced this year.  Again, innovation has been on full display and we expect the trend to continue in 2012 and beyond.
• Mobility plays an increasing role in RFID product, solution and market development each year, and 2011 was no exception.  New RFID handhelds, cloud-based solutions and NFC initiatives have taken center stage as vendors, integrators and end-users embrace the simple fact that mobility matters – especially among an increasingly mobile workforce and consumer base.

We invite you to come back to this Blog on Monday to see what “RFID tricks” VDC Research has identified so far in 2011.

Changing Regional Dynamics of the Barcode Printers Market

VDC’s annual coverage of the barcode printer market is pointing out to a significant regional trend – the growing dominance of Asia-Pacific. According to our recently published estimates and forecasts, the Asian market is expected to continue to account for a larger share of the overall revenues derived by printer vendors the world over – having outpaced EMEA in 2008, and slated to take over North America, when it comes to barcode printer investment, in 2015.

This stupendous (acceleration in) growth can be attributed to a number of factors including:

1. Infrastructure Development – Geographic demand for barcode printing solutions is shifting as vendors increasingly move their manufacturing operations base to emerging country markets, particularly in the Asia-Pacific region. Our market estimates indicate that APAC accounted for over 39% of the revenues that barcode printer suppliers derived from sales to the Industrial/ Manufacturing sector in 2010, a higher share than both Americas and EMEA.
2. Adoption of Global Standards – VDC expects the growing number of standards & compliance regulations across industry verticals to have an impact on barcode printer sales. Organizations are looking to leverage traceability to generate operational efficiencies, in addition to meeting government & industry mandates. Barcode solutions providers are tapping into growing opportunities within the perishable goods supply chain, for instance.
3. Dealer/Distributor Model – This is among the fastest growing distribution methodologies in emerging country markets, and is being heavily leveraged by barcode printer vendors in the APAC region to drive sustainable growth. Dealer/distributors (including VADs) sell to resellers who best understand local market ‘environments’ and are a valuable source for customer feedback. They also provide suppliers with access to a growing number of VARs and System Integrators. VDC’s latest research indicates that this channel is accounting for an increased share of suppliers’ barcode printer revenues.

We expect to continue exploring all of these trends and more in our coverage of the market for Barcode Printers when we launch our 2012 Barcode Solutions Market research program. You can find the outline for the same here.

A "Cool" New Application for NFC Technology

New NFC applications for use in specific enterprise operations continue to emerge. American Thermal Instruments (ATI) recently introduced a NFC-based temperature monitoring solution, which combines a smartphone application with the company’s LOG-IC NFC data logger to scan, review, and communicate real-time temperature monitoring data. The ATI smartphone application is the first of its kind that enables fully functional end-to-end temperature monitoring in real-time.

The ATI solution is inherently mobile (since its software component is deployed on smartphones) and has the added benefit of reducing the upfront hardware investment costs by leveraging a device that many cold chain management workers already carry. As a result, this temperature monitoring solution is more affordable to deploy relative to competing solutions that require dedicated readers and other hardware.

While the ATI solution is an interesting and innovative use of NFC, it will be interesting to see how well the technology performs in this application. Given the relatively short read distance that is associated with NFC technology, placement options for the tag will be limited to the perimeter of pallets/boxes.

Temperature monitoring solutions that leverage other forms of RF technology with longer read distances, on the other hand, typically enable sensors to be placed in the center of a container, giving a more accurate temperature reading. It will be interesting to see if these limited placement options negatively impact the accuracy of the ATI solution.

As fans of NFC technology we are excited to see it gaining acceptance for a broader range of operational applications. We look forward to seeing what other types of innovative enterprise NFC applications continue to emerge.

The Market for Read-on-Metal Ruggedized Gen2 UHF Tags

We’ve been getting a lot of requests recently about the read-on-metal ruggedized UHF tag market.  These tags have been gaining more attention not only due to their ability to perform on or in ‘harsh RF’ environments (i.e.: metals, liquids that distort the RF signal), but also due to their durability.  Typically housed in a durable plastic casing designed to ‘take a knocking and keep on working’, these Gen2 transponders typically offer read ranges in excess of 10 ft in some of the most hostile RF environments. 

They are primarily used for tracking assets such as containers, equipment, vehicles and more recently, IT assets.  In addition, recent innovations around performance and footprint reduction are enabling companies to embed RFID tags in a diverse array of products and materials such as piping, concrete, instruments and tools and consumer electronics.  Although these are not the 10¢ tags (they are typically greater than $1) most commonly associated with EPC Gen2 solutions, they are a cost effective solution for tracking an increasing number of objects in real world installation environments. 

Leading manufacturers of these ruggedized Gen2 UHF read on metal tags include Confidex, Omni ID, Xerafy, RCD, Intermec and Emerson & Cuming.

VDC estimates that the total global market for these tags in 2010 was $36.5 million and is expected to grow at a Compounded Annual Growth Rate (CAGR) of 48% through 2012 when global revenues are anticipated to exceed $80 million.  Preliminary longer-term forecasts indicate a significant increase in activity starting as early as 2013, particularly as supply chain and IT asset tracking applications begin to scale.

When NFC Smartphones are not NFC Capable

In a recent post, we discussed how consumers’ increasing access to NFC devices could drive broader adoption of this technology beyond the enterprise. While this certainly remains true, this week has brought a couple of disappointing announcements for those among us who are excited to use NFC.

AT&T will disable NFC on Samsung Galaxy S2

Tech-savvy consumers who are looking forward to getting their hands on one of the NFC phones set to be released in the US may be in for a disappointment. While devices such as Samsung’s Galaxy S2 will ship with embedded NFC chips, it is unclear which—if any—US network operators will permit these smartphones to reach the public with their NFC functionality enabled.

One carrier’s NFC plans are certain: AT&T customers who upgrade to the new Galaxy will not be able to use their new device’s NFC capability, as AT&T has announced the smartphone will ship with the NFC chip disabled.

What does AT&T’s decision to block NFC capability mean in the broader context of US NFC adoption? Certainly, this move has potential to slow the momentum NFC has been building over the past several months, especially if other major carriers follow suit. From a strategic perspective, AT&T’s refusal to enable NFC seems to indicate the company has not yet devised a way to profit from its customers using contactless payments and other NFC applications. Overall, this is a discouraging announcement for those of us who are interested in using NFC sooner rather than later.

Next generation iPhone 4s will not have NFC

In other disappointing NFC news, earlier in the week, Apple dashed the hopes of iPhone-using NFC fans worldwide with its introduction of the iPhone 4s. As you probably already know, the new device features a number of incremental improvements over the previous version, but no NFC capability.

As with AT&T’s decision to disable NFC capability in the Galaxy S2, Apple’s failure to include NFC capability in the new iPhone dampens the prospects for NFC adoption to scale among consumers in the near-term.

While the iPhone is a distant second to Android devices in terms of worldwide smartphone market share, Apple users represent a significant—and generally brand-loyal—segment of this market. Furthermore, Apple’s support would have put NFC in the global media spotlight, generating beneficial public awareness and excitement for what now remains a relatively unknown technology.