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April 5, 2004

Boom and bust for RFID

IT vendors and customers may be getting overexcited about the wide-spread introduction of RFID over the next two years, but will soon be facing a sharp drop in spending on the technology, research firm IDC has warned.

By CBR Staff Writer

And while some critics have drawn a dystopian vision where RFID tags on individual items will combine with GPS to strip away any shred of consumer privacy, IDC says there is simply no business case for such a model.

Mandates by major retailers and the US Department of Defense will spark rapid investment in the technology at the pallet and case level, this will be followed a decline in spending as the industry prepares to move to item level tracking IDC’s Christopher Boone told a meeting at the firm’s Directions conference in San Jose last week.

Boone said RFID adoption would likely come in five stages, starting with inside the four wall, eg, of individual warehouses, then moving beyond the four walls to encompass various sites of a business, before encompassing the entire retail supply chain, from supplier to retailer. Stage four would involve a roll out across the entire retail supply network, linking multiple retailers and suppliers. The fifth stage would push the technology beyond the retail network, allowing tracking of products anytime anywhere.

It is this fifth stage that prompts the most concern in society at large.

However, Boone said in the next five years, businesses were only likely to move as far as stage three. As for as the big brother like systems privacy advocates fear, there was simply no business case for this type of network, he said.

More immediately, he said, those with an interest in the RFID sector needed to prepare themselves for a boom as suppliers rush to meet the deadlines imposed by major retailers and other significant customers, followed by an equally sharp bust.

Spending on RFID in the US would likely top $200m this year, but would balloon next year to almost $800m. By 2007, spending will be $1.27bn, and on something of a plateau, with spending around $1.3bn the following year.

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That spending will be dominated by hardware costs, with tags themselves the biggest chunk. This will be the case even as tag costs plummet from 50 cents this year, to five cents by 2008.

Up to this point RFID investments will be concentrated on pallet and case level tracking.

After 2008, he predicted, there will likely be a slump in spending, as the industry absorbs its investments to date. However, by 2010, investment in item level RFID will kick in, US spending will soar, with spending in 2020 over four times the previous peak in 2008.

This article is based on material originally published by ComputerWire

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