RFID Projected To Reach $1.5 billion By 2010

Radio frequency identification (RFID) technology in the retail consumer products goods sector reached $161 million in 2005, with hardware accounting for 41 percent, said an analyst firm.

Venture Development Corp. estimates RFID will grow at a compounded annual growth rate (CAGR) of nearly 57 percent during the next four years, with revenue exceeding $1.5 billion in 2010.

"Once this market blows out it will become a multibillion business," said Tom Grant, chief executive officer at ThingMagic, a privately held RFID manufacturer of readers and equipment that closed a round of funding on Wednesday. Investors included Cisco Systems Inc. "Venture capitalist always like the market size that has the letter 'B' in them."

Until now, adoption has been compliance driven. Consumer goods companies are focused on meeting mandates from retail stores Albertson's Inc., Best Buy Corp., Marks & Spencer, Metro Group AG, Wal-Mart Stores Inc., Target Corp., Tesco and others.

HighJump Software, a 3M Company, has begun to deliver RFID-enabled enterprise software, similar to Microsoft Corp., Manhattan Associates Inc., Oracle Corp. and SAP AG. "The numbers seem a bit aggressive, but you will see rapid adoption near term," said Chris Heim, HighJump Software president. "Companies are dipping their toe in the water and waiting for the technology to mature."Hardware is expected to reach $606.9 million in 2010, up from $66.1 million in 2005; compared with services at $681 million, up from $80.3 million; and software at $227.3 million, up from $14.5 million, respectively, the research firm said.

Several factors restricted growth last year. A large percentage of suppliers limited their deployments, meeting minimal requirements. Technology from readers to tags lacked performance early in the year, VDC said.

Most of the companies that adopted RFID to comply with mandates in 2005 found it challenging to measure an internal return on investment (ROI). Industry experts said ROI is achieved when data from RFID tags flows into enterprise resource planning(ERP) platforms or warehouse management systems (WMS) and available in real time as products move through the supply chain.