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The worldwide RFID market, which reached $5.25 billion in 2008, will climb to $5.56 billion by the end of 2009 with most of the money, about $3 billion, being spent on RFID cards and associated services, according to a new report by RFID tracking firm IDTechEx.

The study asserts much of the growth of the RFID market can be attributed to “government-led RFID schemes” including transportation projects, national ID initiatives, military uses and animal tagging. However, not all areas of the RFID world are in good shape. According to IDTechEx, the adoption level for pallet and case tagging has been slow. “The tagging of pallets and cases remains a failure, with only 225 million passive UHF tags used for this application in 2009 – a far cry from the 35 billion tags that one consumer goods company alone predicted that it would be buying in 2009, when they presented at an event in 2003,” IDTechEx said.

It blamed this on technical failures such as poor read rates with high moisture content and metal products, lack of infrastructure and “lack of mutuality of benefit between retailers and the rest of the supply chain.” In a 2007 report, IDTechEx blamed the slow adoption of pallet RFID tagging on companies “doing little or nothing in the face of the huge financial cost and lack of payback if they comply.”

IDTechEx predicts there will be 200 million RFID labels in use on pieces of apparel, including laundry, by year’s end. Also, bolstered by laws that make it a requirement, the RFID tagging of livestock is growing rapidly. IDTechEx said there will be about 105 million tags used on animals during the year, particularly in China, Asia and Australia. Transit will also be a heavy user of RFID technology as IDTechEx predicts 350 million RFID tickets will be sold for transit systems worldwide.

According to IDTechEx, there will be 2.35 billion RFID tags sold in 2009. The researchers said there were 1.97 billion sold in 2008, a bit less than the 2.16 billion they predicted in an October 2008 report. Some $2.23 billion was spent on tags in 2008 with an average of price of $1.13 per tag, said the researchers. “With the launch of printed RFID later this year for transit ticketing and other applications, and the increased use of RFID labels rather than cards, that average will fall to 22 cents in 2014,” IDTechEx predicted in their report.

Global Factors

“Our forecasts have taken into account the global economic slowdown,” said report author Raghu Das. “Looking at the range of applications, the biggest projects, which tend to be government led and are usually profitable for suppliers involved, are unlikely to reverse.”

He said that governments will continue using RFID tags on passports and livestock while there will be an increase in the number of cities around the world “migrating to RFID cards and eventually RFID tickets and RFID enabled cellphones for transit.” Das noted the U.S. military “recently awarded an order involving RFID approaching half a billion dollars,” and pointed out that “governments do not need a fast return on investment (ROI). They seek error prevention, improved customer service and efficiency and greater security.”

Businesses, on the other hand, look for quick return on investment, Das said, noting that RFID is being used in areas where fast ROI is attainable, such as apparel tracking, manufacturing, asset tracking and book tagging. The slow economy has forced delays of some RFID projects but the cost savings that RFID can bring will spur other companies to adopt the technology “for competitive advantage and to increase sales,” according to IDTechEx. Nevertheless, the report notes “it is still very rare for any one customer to buy more than 5 million RFID labels in any one implementation.”