Venture capitalists and the investment community at large are upbeat about the imminent launch of the five-cent tag in 2008 in the world radio frequency identification (RFID) market. These tags will be a tremendous revenue-generator since they are expected to cover specific product lines that have high volumes, rather than being generic RFID tags.
New analysis from Frost & Sullivan (http://www.frost.com
), World RFID Market - Investment Analysis and Growth Opportunities, reveals that this market earned revenues of $2.10 billion in 2005 and estimates it to nearly triple by 2008.
The RFID tags are likely to have limited initial applications, but will be deployed in large markets. For instance, Europe is expected to incorporate these tags only in the high-volume DVD/CD cases and drug markets at the outset. Also, the Food and Drug Administration’s (FDA) mandating the inclusion of RFID in the battle against counterfeit drugs will make the US healthcare industry a happy hunting ground for the RFID investment community.
US spending on RFID is likely to grow by 120% by fiscal year 2009, with applications such as postage stamps, smart tickets and bar codes being the primary users of five-cent tags. Industry experts expect the market for item-level tagging to exceed 500 billion by 2012, setting the stage for large-scale venture capital funding.
Venture capital activity is likely to heat up between 2006 and 2010, since this is when the emerging RFID market is expected to burgeon. Hence, investment companies and venture capitalists that enter the market at this time will have an early-mover advantage and garner considerable profits from this highly lucrative and promising technology.
“RFID markets all over the world are witnessing extensive pilots and initial deployments,” says Frost & Sullivan financial analyst Janani Sankaran. “Falling prices of RFID equipment, growing industry support to RFID-based supply chain management applications and increasing end-user awareness is expected to catalyse exponential revenue growth.”
To keep pace with market growth, RFID companies will have to constantly upgrade or invent technologies, necessitating considerable investments in research and development. While small companies do not have the resources to match the latest technological offerings, some others may compromise on quality in their haste to take advantage of the immense potential and popularity of a new technology.
Ensuring that software developers and manufacturers produce quality software at optimum costs can solve the issue of unreliability. Companies can also achieve greater cost and process efficiencies by enhancing their visibility along the supply chain.
“RFID technology has immense potential in supply chain applications, mainly due to widespread standardisation,” notes Sankaran. “This increasing emphasis on standards necessitates improved technology, which in turn, requires high venture capital.”
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