Decoding Design

The RFID market is growing, but not as planned

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The vision of store shelves filled RFID-tagged consumer items has not come to pass. Nonetheless, the RFID industry could generate $70 billion over the next five years.

Back in 2003, when retail change-maker Walmart said that it would require all of its suppliers to attach RFID tags to cases and pallets of goods by 2006, and the Department of Defense was also taking a fancy to the latest breed of long-range, low cost battery-less RFID tags, some analysts predicted the RFID market would grow to exceed $100 billion. That's not how things shook out.

The technology didn't -- many would say couldn't possibly -- live up to the hype. Still, while RFID has not permeated the retail and Department of Defense supply chains as many predicted it would, plenty of industries have found they could smarten up their operations with those small-but-powerful radio chips.

ABI Research predicts that the market for RFID transponders, readers, software, and services will generate $70.5 billion from 2012 to the end of 2017.  That's a far cry from the industry that would generate $100 billion per year, but it's part of a growing trend ABI is tracking. The market grew by $900 million in 2011, says the research firm, and it expects year-on-year growth of 20% each year.

The government has emerged as a leading user of RFID after all, but not the defense sector. Electronic passports, which use an embedded RFID tag for authentication and to fight forgery, are a major driver of RFID growth, says ABI. If fact, 96 different countries, including the U.S., are now embedding RFID into passports.

The transportation and logistics industries also consume a big chunk of the RFID pie. Tags are used to track valuable assets, everything from reusable containers to trucks and trains. And public transit systems are transitioning from magnetic stipe fare cards to RFID-powered cards. The tags can hold more information, more securely, than magnetic stripe and the readers have fewer moving parts, which means less stuff to break. If you've used a Charlie Card in Boston or the Clipper Card in San Francisco to get on a bus, subway or ferry, you've used RFID.

Turns out, RFID tags are also quite handy for tracking high-value electronic equipment such as servers and laptop, so the technology has found a home in large IT campuses. And the healthcare industry has gone ga-ga over tags that help ensure that vital equipment -- everything from IV pumps to drugs to prosthetic limbs -- are where they need to be, when they're needed.

Oh, and retailers haven't completely abandoned ship. American Apparel uses RFID to keep tabs on inventory at 100 of its stores, with plans to roll out the system to all 280 locations. And many other retailers use RFID, as well, though mostly for tracking high-dollar goods that are prone to theft.

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Image: Flickr/nathanborror

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Mary Catherine O'Connor

Contributing Writer

Mary Catherine O'Connor has written for Outside, Fast Company, Wired.com, Smithsonian.com, Entrepreneur, Earth2Tech.com, Earth Island Journal and The Magazine. She is based in San Francisco. Follow her on Twitter. Disclosure