Insider RFID predictions for 2007

Here we are at the end of 2006, and what a year it's been for the RFID Industry. This year, we saw the industry's largest IPO fail. Yet, some big name companies invested big money in RFID. In May, Lockheed Martin Corporation acquired Savi Technology because of their entrenched position with the U.S. Dept. of Defense to supply active RFID technology for logistics and supply chain tracking. In September, Motorola acquired Symbol for a whopping $3.9 billion dollars. Although some say it had little to do with RFID, my sources tell me otherwise.

Many companies, both big and small, that had high hopes for their products and services have dropped out, saying there's not enough revenue to sustain their business. Others stagger along, claiming they are struggling to break-even. Yet, 2006 proved to be an outstanding year for those that had the right formula. We talk to some companies, including various sponsors here at Switchboard, that are so busy implementing RFID projects they can hardly keep up.

This week, I had a chance to catch up with many of my customers and colleagues and ask them their insight around 2006, and what's in their crystal ball for 2007. It was no surprise the industry veterans all share similar perspectives, but most importantly, we're excited about next year for numerous reasons.

The rapid sunset of Class 0 and 1 surprised many and forced the acceptance of Gen 2 as a single standard across the supply chain. A tire manufacturer proudly stated, "The fact that we can program a single number on a tire tag and it can be used by Wal-Mart, the U.S. DoD, and a bunch of other trading partners, is huge."

This standardization is also helping drive costs down. The cost of passive RFID tags is at an all time low; but the big question is, how much lower can prices go without huge volumes? One industry expert in the tag industry, who asked to remain anonymous, shared his thoughts, "The decreasing tag costs, through subsidizing, reduced some pain for end-users; but how long can suppliers keep losing one or two cents on every tag they sell?"

As for equipment, my long time industry colleague, Dan Paley, put it this way, "the reader wars between vendors have helped products to get significantly better even though prices have essentially remained the same." Like computers, there is no doubt the trend will continue. There are at least three companies I'm aware of that are building RFID readers on a chip or chipset scheduled for release next year. Until now, these stealth projects have been top secret, but soon you'll see smaller readers with lower power consumption and a lower price tag than today's models.

Another unanimous consensus among everyone I've talked to is that closed loop asset tracking is the fastest growing industry segment and that's not going to change in 2007. People lose stuff. RFID helps them find it, and saves them time and money over their current locating techniques. My contacts at Symbol shared that 30% of their trials in 2006 were for asset management. One of my long time customers, a $20 billion durable goods manufacturer, has been working with RFID for years and plans to significantly expand their use of RFID for asset tracking.

Even with all the adoption, RFID is still considered a covert operation by most companies. For four years now, I have not been able to publish this customer's company name, nor those of 95% of my other customers. Carl Brown at SimplyRFID.com has a similar dilemma, saying "we now have over a 1,000 customers, but we're not allowed to tell you what they're doing." Many think 2007 will be the year end-users become more forthcoming about their deployments and their successes. Personally, I believe companies are going to continue to use RFID as a competitive advantage and publicly say there's no value in it.

The fact is the hype has helped raise awareness of RFID and people are getting educated - whether they want to or not. Companies are planning now and getting processes setup, but changing the ways of business takes time. My colleagues and I believe 2007 will be the year many companies will take major steps forward, beyond labs and past pilots, to adopt RFID technology as part of their core business practices.