Govt subsidies drive RFID market: analyst

August 13, 2009:The global financial crisis has hit the radio frequency identification (RFID) market hard, but government support for the technology in countries like Australia is helping manufacturers to stay afloat, according to new analysis.

Global analysts Frost & Sullivan highlight the considerable support offered by government in the form of direct funding for vendor initiatives or subsidies to end users intending to adopt this technology. Their report on the Asia Pacific RFID Market, finds that the market earned revenues of $US569.7 million in 2008 and estimates this to reach $US2.17 billion in 2015.

"The Japanese and South Korean governments have promoted extensive research in RFID to keep track of their high-valued assets," says Frost & Sullivan Industry Analyst Parul Oswal. "South Korea is more aggressive than others, and the government is active in initiating funding for R&D, and for actual deployments."

There has also been increasing government sector potential for active RFID deployments in Australia, considering the number of high-valued mobile assets the country owns under various government ministries. More government-backed initiatives and deployments are expected to be rolled out in the next five years across Asia Pacific, as RFID's popularity continues to grow across the region.

Despite these government initiatives, the high capital costs and system integration issues deter vendors and retailers. RFID companies should not fail to justify the business return on investment (ROI) in their eagerness to focus on technology.

There is huge potential for newer applications, where vendors need to demonstrate the uniqueness and innovation of their systems and their ability to provide an appropriate solution to a specific problem. RFID manufacturers have to work with IT experts to develop cost-effective ways to manage data and integrate it with the back-end systems.

"The integration of technologies is increasingly gaining significance due to the need to ensure complete safety and the inclusion of more applications in a single system," notes Oswal. "Active RFID enables a new set of applications when combined with passive and bar code solutions."

Other integration technologies include RFID with closed circuit television (CCTV), smart cards, biometrics, and other access control systems.

Meanwhile, the market has made steady progress toward introducing standards, which has ensured that middleware solutions are better equipped to support the technology than it used to three or four years ago. Standards have also made certain that communication with the hardware is more structured, enabling interoperability.

The establishment of standards has solved issues related to quality and technical glitches, raising the performance of both low frequency (LF) and high frequency (HF) to a credible level.

"Ultra high frequency (UHF) is now the emerging technology, as various mandates in the retail industry are leading to its extensive adoption," remarks Oswal. "Improvisations on overall tag architecture and form factors have also benefited the RFID inlay industry, increasing growth."