According to research firm Venture Development Corporation (VDC), the global market for RFID systems in the electronics vertical market reached an estimated $34 million in 2005. VDC anticipates a compounded annual growth rate of 42% through 2010, with revenue shipments projected to approach $200 million within five years.

VDC's electronics vertical market report includes coverage and analysis of RFID system adoption among electronic components manufacturers, distributors and electronic product OEMs. RFID has historically been used in the electronics market for security/access control applications. Although these applications represent the majority of RFID activity, several emerging applications are expected to foster significant growth over the next three to five years. As technological hurdles are overcome and economies of scale are attained, applications such as supply chain management, shop floor automation, and asset management are expected to blossom.

Although integration of RFID into electronic products is expected to be one of several applications within the vertical market, horizontal applications that transcend multiple verticals are the primary RFID revenue generators. The success of these horizontal applications is expected to drive the adoption of the technology, slowly moving it into the manufacturing and supply chain, and eventually becoming embedded within the finished product. Furthermore, most current supply chain RFID-related activity can be attributed to internal installations/pilots of RFID manufacturers and vendors (i.e., IC/semiconductor manufacturers). It is a common practice for RFID manufacturers to use their own products and solutions for their own applications. Key challenges limiting further RFID adoption in the electronics vertical market include:

• high up-front costs with constrained IT/new technology budgets;

• uncertainty surrounding a preferred solution, standards, mandates and ROI models; and

• performance issues in the specified environments (i.e., presence of metal, RF/EM interference, etc.).

According Michael J. Liard, director of RFID Research, “Future growth will be driven by increased demand for applications that provide manufacturers increased visibility, improved operational efficiency, and lower costs/increased margins. Diminishing margins and high-levels of competition are forcing electronics manufacturers and distributors to look internally for cost savings and automating processes is expected to improve operational efficiencies and reduce labor requirements.”

For more information, visit www.vdc-corp.com