Former Cold War technology makes successful transition to commercial applications

Everything old is new again, including radio frequency identification - a Cold War technology making a successful transition to commercial applications.

Companies such as Symbol Technologies Inc. are banking heavily on the future of handheld RFID devices, and with good cause: Analysts

Technology once used by eavesdropping secret agents can now be found everywhere, from the stockroom to the EZ Pass lane. So why would ABIresearch analyst Michael Liard, who has tracked the RFID industry for the past seven years, downgrade his 2007 revenue forecast by 15 percent?

We have to keep the numbers real, Liard said. The thing is, everything is going up, up, up. The market is growing, but taking longer than expected. The figure includes RFID markets other than just Symbol products, including toll and animal tagging.

Liard says the market is just beginning the next phases of expansion, and should account for $3.1 billion in software and services sales during 2007. But there's a caveat to that growth, he added.

Four interrelated factors, particularly within asset management and supply chain management RFID markets, have led us to revise our forecasts, Liard said. They are market consolidation, collaborative solutions, the growing availability of off-the-shelf commercial RFID software packages and the improving level of skills in RFID project planning.

The four points are actually market enablers, with old hats like Microsoft and Oracle getting involved with RFID integration and making it easier for users, Liard added.

There's still a mystique around the technology, enough to encourage the U.S. Senate to consider educating legislators and the public on the significance of RFID. A first caucus meeting was held last month at the Hart Senate Building in Washington, D.C., led by Sen. Byron Dorgan, D-North Dakota, who opened the session with remarks on how RFID is an emerging technology that needs to be regulated.

RFID promises dramatic benefits in areas as diverse as national security, food and drug safety and supply chain management, and the United States needs to be at the forefront of its development and implementation, Dorgan said.

The caucus also included examples of RFID use by the U.S. Department of Defense, which operates the largest supply chain management system in the world. The DOD has 40,000 supply chain partners and tags items using RFID systems on the item level, as opposed to retailers who typically scan at the palette or case level.

If retailers such as Wal-Mart and Target decide to scan at the item level, that would be the holy grail for RFID businesses, Liard noted.

RFID product reader shipments increased 14 percent in the first quarter of 2006, ompared to the prior-year quarter, according to manufacturers, due in part to a standardization of technology and a drop in prices.

In China, however, RFID standardization has stalled. Three competing tag standards have emerged, and the Chinese government has not yet made a decision on a national standard, stalling RFID adaptation by U.S. companies that employ Chinese manufacturing.