RFID Technology and Applications


Executive Summary


Radio Frequency Identification (RFID) is an electronic system to identify and track tags through the use of radio waves. These tags can be attached to various assets like manufactured goods, spare parts, and even humans, and impact a variety of industries including retail, manufacturing, transportation, and healthcare. The global market for RFID is currently at about $12 billion USD. North America is the dominant market ($5B) followed by Asia ($4B) and Europe ($3B). Africa and South America combined consists of less than $1 billion USD.


RFID tags consist of an integrated circuit, and an antenna. The circuits’ purpose is holding data such as serial numbers and electronic product codes, while the antenna is used to collect the energy needed to turn on the integrated circuit and transmit information back to the reader. The reader, or interrogator, is connected to a computer network. Tags can either be active (tag supplies its own energy) or passive (tag captures and briefly stores small amounts of energy from the reader).  Active technologies only account for about 25% of the global market size while passive technologies account for about 75% of the global market size. The dominance of passive technologies is because of the lack of batteries in the products, while active RFID technologies utilize batteries to operate.


RFID has three main frequency types: low, high, and ultra-high frequency. Low frequency has a short range (~20 inches) and is mainly used for access control and livestock tracking. The high frequency type has a range of up to 10 feet and is used for ticketing applications in transportation, as well as payment and data transfer in retail. Ultra-high frequency RFID operates with a range of 3-20 feet and its applications include inventory management, pharmaceutical anti-counterfeiting, and wireless device configuration.


In terms of cost of installation / operation, the major drivers include software (37%). services (30%%), and hardware (18%). The physical tags and sensors actually consist of only a small amount of the total cost of ownership (~12%). Low frequency tags are the lowest costing tags, high frequency tags are mid-tier, while active ultra-high frequency tags (passive or active) are the most expensive.  


In terms of end-uses, industrial applications account for 25% of the global market size, followed by transportation (23%) and retail (15%). For industrial applications, RFID is mostly used for asset tracking (e.g. tracking equipment, tools, inventory, and even people). Ticketing on major roadways around the world is how the transportation industry uses RFID (e.g. the American E-Z Pass). Retail uses the technology for apparel item tracking – which enables retailers to easily track inventory and account for how much is sold. Other sectors for RFID include healthcare (7%) and education (5%). Other uses include government mandates for the tracking of livestock.


In applications like retailing, RFIDs are just taking off.  RFIDs can reduce the likelihood of an item out of stock by about 70% and also improve supply chain efficiency including reduced inventories and a better matching of styles / items to customers’ preferences. RFID can also greatly reduce theft – losses due to theft are estimated at a staggering $37 billion per year.


Overall, the RFID global market will reach ~$25 billion USD by 2020. Retailers are expected to adopt this technology widely and applications in the sector will grow. Emerging channels like e-commerce are further accelerating the adoption; the need to offer fast shipping and omni-channel operations will drive companies to begin deploying RFID.