01A_ RFID_Value_Chain_F


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01A_ RFID_Value_Chain_F

  1. 1. Table of Contents 1. Introduction Overview & Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 RFID Deployment in Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2. RFID Applications Traditional Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Emerging Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 3. RFID Value Chain in Asia Pacific Complete Segments in the RFID Value Chain and Relationship with each Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 4. Competitive Landscape Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Partial List of Companies with Presence in Asia Pacific . . . . . . . . . . . . . . . . . . . . . . .10 5. Evolving Value Chain RFID Market Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 6. Conclusion and Outlook Future of RFID in Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 2
  2. 2. 1 Introduction Overview & Definition This white paper by Frost & Sullivan identifies and analyses the various segments of the radio frequency identification (RFID) value chain in Asia Pacific – looking at it from an in-depth perspective and taking into consideration all of the main segments that contribute toward full scale RFID deployment.This includes the initial chip manufacturing process right up to the end user. It additionally takes a comprehensive look at all the major applications and functions which currently leverage on RFID to provide a form of track and trace. It also explores the dynamics of some of the large companies involved in each segment as well as their relationship, contributing to the value-creation of the RFID ecosystem. Some of the changes impacting this value chain resulting from shifting market conditions are also examined in this paper. Definition The key segments of the RFID value chain include manufacturers of RFID chips, tags, readers, label printers, system integrators (SIs) and distributors. SIs is used loosely to refer to any vendor which provides value-added services (from project management), site surveys, and consulting to turnkey provision of services. The term chip manufacturer refers to companies involved in design, fabrication, and manufacturing of integrated circuit chips used in the RFID industry. RFID Deployment in Singapore Singapore has been one of the pioneers in adopting RFID in Asia Pacific since the mid 1990s. Although the country has seen aggressive initiatives in the last few years led by various government, non-government and private organizations - the market is however still relatively small with huge potential to grow moderately. While there are over 100 companies in the Asia Pacific RFID ecosystem, approximately 40 to 50 companies are relatively large companies with the majority of these companies setting up their regional headquarters in Singapore. As compared to 2005, most medium and large scale enterprises in Singapore now have better awareness on RFID. While some enterprises may not fully understand the return on investment (ROI) and may need additional exposure and education to build their understanding, many enterprises are beginning to understand the potential benefits they stand to reap by adopting RFID; greater visibility, traceability, and security through real time or near real time tracking and tracing. Through the various proof-of-concepts and pilot initiatives being carried out across Singapore by the various aforementioned parties enables greater awareness among the general public and potential end users. There are however certain issues that need to be looked at, especially when it involves large scale deployments. One of the primary factors that are inhibiting wide scale adoption of RFID are cost related issues making the ROI business case a viable one. Singapore is a small country with just over 4 million people. The market is relatively small to gain benefits from the economies of scale in RFID deployments. Absence of large retailers like Wal-Mart to drive large-scale adoptions means mandates based implementations are unlikely in Singapore. 3
  3. 3. With the ratification of UHF band in Singapore, decreasing cost of RFID hardware over time and increasing awareness will result with more enterprises in Singapore leveraging on RFID to solve various inefficiencies related to visibility and traceability that affects their businesses today. 2 RFID Applications RFID is now increasingly utilized in a wide range of applications and functions to enable the track and trace of objects. While RFID is still considered a nascent technology, the Asia Pacific market is witnessing increasing deployments for various applications, and more new RFID applications are emerging from time to time. Chart 2.1 presents the RFID Applications in APAC Source: Frost & Sullivan Traditional Applications Listed below are some of the ‘traditional’ applications identified by Frost & Sullivan – those that have been around for 3 years or more currently observed in the Asia Pacific region. Access Control As enterprises grow in scale, one of the toughest challenges faced by many is to keep track of its employees. It becomes increasingly challenging to keep track of hundreds or thousands of employees with the size of enterprises and locality increasing over time. Most access control systems deployed are presently using high frequency (HF) but market participants believe Ultra High Frequency (UHF) is slowly gaining acceptance in this area. 4
  4. 4. Animal Tagging Animal tagging has been quite commonly used in certain countries such as Australia and New Zealand for over a decade, and RFID is increasingly being used for livestock tracking, wildlife tracking, companion animal tracking, and fisheries and aquaculture tracking in other parts of Asia Pacific as well. RFID used in animal tagging commonly runs in short to medium range, mostly deploying low frequency (LF) while there is to a small portion that runs on high frequency (HF) or ultra high frequency (UHF). Library Tracking The library tracking system is one of the earliest known applications using RFID in Asia Pacific. One such example is the National Library Board (NLB) of Singapore which has implemented RFID to automate much of its library services since 1998 through the Electronic Library Materials Management System (EliMS).Through this system which has tagged over 10 million library materials, total operational cost has managed to be reduced as the NLB is able to save on manpower cost without the need to hire additional manpower with increasing number of new users. HF seems to be the preferred choice for most library systems but UHF is slowly being trialed out in several libraries across Asia Pacific. Emerging Applications Emerging applications can be categorized as applications that have gained prominence in Asia Pacific in the last 3 years, and can be considered still a very nascent market. Frost & Sullivan believes much of the market across Asia Pacific is still untapped and there is great potential for these emerging applications to grow in stature in the coming years. Asset Management Asset management is an application where RFID is deployed horizontally across all enterprises and industries.Typically, RFID is used to keep track of mobile assets and the type of tag used depends very much on the value of the asset itself. Active tags are commonly used for assets of very high value as it enables continuous real time monitoring while passive tags which are commonly the UHF passive tags are deployed for assets of medium or high value. Aviation The aviation industry is unique as it has its own requirements and specifications. Asia Pacific is beginning to see widespread adoption of RFID in several specific areas of the aviation industry and can be further expanded into the following: Baggage Handling One of the biggest prospects for RFID tagging is for baggage handling. RFID initiation in baggage handling boosts security while improving the airport's baggage-handling efficiency. The Hong Kong International Airport (HKIA), one of the earliest adopters in the world for RFID baggage handling is already witnessing this regions largest single site item level UHF RFID deployment for its baggage handling since 2005. 5
  5. 5. Additionally, several other airports across Asia Pacific especially those in Malaysia, India, China, Japan, and Korea have also begun feasibility studies and pilots to consider embarking on RFID for baggage handling. Many market participants believe that it could soon become compulsory by IATA, possibly by 2012 for all major airports globally to adopt RFID for its baggage handling facilities as results from present deployments are very encouraging besides the fact of achieving greater levels of security for air travel. Cargo Handling RFID is beginning to see proof of concepts and pilots being carried out to track unit load devices (ULDs) and time- definite (TD) cargo shipments. The Free Trade Zone at the Bangkok International Airport and SkyCargo, the freight division of Emirates Airlines are among some notable projects deploying RFID in stages for its cargo handling system. Maintenance, Repair and Overhaul The maintenance, repair and overhaul (MRO) is another area seeing increasing adoption of RFID in the aviation industry. Enterprises involved in this industry are beginning to realize RFID is able to facilitate and streamline the entire MRO process ensuring greater visibility. Although at the present moment it is still propriety based, three airlines companies within Asia Pacific are known to have begun adopting RFID to streamline their MRO facilities. Pharmaceuticals The healthcare market, in particular the pharmaceuticals industry is seeing an increasing amount of companies adopting RFID to better manage and optimize the pharmaceuticals supply chain. Plagued with several common issues; drug diversions where cheaper priced medicine meant for public hospitals or charitable institutions are diverted to the open market, or counterfeits where non-genuine medicine is sold to the public. Additionally, the pharmaceuticals industry is also prone to error where an occurrence of a medicine bottle is wrongly labeled. Counterfeit medicines especially lead to huge problems for those involved in the pharmaceuticals industry, where it could be lethal, lead to loss of revenues due to recalling of all medicines, and bad publicity. The Food and Drug Administration (FDA) has endorsed the use of RFID by pharmaceutical companies to combat counterfeiting, and expects RFID to enable a platform for an electronic pedigree (e-pedigree) among all stakeholders involved in the pharmaceutical value chain. It is a matter of time before the FDA comes out with some form of a mandate requiring companies to tag their pharmaceutical products, and market participants believe this mandate is expected to be in place by 2010. Postal Tracking One of the emerging applications in Asia Pacific, the postal tracking system incorporates the tracking of high value postal parcels and or bags. China Post has begun tagging the bags containing express mail with EPC compliant tags as it will enable the mail bags to be automatically tracked as it moves through various points in their processing cycle. Through the implementation of RFID for postal tracking, processing time of mail bags can be reduced and potential late deliveries could be avoided. 6
  6. 6. Product Authentication RFID is increasingly being used as a form of ensuring authenticity of a product. Besides some more common products already used for authentication purposes such as document tracking or for pharmaceutical products for example, RFID is also being explored as a form of authentication to combat counterfeiting. Sports Timing Sports timing is another area where RFID is gaining prominence in Asia Pacific. Sports timing systems leveraging on RFID technology collects accurate timing data of athletes participating in events such as marathons, where it has always been difficult to keep track of hundreds of athletes participating in a single race.The tags are encapsulated in a glass capsule that is enclosed in a specially designed plastic band which an athlete can wear on his wrist or leg. A reader is placed at the finish line and will automatically track the tags as the athletes crosses the line. The glass capsule which is more commonly used operates on LF while another form also used for sports timing; label based tags operate on HF. Supply Chain Management The supply chain management function is seen as the biggest potential for RFID deployments as it provides near real time visibility across the entire supply chain. With greater visibility, enterprises are able to streamline operations more efficiently and have greater power to optimize the supply chain from supplier right to the end user. UHF is the most used RFID type in the supply chain, and with the ratification of the Gen 2 standards by ISO and EPC global in 2006 enables greater interoperability in terms of frequency optimization and vendor neutrality. This in turn makes it more feasible for end users to adopt RFID. Transportation The transportation industry is another area showing great potential for RFID. Several areas in the transportation industry are beginning to leverage on RFID to either solve current inefficiencies in the system or improve overall security.The type of RFID tags used for these applications is the battery assisted passive or active RFID tags operating at 2.4 GHz Microwave band or 900 MHz UHF band manufactured by companies specializing in RFID products for the transportation industry. Automatic Toll Collection One of the areas under the transportation industry that is gaining prominence is the use of RFID for automatic toll collection (ATC). The customers open an account with a predefined amount of money with an agency managing the toll operations enabling them to have a cashless and secure way of traveling through toll roads. Among the notable projects currently in operation is the Hong Kong and South China toll project which is handled by Autotoll Limited. 7
  7. 7. Automatic Vehicle Identification This solution, the automatic vehicle identification (AVI) is used in parking areas to identify and keep track of vehicles for greater access control and improve parking fees collection. It provides a more convenient way for users, parking owners and operators to manage their parking needs which ultimately improve overall customer service. Areas that see great potential for AVI are public and private car parks, fleet terminals, container terminals, airports, warehouses and factories. 3 RFID Value Chain in Asia Pacific Complete Segments in the RFID Value Chain and Relationship with each Segment Chart 3.1 presents the complete segments of the RFID value chain in Asia Pacific Source: Frost & Sullivan 8
  8. 8. The full RFID value chain involves several segments that interact with each other depending on the service it provides. In most circumstances, the end user will only interact with the system integrator (SI), but will know of the existence of the products under the ‘front end’ category (as defined by Frost & Sullivan), where the product supplied by the SI has the company brand clearly visible.These front end segments include the supporting infrastructure manufacturers, smart label, label printers and encoder manufacturers, tag manufacturers, reader manufactures and software developers. There are also those segments that are the ‘back end’ category (as defined by Frost & Sullivan) - where most end users and typically SIs do not have any interaction with, which includes the integrated circuit (IC) manufacturers, inlay manufacturers, and reader chipset manufacturers. Only larger SIs which have personnel with vast expertise such as HP and IBM for instance may have relationships with every segment in the RFID value chain to ensure successful transfer of knowledge is achieved to ensure all technical criteria’s are well understood for an RFID deployment. Additionally for most companies in the other segments of the RFID value chain, companies, they only have relationships with the immediate segments and only larger companies may have professional relationships with all segments. This type of relationship between each segment of the value chain applies for most applications discussed earlier except for a few where relationship between vendors may differ. For instance, the baggage handling application differs whereby the end user will have relationships with the front end category. In the HKIA project, end users do not only rely on the SIs but also have relationships with the other segments, such as having professional relationships with Motorola to obtain the tags and readers. This is achievable due to the scale of the project, where there is a high volume of readers and tags needed, thus end users deal directly with other segments to get the best price for these products in bids to reduce overall operational cost. 4 Competitive Landscape Overview Compared to approximately 3 or 4 years ago, only a handful of companies had presence in the RFID value chain in Asia Pacific. However, due to increasing adoptions for a myriad of applications supporting various industries, RFID in Asia Pacific now has a presence of over 70 companies.This indeed highlights that competition between the companies involved in the RFID ecosystem is continuously increasing, and Frost & Sullivan opines similar trends are expected in the next 5 years. Although a majority of the RFID vendors are still those from either North America or Europe, the Asia Pacific region is beginning to witness the emergence of local companies getting involved in this business. Most of these companies are from North Asia - China, Hong Kong, Japan and South Korea where there is an increasing strong presence in all segments of the value chain. This is possibly contributed by the fact that RFID is seeing the biggest adoption in that part of Asia Pacific. However, other countries such as Australia, Malaysia, New Zealand, Singapore and Thailand are beginning to see more RFID vendors emerging, most especially SIs. 9
  9. 9. Partial List of Companies with Presence in Asia Pacific Chart 4.1 illustrates partial list of companies having a presence in the Asia Pacific RFID Value Chain Source: Frost & Sullivan A more comprehensive list or chart of over 70 companies having a presence in Asia Pacific can be found in the research service entitled “Market Insight: RFID Value Chain in Asia Pacific”. The chart highlights the segment the respective company is involved with. Additionally, for those companies involved in the RFID hardware business - both tags and readers, the chart additionally highlights the frequency range these products can support. 5 Evolving Value Chain RFID Market Dynamics Direction of Original Equipment Manufacturers The presence of original equipment manufacturers (OEMs) for the RFID industry is still relatively small currently. There are several underlying reasons for this which include: 10
  10. 10. RFID Still a Nascent Technology Considering RFID as a technology is still very new and is continuously evolving, the market is witnessing improvisations and innovations on this technology constantly. This makes it relatively difficult for larger companies to outsource or license their products to OEMs when this technology is still not mature. Strong Brand Name Large RFID hardware companies such as Motorola have a strong brand name, thus potentially do not see themselves re-branding their products under any OEM agreements in the near future. However, although Motorola may not have any specific plans to re-brand their products through OEM agreements with other companies, they have signed strategic agreements with other companies such as Avery Dennison recently in early 2007. However, the presence of OEMs is slowly beginning to make inroads for several strategic reasons as Frost & Sullivan believes. Due to this, the market is expected to see more companies involved in the RFID industry through various OEM agreements. Strengthening Stake in Asia Pacific Considering numerous companies are now offering various RFID solutions – both hardware and software related, existing companies in the RFID value chain are facing increasing competition. Due to this, they have begun offering OEM partnerships to other companies to ensure their existing stake in the market is not lost, and at the same time try to penetrate untapped markets. One such agreement seen in recent times as mentioned earlier in this research service was the agreement between Impinj and CSL whereby through the OEM agreement, CSL which is based in Hong Kong will re-badge Impinj portfolio of UHF passive readers and is expected to focus in the Hong Kong and China market specifically. Additionally, knowledge sharing activities could stand to benefit both parties with the transfer of technical competency where more technology innovations could be achieved. Under this circumstance, Paxar reached an agreement with Alien Technology in 2006 where they will resell Alien Technology’s portfolio of readers. In turn, Paxar’s team through the Monarch System Integration Consultant team will be completing the Alien Academy RFID training program to better understand the installation and integration of Alien Technology’s readers. Ultra High Frequency increasingly being utilized While certain applications such as animal tagging, access control and library tracking for instance predominantly run on LF or HF, an increasing number of newer applications are leveraging on UHF. Frost & Sullivan believes one of the possible reasons those former mentioned applications operate on either LF or HF is because it started being widely used before UHF was feasible enough to be widely deployed. Those aforementioned applications can be considered ‘traditional’ applications considering it already started being widely deployed when UHF was still in its infancy. 11
  11. 11. With UHF now being allocated in most countries across Asia Pacific by the respective regulators, it is no longer an obstacle for enterprises to consider adopting UHF as the chosen frequency to support a myriad of applications. Additionally, since the inception of the Gen 2 standards in 2006, enterprises now have a more solid backed standard that has solved much inefficiency associated with the Gen 1 UHF standards such as low read rates, susceptibility to dense reader mode (DRM) and having interoperability issues when it involved using products from different vendors. Moreover, UHF has benefits over LF and HF as it provides longer read ranges and is typically a cheaper option of products compared to those two latter frequencies. As standards and technology innovations continue to improve overall usability of RFID, it is expected that UHF will be the main form of frequency adopted to support the various applications. Market participants in fact believe that UHF will ultimately be the chosen frequency to operate on for many of the traditional applications mentioned earlier. In fact, some companies are already known to be developing UHF based products for library tracking and access control, which are expected to be more widely adopted in the next 2 or 3 years. Considering UHF holds the biggest potential, many companies currently involved in the RFID hardware industry but not offering any UHF based products yet are already slowly migrating and developing UHF based products in anticipation of greater demand in the near future. 6 Conclusion and Outlook Future of RFID in Asia Pacific The RFID value chain in Asia Pacific certainly has huge potential. The market is still nascent and there is still a large untapped market for this region. Due to the various potential benefits which can be achieved by having greater visibility through this track and trace technology, RFID is expected to continue to grow and be more pervasive in the environment. More enterprises will adopt RFID for various applications, and many new applications are expected to be developed in the next few years leveraging on RFID. Frost & Sullivan is of opinion that RFID stakeholders; RFID hardware manufacturers, software developers, and SIs should ensure this technology continues to see a positive image among end users by ensuring all products developed are built around a solid platform of standards.This will enable RFID continues to grow not only today but ensure long term sustainability of this technology. Additionally, as much as the potential benefits reaped through an RFID deployment seem hard to ignore, these RFID stakeholders will need to ensure every proposed deployment has a strong business case to it. RFID is not a silver bullet to solve every problem or inefficiency found in the enterprise, and likewise companies involved in this technology need to continuously educate end users on the capabilities of RFID and study if the end user will stand to gain from a return on investment (ROI) perspective after implementation. 12
  12. 12. Issues of over hyping RFIDs potential to end users which ultimately portrays a negative image to many potential end users was common in the initial phase of deployments in the late 1990s and early 2000s, when this technology begun attracting greater interest for commercial use. However, it is encouraging to know many of the market participants have disclosed that they have advised their clients of other alternative tracking solutions such as barcodes if they felt the end user would not stand to gain ROI by deploying RFID. RFID is expected to eventually have a huge impact on the daily lives of humans as it becomes increasingly more ubiquitous supporting a myriad of applications. However, RFID stakeholders have a tremendous responsibility in ensuring this technology is able to overcome certain issues related to standards and is able meet to specific needs of end users whilst ensuring a sustainable technology for the long term. This white paper is extracted from the full research service titled “Market Insight: RFID Value Chain Analysis in APAC”. This study is available through the Automatic Identification and Security Subscription & Growth Partnership Service, which includes research services in the following markets: RFID, Security, and Biometrics. All research services included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. Frost & Sullivan Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com For more information, contact Donna Jeremiah at tel (60) 3 6204 5832 or e-mail djeremiah@frost.com. 13