Supplier Locations Drive Regional Shipments in the RFID Transponder IC Market

Recent research published by Venture Development Corporation (VDC) reveals the global market for RFID transponder ICs reached approximately $76 million in 2002. According to the Global Markets and Applications for RFID Equipment and Contactless Smartcard ICs, 4th Edition, RFID transponder IC revenue represents approximately 16% of the total finished transponder market. Meanwhile, transponder IC unit shipments totaled more than 295 million in 2002. VDC expects the global market for RFID transponder ICs to grow by slightly more than 27% (compounded annually) in terms of supplier revenues and by more than 36% annually in terms of unit shipments through 2007.

Global Shipments of RFID Transponder ICs Segmented by Regional Market (Millions of Dollars) are:

Americas: 36.6%

EMEA: 46.9%

Asia-Pacific: 16.5%

Three trends stand out as primary forces shaping regional trends in RFID IC fabrication, integration, sourcing and support:

• Many RFID IC producers are investigating and investing in fabrication facilities and partnerships with local fabricators. Shifting production to Asia is generally seen as 'inevitable' and as the best way to reduce costs in response to market demand for lower IC and tag prices. In this context, IC suppliers see this shift as a natural evolution in their business models. This trend is expected to shift IC sourcing patterns and RFID market influence toward Asia during the next few years;

• Regional markets continue to develop at different rates, around different frequencies, and on different standards. This fragmentation is making it difficult for RFID system and IC vendors to establish strong presence in multiple regional markets – unless those markets share a number of common characteristics. Market requirements are expected to remain highly divergent for a number of years. This trend is expected to inhibit faster migration of production to Asia, as significant cost savings associated with high volume production will remain elusive for all but a few IC products;

• The most successful RFID IC and system vendor are likely to maintain significant local presence, yet increase their dependence on Asian sources. Few companies will have the scale or influence to manage a local-market focused solutions business and a centralized IC production capability. However, if standards consolidate and codify and markets continue to mature, it will be increasingly possible for suppliers to meet global cost and local service requirements.

VDC is a technology market research and strategy firm that specializes in industrial and commercial electronics, identification technologies, computing, communications, software, and power systems markets.

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