RFID 2014 State of the Industry

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1 RFID 2014 State of the Industry Bill McBeath, Chief Research Officer, ChainLink Research September 9, 2014 Dramatically improving supply chain performance through real-world research

2 Agenda Market Observations Market Growth RFID Value Chain Structure Innovation, Current and Future Implications for End Users Implications for Investors What's on the RFID Research agenda? ChainLink Research 2014; All Rights Reserved Slide 2

4 Some Market Observations Retail RFID is in the tornado Next Killer App is TBD IoT is Huge Catalyst for RFID Growth Out-dated Views of RFID Persist Moving from general-purpose to application-specific readers Alternatives to handheld readers for retail are coming Cloud + RFID increasing in importance Vertical solution providers are making money. Horizontal VARs struggling. ChainLink Research 2014; All Rights Reserved Slide 4

6 UHF Passive RFID Perspective 4.4B tags/y Auto-ID Center Established Class 0 Available (Matrix) Class 1 available (Alien) Class 1 Gen 2 ratified by EPCGlobal ISO c ratified Intel launches 1 st UHF RFID reader chip Impinj buys Intel Rdr chip GP reader prices drop GS1 & EPCGlobal merge MCS chipbased serialization pact Gen2V2 ratified by GS Marks and Spencer inventory pilot Alien announces 500M unit, 5 Squiggle tag order from Gillette Walmart and DoD supply chain mandates begin Walmart pulls back supply chain mandate Asian inlay capacity ramps up American Apparel reports 14% revenue uplift in field test Walmart HH apparel inventory begins Macys announces accelerated RFID plans American Apparel fixed infrastructure pilot M&S to tag 100% of inventory 400M tags Symbol Motorola Zebra buys Checkpoint Honeywell buys buys Motorola buys Oat buys Matrics Symbol Solutions Systems; Intermec; for Tyco buys Smartrac SML buys $230M Vue buys UPM Xterprise Zara 500M tags/y 150 Billion RFID Tags Will be Deployed in this Decade announces 2000-store rollout ChainLink Research 2014; All Rights Reserved Slide 6

7 RFID Unit Forecast 40,000 M 35,000 M Six Year Passive RFID Forecast U n i t s 30,000 M 25,000 M 20,000 M 15,000 M 10,000 M 5,000 M Passive Tags w/ Sensors UHF BAP μwave Passive Tags UHF Passive Tags HF Passive Tags LF Passive Tags 0 M Years ChainLink Research 2014; All Rights Reserved Slide 7

Falling Prices, Purpose-driven Design Improve UHF Reader Price-Performance Special-purpose readers Integration reduces reader BOMs Eroding

9 Falling Prices, Purpose-driven Design Improve UHF Reader Price-Performance Special-purpose readers Integration reduces reader BOMs Eroding reader chip ASPs (~50%/5yrs) Expanding formfactor and price/performance diversity -9% CAGR ChainLink Research 2014; All Rights Reserved Slide 9

10 Embedded RFID to Swell Number of UHF-RFID Enabled Devices thousands Embedded RFID (IoT-related) 80% CAGR Fixed infrastructure deployment 49% CAGR Growing diversity of purpose-designed readers 30% CAGR Mainly generalpurpose readers, some handhelds ChainLink Research 2014; All Rights Reserved Slide 10

12 UHF RFID Ecosystem Structure Tag Chip Vendor (Alien, EM Marin, Impinj, Hitachi, NXP, Tego) Inlay Contract Manufacturer (Arizon, Shang Yang) Inlay Vendor (Alien, Avery, Invengo, Shanghai Boing, SMT, Trace) Hard tag Vendor (Confidex, Datamars, HID, OmniID, Tyco, Xerafy) Converter-Service Bureau (Avery, CCL, Data2, George Schmitt, Kennedy, MPI, Print-o-Tape, Repacorp, r-pac, RR Donnelly, SML, Top Flight, Weber) Vertical Solution Provider (Checkpoint, FileTrail, Lyngsoe, Seeonic, Stanley B&D (AeroScout), Terso, Tyco) Reader Chip Vendor (AMS, Impinj, PHYCHIPS) Hardware Vendor (Alien, ATID, AWID, Caen, CSL, Deister, Kathrein, Motorola, Honeywell, Impinj, Times-7, TSL, Siemens) Horizontal AIDC VAR (Barcoding Inc., Fluensee, GlobeRanger/Fujitsu, RFID GS) RFID Software Vendor (InSync, Nofilis, Seagull) End Users IoT Platform Software and/or Service Provider (Axeda, Digi, Gurtam, ILS Technology, InSync, Modus, Omnilink, Spireon, ThingWorx Transcends, Ubidots, WebNMS, Zebra Zatar) Example companies are meant to be illustrative, not comprehensive Enterprise Software (with RFID Support) (IBM-WebSphere, Microsoft-BizTalk-RFID, Oracle-Enterprise 1, SAP-AII) General System Integrator (Accenture, CACI, HP, IBM, ITT, Oracle, SAIC, SRA) ChainLink Research 2014; All Rights Reserved Slide 12

Innovation not Slowing Total applied tag cost Encoding speed and reliability Die attach innovation Antenna/substrate innovation Cloud solutions Over 60% of vendors at RFID J Live had SaaS IoT

14 Innovation not Slowing Total applied tag cost Encoding speed and reliability Die attach innovation Antenna/substrate innovation Cloud solutions Over 60% of vendors at RFID J Live had SaaS IoT platforms More sensitive chips and tags Enables smaller tags, more applications Shifts performance burden to readers Embedded RFID RFID in the IoT When RFID is just a feature ChainLink Research 2014; All Rights Reserved Slide 14

15 Innovations to Watch For Gen2V2 Standard ratified, products in development Cryptographic tag authentication (small cost adder) Extensive memory security and access options (large cost adder) Fixed infrastructure readers in the ceiling Smarter readers with steerable beams Lots of dumb readers? Drones? (Some surprising potential there) Data analytics Item intelligence Activity as a leading indicator of sales May require fixed infrastructure for full realization RFID as a Service (RaaS) Financial innovation can flatten capital investment hurdle ChainLink Research 2014; All Rights Reserved Slide 15

17 Implications for Retail ROI is very strong for certain categories High mix complexity Solid business case can be made today Don t underestimate rollout efforts Associate training is critical to achieve high inventory accuracy Don t expect suppliers to tag (unless you are private label) Supply chain implementations in some private label chains Will suppliers reach a tipping point? % of total items being tagged Ability to realize an ROI (chargeback reduction) Industry-wide outreach efforts brewing ChainLink Research 2014; All Rights Reserved Slide 17

18 Implications for Manufacturing Proven use cases abound Asset tracking containers, raw materials and components, finished goods, tools Visual RFID replacing paper Mass customization Feeder line synchronization Item-level process control RFID readers embedded in production equipment Majority are closed-loop today looking at open-loop applications Manufacturers putting RFID in the products Adding intelligence and functionality to products Protecting brand Ensure authentic parts/supplies used ChainLink Research 2014; All Rights Reserved Slide 18

20 What is the Internet of Things? Broadband internet Ubiquitous, low-cost cellular & WiFi Short range wireless networking Cheap, standardized electronics RFID IoT 25 years of convergent evolution of technologies and markets Lightweight comms protocols Advanced sensors RFID is Part of the Internet of Things ChainLink Research 2014; All Rights Reserved Slide 20

RFID is Part of the Internet of Things IP

Sensors (tags) Gateway (Reader) ChainLink

22 Corporate Titans are Investing Billions in IoT R&D and Marketing Intel Firm Google Microsoft Cisco SAP IBM GE In every case RFID is part of the story Activity Chips and gateway product roadmaps for IoT. Partnerships to build a whole product for IoT apps. RAIN Alliance founding member. Massive acquisition program including robotics, AI and smart home products. Wearables. Stated vision to build a real life internet. Rumored IoT platform development. RAIN Alliance founding member. Renaming Embedded Team IoT Team and staffing up. Expanding focus from industrial to consumer. Integrating embedded with Azure. Rumored major software IoT platform development. Wearables R&D. Biz Talk Server/RFID Promotion of IoE ( everything ) thought leadership messaging. Network product development including IoT gateways. RFID data center deployment Investment in development of real-time, contextual data analytics for process control. Thought leadership messaging. AII RFID platform Watson AI, sensor business unit, M2M system integration. Lightweight communications protocol development. WebSphere RFID support Allocated $1B for Industrial Internet targeting aviation, healthcare, rail, power, oil & gas. RFID solutions for healthcare, oil and gas, others. RAIN: RAdio-frequency Identification Alliance Source: Company web sites, interviews, public news sources ChainLink Research 2014; All Rights Reserved Slide 22

23 Signposts for Investors 3. Active innovation and re-investment 2. Exponential growth in retail Internet of Things 5. Compelling upward momentum 4. A Coordinated ecosystem 1. A Broadly growing base in global healthcare, banking, government, biosciences, oil & gas, aerospace, automotive, IT and more ChainLink Research 2014; All Rights Reserved Slide 23

25 The Challenge for RFID Solution Providers What is the Market? Where will the growth be? Which segment should we focus on? What does it take to enter that market segment? Is my solution complete? Who are the buyers? What is the Value? ChainLink Research 2014; All Rights Reserved Slide 25

26 The Challenge for End Users What are our current business drivers, challenges and goals What should our roadmap look like to achieve these goals? Who are the providers who can deliver the Value ChainLink Research 2014; All Rights Reserved Slide 26

27 What s on our Agenda Webinar Education Series on RFID Markets and Solutions Internet of Things research: What is it? Creating a framework for IoT landscape. Platforms Applications RFID research: Fixed Reader Infrastructure Economics for Retail RFID Market Growth Passive and Active Markets Industry/use-case specific market growth and solutions: Retail Healthcare Manufacturing Logistics & Transportation Oil and Gas ChainLink Research 2014; All Rights Reserved Slide 27

The RAIN RFID Market Raghu Das, CEO, IDTechEx

The RAIN RFID Market Raghu Das, CEO, IDTechEx r.das@idtechex.com 1 IDTechEx: Brief Overview of RFID Capability IDTechEx is an independent technology and market analyst company IDTechEx has covered the