Exploring the Growth and Market Breakdown of Passive RFID: A Comprehensive Analysis from IDTechEx

Estimated reading time: 4 minutes

The RFID industry is expected to maintain its growth trajectory, with IDTechEx forecasting a market value of US$14 billion in 2023, up from US$12.8 billion in 2022. This market value encompasses various RFID form factors, including labels, cards, fobs, and tags, as well as scanners, software, and services for both active and passive RFID technologies. Among these, the 'Passive RFID Tags' segment stands out as the largest, comprising more than half of the total RFID market. This article will provide a comprehensive analysis of the passive RFID market, focusing specifically on the UHF and HF segments. We will delve into a detailed market breakdown for each segment and explore the key drivers and momentum behind their growth.

The UHF RFID market is predominantly driven by the retail apparel sector, which accounts for 64% of the market share by tag volume and 72% of the market share by value. While nearly 24 billion RFID labels are expected to be used in retail apparel tagging by 2023, the total addressable market for retail apparel alone is believed to be around 80 billion tags per year, indicating ample growth opportunities. The maturity of the ecosystem and the availability of solution providers in the retail apparel sector have been crucial in the successful adoption of RFID technology. Low cost, enabling infrastructure, and other advantages, such as improved stock monitoring, better customer service, and access to new marketing information, have also contributed to the widespread adoption of UHF RFID technology in retail apparel applications. Despite the dominance of retail apparel, other retail sectors, such as electronics, soft furnishings, and home appliances, are also expected to show strong growth in RFID tagging. Walmart's mandate has been a significant driving factor in this regard.

While other industries have been slower (compared to tagging retail apparel) in adopting RFID technology, growth is anticipated in the supply chain and logistics industry, which accounts for 22% of the market share by tag volume and 14% of the market share by market value. The pandemic has also accelerated the adoption of UHF RFID technology, with increasing digitalization across various industries and continued reduction in tag costs contributing to the growth of the UHF RFID market.

In conclusion, the UHF RFID market is poised to expand in the coming years, fueled by various factors, including the pandemic, cost reduction, and lighthouse projects demonstrating the potential of RFID technology in improving operational efficiency and productivity. However, it is worth noting that the UHF reader network is still primarily a business tool, with the cost of UHF reader smartphones targeted toward industry use rather than consumers.

The HF RFID technology is well-established for secure access, transit applications, and payments. In 2023, it is estimated that 5.1 billion HF tags will be sold, equivalent to a market value of 5.2 billion US dollars. The HF market value is larger than the UHF market value, despite the smaller tag volume, due to the higher HF tag average selling price (ASP). Contactless cards/fobs are dominating the HF market, but it is expected to decline in the medium term as emerging digital methods such as mobile payments and QR codes gain traction rapidly. The second largest market for HF tags by value is the passport sector. Although the total tag volume in this sector is not as high, the ASP is high, resulting in higher market value.

NFC applications beyond payments will continue to grow to several hundred million labels in 2023. However, most are still relatively low-volume deployments across many projects, such as Bluetooth pairing, gaming, and smart packaging. Smart packaging is believed to have the highest volume opportunity in this sector, with over 1 billion units per year. However, no NFC provider has yet demonstrated a strong enough payback or value for mass deployment of NFC on smart packaging at current NFC label prices. Big brands suggest that NFC labels need to cost less than 1 US cent for them to be widely deployed on packaging, but the current price point is around 6 US cents, indicating a long way to go. Flexible integrated circuits and new technologies may help to drive the price down in the longer term. IDTechEx continues to monitor the R&D development as well as the scaling opportunities of the companies that are developing innovative technology to drive down the cost.

Overall, the RFID market is expanding, but it faces various obstacles. The article outlines the effects of global supply chain problems and macroeconomic conditions. In 2021, global supply chain issues arose and have not been fully resolved. However, the negative consequences have reduced since then. IDTechEx conducted primary interviews and found that most firms believe the situation will improve by early next year. The economic downturn has resulted in some industries reducing their purchases of RFID tags, especially in some initiative projects, which could potentially slow down the market's growth rate. In addition to these two, there are some other ongoing challenges that the RFID industry must continue to address to ensure sustainable growth, including better education, regulation, ecosystem establishment, cost reduction, etc.