NEW US Industry Study R with forecasts to 2007 & 2012 Freedonia

RFID & Other Study # 1725 November 2003 Smart $3900

Demand to grow changing labels for promo- 14+% per year Retail & Smart Sales by Application tions and limited runs, both Distribution (10.7 billion units, 2002) thermochromatics and through 2007 79% other interactive label types US smart labels demand is are beginning to find projected to expand more broader use. For example, than 14 percent per annum growth opportunities exist through 2007, approaching for time-temperature 11 billion units valued at indicators and pharmaceu- $460 million. Smart labels tical compliance labels. will penetrate both existing and new labeling applica- Government/ Market leaders Institutional tions, based on their ability 14% Given that EAS labels to add value to labels’ basic Services & currently dominate the identification function along Other 7% Photo courtesy of Texas Instruments Inc. Instruments Photo courtesy of Texas market, the US smart label various parameters. These market leaders are the range from enhancing the labeling of crates and three major suppliers of security and brand building EAS anti-shoplifting , airline baggage, EAS systems — Tyco (via to improving customer library books, mail and labels to retain near Sensormatic Electronics), service and merchandising packages, and military term dominance Checkpoint Systems and efficiency across a broad assets. In such applica- 3M — which jointly meet range of industries. Basic electronic article tions, the value of the some 80 percent of de- surveillance (EAS) anti- mand in unit terms. Over tagged item and/or the shoplifting labels will RFID market will potential savings to be had the longer term, as the continue to dominate sales RFID segment develops, almost double each through improved service into the next decade, and efficiency more than these firms (all of which year through 2007 based on their established have diversified into RFID compensate for the still record as a successful By far the best gains are smart labels) will be joined high cost of most RFID security modality and expected in the nascent by major players in that systems. Over the longer widespread use in the retail RFID label segment, where segment, such as Texas term, falling prices, econo- sector. While advances will the market size will nearly Instruments and TAGSYS. mies of scale, technologi- slow in line with market double each year off a cal advances and the maturity, label sales will slender 2002 base. Intro- establishment of uniform continue to benefit from Study coverage duced in the late 1990s, RFID communications falling unit costs, source Details on these and other RFID smart labels hold the standards (which will allow tagging initiatives and the findings are contained in a potential to revolutionize open sourcing of system opening of apparel, or “soft new Freedonia study, RFID supply chain management components and inter- goods,” markets, based on & Other Smart Labels, and operations communicability between the transition from EAS available for $3900. It pro- across a range of indus- tags from different ven- hard tags to labels. vides historic data to 2002 tries, and someday even to dors) will support the plus forecasts to 2007 and replace the ubiquitous bar development of additional Opportunities will also be 2012 by technology and code on trillions of fast market segments. How- favorable for interactive application. It also presents moving consumer goods. ever, consumer privacy packaging labels. While market share and profiles concerns will remain a usage has primarily been In the near term, the best 29 US industry participants. major hurdle, especially in limited to items like color opportunities will exist in the key retail segment. Table of contents & sample pages inside; other studies, order information on back Table of Contents/List of Tables & Charts each table includes forecasts through 2007 & 2012

Introduction Low ...... 53 Defense ...... 107 High ...... 54 Table - Defense Smart Label Sales .. 109 EXECUTIVE SUMMARY ...... 1 Ultrahigh ...... 56 Health Care ...... 109 Summary Table ...... 3 Microwave ...... 58 Table - Health Care Power Supply ...... 59 Smart Label Sales ...... 110 MARKET ENVIRONMENT ...... 4 Table - RFID Smart Label Miscellaneous ...... 111 Sales by Power Supply ...... 60 Table - Miscellaneous Government & General ...... 4 Chart - RFID Label Sales Institutional Smart Label Sales .... 112 Macroeconomic Outlook ...... 5 by Power Source, 2002-2012 ...... 60 Services & Other ...... 113 Table - Macroeconomic Environment . 6 Passive ...... 61 Table - Service & Other Smart Label Demographic Trends ...... 7 Active...... 61 Sales by Application ...... 114 Table - Demographic Trends ...... 8 Semi-Active ...... 64 Office & Factory ...... 114 Consumer Income & Spending ...... 8 Intelligence ...... 64 Table - Office & Factory Table - Consumer Income Table - RFID Smart Label Smart Label Sales ...... 115 & Spending Trends ...... 10 Sales by Intelligence ...... 65 Aviation ...... 116 Manufacturing Outlook ...... 10 Chart - RFID Label Sales Table - Aviation Smart Label Sales . 116 Table - Manufacturers’ Shipments .... 11 by Intelligence, 2002-2012 ...... 65 Advantages ...... 117 Durable Goods ...... 12 Programmable ...... 66 Applications ...... 118 Table - Durable Goods Shipments .... 12 Read-Only ...... 67 Package Shipping ...... 119 Nondurable Goods ...... 13 Other Smart Labels ...... 70 Table - Package Shipping Table - Nondurable Goods Shipments14 Table - Other Smart Label Smart Label Sales ...... 121 Retail Sales ...... 14 Sales by Type...... 71 Miscellaneous ...... 121 Table - Retail Sales ...... 17 Electronic Article Surveillance ...... 71 Table - Miscellaneous Business Establishments ...... 17 Source Tagging ...... 73 Smart Label Sales ...... 123 Table - Business Establishments ...... 18 Products ...... 74 Labeling Trends ...... 18 Applications ...... 76 INDUSTRY STRUCTURE...... 124 Table - Label Sales ...... 21 Interactive Packaging ...... 78 General ...... 124 Automatic Identification Trends ...... 21 Thermochromatic Labels ...... 78 Bar Coding Trends ...... 21 Industry Composition ...... 125 Time-Temperature Indicators ...... 80 Market Share ...... 127 Table - World Bar Code Other Interactive Labels ...... 81 Equipment Sales ...... 22 Chart - US Smart Label Market Share, 2002 ...... 128 Competitive Profile ...... 23 APPLICATIONS ...... 84 Packaging Trends ...... 24 Tyco International ...... 129 Table - Packaging Shipments ...... 27 General ...... 84 Checkpoint Systems ...... 129 Electronic Security Trends ...... 27 Table - Smart Label Sales 3M ...... 130 Table - Electronic Security Sales ...... 29 by Application ...... 85 Cooperative Agreements ...... 130 Historical Trends ...... 29 Chart - Smart Label Sales Table - Selected Cooperative Table - 1992-2002 Smart Label Sales 30 by Application, 2002 & 2012 ...... 86 Agreements ...... 132 Chart - Smart Label Historical Trends, Retail & Distribution ...... 87 Mergers & Acquisitions ...... 140 1992-2002...... 31 Table - Retail/Distribution Smart Label Table - Selected Acquisitions Pricing Trends ...... 31 Sales by Application ...... 88 & Divestitures ...... 142 Table - Smart Label Pricing Trends .. 33 Security/Access Control ...... 88 Manufacturing ...... 142 Regulatory Issues ...... 33 Table - Retail Security/Access Control Labels ...... 143 Standards ...... 34 Smart Label Sales ...... 90 Electronic Components ...... 144 Privacy Issues ...... 37 Primary Packaging ...... 90 Marketing ...... 146 Environmental Considerations ...... 38 Table - Primary Packaging World Markets & Foreign Trade ...... 39 Smart Label Sales ...... 91 Company Profiles ...... 147-215 Supply Chain Management ...... 91 RAW MATERIALS ...... 41 Table - Supply Chain Management Smart Label Sales ...... 92 General ...... 41 Advantages ...... 92 Table - Raw Material Demand Recent Developments ...... 93 in Smart Labels ...... 42 Opportunities ...... 94 COMPANY PROFILES Chart - Raw Material Demand Threats ...... 98 in Smart Labels, 2002 ...... 42 Other ...... 99 presented for 32 players Electronic Components ...... 43 Table - Other Retail & Distribution Inks & Coatings ...... 44 Smart Label Sales ...... 100 in the US smart labels Carriers ...... 45 Government & Institutional ...... 101 industry such as Avery Table - Government & Institutional Dennison, Checkpoint TECHNOLOGIES...... 47 Smart Label Sales by Application 102 General ...... 47 Library ...... 102 Systems, Paxar, Sentry Table - Smart Label Sales by Type .... 49 Table - Library Smart Label Technology, 3M and Chart - Smart Label Sales Sales by Type...... 103 Tyco International by Type, 1992-2012 ...... 49 EAS...... 103 RFID ...... 50 RFID ...... 103 Frequency ...... 51 Vendors ...... 104 Table - RFID Smart Label Other ...... 105 Sales by Frequency ...... 52 Postal ...... 105 Chart - RFID Label Sales Table - Postal Smart Label Sales ..... 107 by Frequency, 2002-2012 ...... 53 Study #1725 - “RFID APPLICATIONS & Other Smart Labels” TABLE V-2

RETAIL & DISTRIBUTION SMART LABEL SALES BY APPLICATION (million units) Freedonia’s methods involve: Item 1992 1997 2002 2007 2012 Retail Sales (bil 1996$) 2024 2612 3510 4160 4860 Manufacturers’ Shpts (bil 1996$) 3094SAMPLE 3742 3715 TABLE 4430 5050 • Establishing consistent economic and labels/000$ sales 0.5 0.9 1.3 2.0 3.8 market forecasts labels/000$ shpts 0.4Presents 0.6 1.2historical 1.9 3.6 Retail & Distrib Smart Label Sales 1107data 2342 to 44822002 8420 plus 18380 Security/Access Control 1037 2206 4226 6900 9780 Primary PackagingFreedonia 63 122 225 forecasts 450 855 • Using input/output ratios, flow charts and Distribution/SCM* † neg 5 1010 7600 other economic methods to quantify data Other 7through 14 the 26 years 60 145 *supply chain management Source: The2007 Freedonia and Group, 2012 Inc. • Employing in-house analysts who meet Security/Access Control stringent quality standards Demand for smart labels used in retail security and access control appli- cations is projected to rise over ten percent annually to 6.9 billion units in 2007. The primary products covered Datahere are EASsupported labels used for with retail security, • Interviewing key industry participants, whether they are installed at the retail,the distributionaid of centerover or 60manufacturers (i.e., experts and end-users source) level. Advances will be based on such tags’proven cost effectiveness in reducing retail shrinkage, both externaltables (i.e., andshoplifting) charts and internal (i.e., employee theft). Gains will be propelled by the penetration of new markets and • Researching a proprietary database that applications, as well as by the trend toward tagging larger volumes of products includes trade publications, government as prices fall and source tagging initiatives are more widely adopted. reports and corporate literature Still, retail security represents the most mature segment of the smart label market, and is expected to fall from 70 percent of total unit sales in 2002 to less

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TECHNOLOGIES

RFID Demand for RFID smart labels is projected to more than double annually off a slim 2002 base, rising to 1.8 billion units in 2007. By 2012, demand will increase a further ten-fold, reaching 17.5 billion units. Following their com- COMPANY PROFILES mercializationSAMPLE in the late 1990s, PAGE RFID labels have begun to penetrate a broad range of applications, where their ability to provide a low cost means of data presented for 29 players in the storage and communications promises to revolutionize applications from supply chain and inventory management to health care and airline baggage tracking. US industry including Avery A range of industries and institutions have become aware of the potential of Dennison, Checkpoint Systems, smart labels to improve efficiency, lower costs, enhance security and improve Paxar, Sentry Technology, 3M customer service. As a result, dramatic gains are expected, both in extant and emerging uses. and Tyco International

Limiting even further gains will be the still high costs of labels, which has to date limited their use primarily to higher value items, as well as to situations in which labels are reused rather than disposed of. Inventory management at the case or level in closed loop systems is a prime example. The costs of de- This study can help you: ploying label-related infrastructure — readers, scanners, printers, smart shelving units, etc. — also poses a barrier for many potential users. Other hurdles include • Determine your market & sales potential a lack of uniform standards, which limits the ability of competitive systems to interoperate, as well as growing consumer opposition to item level tagging based • Learn more about industry competitors on privacy concerns.

RFID smart labels generally encompass ultra thin RFID tags, or inlays, • Assess new products & technologies embedded in or attached to some sort of flexible, adhesive coated substrate, most commonly or a film. The tags contain integrated circuits (ICs) • Identify firms to merge with or acquire attached to an antenna for wireless radio frequency communication, typically a coil of wires. Data is stored on the IC and transmitted through the antenna. Also • Complement your research & planning covered here for present purposes, although not technically RFID labels, are similarExplanations products which communicate that through electromagnetic or other nonradio • Gather data for presentations means.support RFID labels each can betable’s segmented along various parameters, including transmission frequency, power supply, type of intelligence and format. data and forecasts • Confirm your own internal data

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