Government and manufacturing sectors spur growth in RFID adoption in Malaysia, says IDC

01 August, 2006

Kuala Lumpur, August 01, 2006 – According to IDC's latest research on radio frequency identification (RFID), local commercial spending on RFID in Malaysia is estimated to grow from US$2.45 million in 2005 to almost US$20.94 million in 2010, with a compound annual growth rate (CAGR) of 45.84%.

Entitled Malaysia RFID 2006-2010 Forecast and Analysis, this study analyzes the state of the market for RFID solutions implementation in Malaysia, charts its history and development, and examines expectations for the future. The study also presents an end user's RFID case study and write-up on key players that offer RFID solutions in Malaysia.

Based on the study, hardware makes up the largest portion of the total commercial RFID spending in 2005 at 60%, driven primarily by the purchases of readers and tags, followed by software and services which take up the remaining 40% of the RFID spending. "Based on the IDC's definitions, software revenue captured in this forecast is limited to RFID middleware, reader firmware, and additional enterprise middleware directly related to integrating data from the RFID layer with the enterprise application layer. It does not include spending on enterprise applications and upgrades beyond middleware to accommodate and take advantage of the influx of data from RFID tags. Services included in this forecast are business process consulting, installation, systems integration, and ongoing support services. Software and services would pose more growth potential, with CAGR of 48% and 51% respectively," said Katherine Chan, Senior Analyst, Services Research, IDC Malaysia.

Today, government is one of the key vertical markets in Malaysia that has opted for RFID adoption. The Ministry of Domestic Trade and Consumer Affairs, the Ministry of Agriculture, and the Malaysia Prisons Department are some government agencies that have adopted RFID solutions. Several other government agencies are also in the process of evaluating business case for implementing RFID technology. Furthermore, few of the public and universities' libraries have also installed RFID technology to track high volume of books and periodicals within the premises. In the private sector, the manufacturing industry is among the major RFID users. It is noted that the sales cycle for manufacturing RFID solution is longer as it involves complexities in integrating the RFID solution and processes in its existing solutions and processes. Lastly, customers would only decide to invest on an RFID tracking system if and only if the items that require tagging are worth much more than the deployment cost of RFID.

"The majority of spending during the forecast years will occur among public sectors (e.g., education and government ministries), manufacturing, financial services and healthcare sectors. RFID will be deployed in waves as early adopters move along the learning curve and tag and reader costs come down over the course of the forecast. Dropping prices mean that early adopters will expand deployments as new companies begin spending on RFID," adds Ms. Chan.

Despite the recent media noise and government initiatives, there is a long way to go before mass-market adoption of the RFID technology occurs in Malaysia. "There are a lot of challenges in promoting RFID deployment because it ultimately deals with changing the way company does business. High initial outlay, the lack of universal RFID standards and awareness, and the competition from barcode system are some challenges that solution providers will face in the process of promoting RFID implementation," says Ms. Chan.

For more information about purchasing this research, please contact Hazmi Yusof at +603-2169-7522 or hyusof@idc.com; or Stephen Chong at +603-2169-7521 or ckchong@idc.com

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