2004 will be a crucial year for radio frequency identification (RFID), with large-scale deployments bringing the controversial technology into the mainstream.
Manufacturers and distributors of RFID are "scrambling" to meet the requirements of high-profile deployments from organisations including Wal-Mart and the US Department of Defence, according to IDC.
The analyst group predicts that RFID spending for the US retail supply chain will grow from $91.5m (£50m) in 2003 to nearly $1.3bn in 2008.
But once initial deployments are complete, RFID spending will level off as the industry prepares for the next wave: item-level tagging.
IDC's US vertical industry research programme manager, Christopher Boone, said RFID will be deployed in "fits and bursts" as manufacturers and retailers move along the learning curve and as tag and reader costs come down.
"Although many suppliers and distributors are currently unfamiliar with RFID technology, they will soon need to comply at some level with customer demands for RFID tagging of cases and pallets," he said.
The IDC study, US RFID for the Retail Supply Chain Spending Forecast and Analysis, 2003-2008 expects hardware purchases to dominate RFID spending over the forecast period, reaching $875m in 2007.
Most of this spending will occur among manufacturers and their distribution partners, who will bear the burden of purchasing RFID tags on top of the necessary infrastructure and systems integration.
IDC predicts that RFID-related services will grow quickly at first, approaching $270m in 2007, but that growth will slow after 2005.
Meanwhile, software spending will accelerate in the second half of the forecast period as more and more companies feel the need for RFID middleware.
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