To scan the headlines, you would think that RFID is driving the train for the automatic data capture (ADC) industry.

The reality is quite different. While the world's top suppliers of ADC solutions for the industrial market posted some of the strongest gains in recent years in 2004, the growth came from traditional technology solutions, according to Bennett Mason and Mike Liard of Venture Development Corp. (508-653-9000), a research group that focuses on the ADC industry. Those include one- and two-dimensional bar code scanning and printing, wireless communications, mobile computing and camera-based image capture systems.

The perfect example may be the market for hand-held and stationary bar code readers, which grew by more than 15% to $1.5 billion last year, according to Mason, VDC's senior AIDC research analyst. "That's a seemingly mature industry that we expect to continue to grow about 7% a year," he adds.

Factor in printers and the bar code industry totaled $3.2 billion. By comparison, revenues for RFID applications related to supply chain management totaled just $70 million. That's triple what it was in 2003, but still a fraction of the overall ADC industry.

"RFID is not yet the threat to traditional solutions that people thought it would be because the price points aren't there," says Mason. "That's leading to growth in bar code and mobile computing applications as well as emerging markets."

Mason says growth came from three areas:

• Traditional sectors like transportation, distribution, manufacturing and retail opened their checkbooks and upgraded their systems, especially around 2-D bar codes and image capture systems.
• China also contributed to growth, as that country continued to adopt ADC technologies to improve its supply chains.
• Finally, data capture technology is moving into new areas, especially health care, commercial services and government applications.

While the industry posted strong gains last year, the spoils went to the same leaders that have dominated our list from the start.

Symbol Technologies (866-416-8545) remains number one, with $1.73 billion, up from $1.53 billion the prior year.

Intermec (800-934-3163) is once again in the number two position, with an estimated $811 million, up sharply from $706 the prior year.

Danaher (202-828-0850), which includes Accu-Sort, Videojet, and Willett, posted $666 million in sales, just a few million ahead of Zebra Technologies (800-423-0422) with $663 million.

Privately-held Markem (800-356-2375) is our newest addition, at number 7 with more than $300 million. Long a leader in laser coders, Markem has made a significant push into RFID solutions for manufacturing in the last year, according to Mike Liard, VDC's practice leader for AIDC and RFID.

There were only a handful of mergers and acquisitions in the industry last year. The most notable was Symbol's purchase of RFID tag maker Matrics, marking Symbol's entry into the RFID consumables market.

That was followed by two more recent purchases.

DataMax (407-578-8007), number 17 on last year's list, was bought by Dover Technologies, a subsidiary of the Dover Corp. which also owns Imaje (770-421-7700), number 6 on last year's list. The combined companies account for more than $383 million in ADC sales.

This past March, Datalogic (859-689-7000), number 11 with $192.7 million, acquired Informatics, Inc. (972-881-5500), a Texas-based bar code and RFID company, to expand its US presence.

There was also one notable exit, as middleware provider GenuOne (617-226-3000) closed its RFID supply chain practice.

Liard believes there may be more shakeout to come in the RFID space.

RFID may not have taken off just yet, but there were still notable achievements last year that will promote the adoption of the technology, says Liard.

One was the ratification of the Gen II specification. "That set the tone for going forward," Liard says. "Vendors, integrators and software providers now have an industry standard they can develop around."

Still, the technology remains one of the challenges to the adoption of passive RFID solutions for the supply chain. "Each application and each location brings a unique set of challenges to the table and that's difficult," says Liard. "You can't create a cookie-cutter solution like you can with bar codes or a warehouse management system."

The focus on item-level tracking in the supply chain also means that many users are overlooking other applications that may deliver great results today. "There have been some really great wins in asset management, especially around real-time location systems," says Liard. "There, the costs are justified and they're delivering an ROI. But that message is getting lost while we focus on the Holy Grail of item level tracking."

Going forward, Liard believes end users will move beyond looking at the price of tags to asking what should an RFID system look like and how should it act with a broader network. Then RFID applications will deliver value.