The market for industrial automatic data capture (ADC) systems grew more than 9% between 2005 and 2006, topping $17.75 billion in sales last year, according to Drew Nathanson, who directs ADC research at VDC (508-653-9000), a Massachusetts-based research firm.

The ADC market includes handheld and stationary bar code scanning and imaging devices, bar code printers, consumables like bar code labels, RFID solutions for the supply chain, and ruggedized mobile computing solutions for the factory and warehouse.

That relatively robust growth comes on the heels of an unexpected slowdown in 2005, when many companies reigned in spending. But 2006’s growth was more than just the result of a loosening of the purse strings. For most market segments, VDC is projecting compound annual growth rates of 6.6% to 10% through 2011; the RFID market is expected to grow 31% per year for the next five years.

Motorola (800-722-6234), formerly Symbol Technologies, led Modern’s annual list of top ADC suppliers with an estimated $1.9 billion in revenue. Thanks to mergers and acquisitions, the other four companies in the top five surpassed the $750 million mark in 2006 sales, including Intermec Technologies (800-755-5505) with nearly $850 million, Danaher (202-828-0850) with $843 million, Dover Corporation (212-922-1640) with an estimated $800 million and Zebra Technologies (847-634-6700) with nearly $760 million.

Mergers account for some of the growth among the leaders. But the overall market is being driven by the ever-increasing need for real-time information from across the supply chain, regardless of how that information is collected.

“One of the most important trends today is that data collection platforms have opened up to the point that they are totally ADC agnostic,” Nathanson says. “It doesn’t matter whether the data is in a bar code, an RFID tag or collected through a voice recognition system. Today’s systems can take that data from any source and feed it back to your enterprise applications.”

That is especially true in the industrial RFID market, adds Michael J. Liard, research director for RFID & Contactless at ABI Research (516-624-2500). “RFID and other ADC technologies are penetrating new markets,” says Liard. “Plus it’s not just Tier I any longer. Tier II and Tier III are also adopting ADC technologies to streamline their business processes.”

This is Modern’s sixth-annual look at the leading manufacturers of ADC hardware and solutions. To make our list, companies must sell in North America, though the chart includes worldwide revenues. Modern does not include resellers, systems integrators or other companies that do not manufacture ADC hardware. Since our readers are primarily focused on supply chain applications, we do not include companies whose primary focus is the retail checkout counter or non-industrial settings, like hospitals, libraries or resorts.

Because the industry includes public and private companies, the list is compiled from annual reports, SEC filings and estimates from industry analysts like VDC and ABI Research.

Each of the six segments tracked by VDC showed strong growth last year, according to Nathanson. The market for stationary scanners, for instance, reached $840.3 million and is projected to grow 6.6% annually through 2011. The handheld scanner market was $809.2 million and is projected to grow 8% annually.

The market for bar code printers topped $1.87 billion last year and is expected to grow 8.8% annually while the market for consumables topped $7 billion and is growing at a 10.1% annual rate.

Based on prior year estimates, the market for ruggedized mobile computers totaled more than $4.75 billion last year, after growing at an annualized 9% the year before.

Finally, the industrial RFID market, which includes both active and passive applications, topped $2.4 billion and is growing at a 31% rate. While the market for passive EPC RFID hardware used to comply with the Wal-Mart and Department of Defense mandates is growing at an impressive 42.2% clip, total hardware sales in 2006 were just $135 million. While it is the segment with the most potential for growth, it is also the smallest today.

As the market picks up speed, several trends are emerging both in the market and in the way end users are buying and using ADC systems.

Mergers continue: Market consolidation continued in 2006. The biggest news was the $3.8 billion acquisition of Symbol Technologies by Motorola. But that wasn’t the only deal: Last year Dover acquired Markem (800-322-0057); PSC was acquired by Datalogic (800-695-5700), merging two companies that traditionally were in the top 10 in their categories; Zebra acquired WhereNet (800-490-2261), a provider of real-time locating solutions; Sato (704-644-1650) acquired a line of printers from Checkpoint Systems (800-257-5540); and label maker Avery Dennison (626-304-2000) acquired Paxar (800-337-2927). In other news, this is the last year Denso-ID (No. 14, est. $125 million) will be on the list since the company is pulling out of the North American market as of the end of September.

A convergence of technologies: Until recently, implementing an ADC solution was an either/or proposition: You either used this type of solution or you used that type of solution. In part, that was a matter of cost, and in part it was driven by the fact that solution providers often used their own proprietary systems. Today, ADC providers are embracing open standards, whether they provide bar code, voice or RFID solutions. The result is a convergence of technologies that allows an end user to marry a business process to the most appropriate technology, or a combination of technologies. “We’re seeing the convergence of bar code, voice, RFID and sensing and monitoring technologies to give us a broader view of our processes and supply chains,” says Liard.

More functionality at a lower cost: Anyone who’s bought a new TV lately knows that in consumer electronics, we get more functionality at a lower cost than ever before. That same phenomenon is beginning to take place in the ADC market. For instance, the market for high performance printers is being eroded by lower-cost printers in the mid-tier. “We’ve had several users tell us they’d rather buy three mid-tier printers instead of one high-performance machine,” says Nathanson. “They can distribute the printers and get almost as much functionality.” Meanwhile, cheaper mid-tier printers are losing market share to improved entry-level printers. “Historically, the sub-$200 printers weren’t rugged enough for an industrial setting,” says Nathanson. “That’s changing.”

RFID adoption continues: The RFID market continues to grow, even if the mandate-driven adoption in the retail supply chain is slower than anticipated. “Right now, RFID is finding new application areas for success,” says Liard. “We’re seeing applications using passive and active technologies where the value proposition isn’t just enhanced visibility, but enhanced security for products like jewelry and enhanced conditioning and status monitoring with sensing devices.” But it’s not just the adoption of RFID, adds Nathanson. “We’re also seeing technologies like 2D bar codes growing at around 20% for applications like direct part marking (DPM) in government, automotive and the oil and gas industries.”