A White Paper by Frost & Sullivan 50 Years of Growth,
Innovation and LeadershipAIDC Market in India A Sunrise Sector 2011
Frost & SullivanTABLE OF CONTENTSIntroduction and Overview of
AIDC Market in India
......................................2Emerging Trends for AIDC
Technologies in India
............................................3Frost & Sullivans
Key Findings on AIDC Market
............................................5Market Drivers and
Restraints
........................................................................7Key
Areas in Need of Improvement
................................................................8Outlook
...........................................................................................................10Annexure........................................................................................................11F
R O S T & S U L L I V A NINTRODUCTION & OVERVIEW OF AIDC
MARKET IN
INDIATheEconomyofIndiaisthe10thlargestintheworldbynominalGDPandthefourthlargestbypurchasingpowerparity(PPP).IndiasGDPwitnessedconsistentgrowthratesinexcessof9percentuntil2007.Despitetheglobaleconomicturbulence,IndiacontinuestoremainoneofthehighgrowtheconomiesanditsGDP
is expected to deliver consistent growth in this decade. With a
nominal
GDPof$1.43trillionin2010,IndiaisexpectedtosurpassChinaastheworldsfastestgrowingeconomyby2018andbecomea$3.5trillioneconomyby2020.TheservicessectorcontributedamajorcomponentoftheGDPaccountingfor57.2percentin2010.Industrialand
Agriculturesegmentscontributed28percentand14.6percent,respectively.Followingstrongeconomicreformsfromthepost-independencesocialisteconomy,thecountry'seconomicgrowthprogressedatarapidpace,asfreemarketprincipleswereinitiatedin1991forinternationalcompetition
and foreign investment. Automatic Identification and Data Capture
(AIDC) refers to the methods ofautomatically identifying objects,
collecting data about them, and entering that
datadirectlyintocomputersystems(thatis,withouthumaninvolvement).
Technologiestypically considered part of AIDC include bar codes,
Radio Frequency
Identification(RFID),biometrics,magneticstripes,OpticalCharacterRecognition(OCR),smartcards,
and voice
recognitionFrost&SullivanclassifiesthefollowingtechnologiesundertheambitofAIDC,
namely:1. Smart Cards 2. Radio frequency Identification Device
(RFID) 3.
BiometricsTheAutomaticIdentificationandDataCapturemarketinIndiaisfastemergingasasignificantcontributortowardshelpingorganizationsmanagetheiroperationalefficiencieseffectively.High-endAIDCtechnol
ogi essuchasradi
ofrequencyidentification(RFID),biometricsandsmartcardsarehelpingbothGovernmentandPrivatesectorenterprisesinrealizingtheirobjectives,whetherinsecuritysystems,trackandtracesolutions,orpersonnelidentification.AIDCtechnologiessuchasRFIDhavefoundfavorinSupplyChainManagement(SCM),whichincludesinventorymanagementandlogistics,followedbygovernmentprocurement.Thishasdrivenwidescaleadoptionofsuchtechnologies.
However,challengescontinuetoexistintheformofcontinuedlowlevelsofawarenessabouttheAIDCproduct,highhardwarepricestherebyleadingtoprojectsnotmovingbeyondProof-of-Conceptstage(PoC).Therealsoexistunderlyi
ngsecuri tyconcernsaboutpri vacy.Frost&Sul l i
vanexpectsnewopportunitiestoemerge,pavingthewayforacontinuedfallinhardwareprices,www.frost.com
2011 Frost & Sullivan4F R O S T & S U L L I V A N AIDC
Market in India A Sunrise Sectoremerglng ageLhelr hasradlo 2011
Frost & Sullivan www.frost.com5leading to a faster rate of
adoption amongst industry peers. AIDC technologies areanticipated
to garner momentum between 2010 and 2020, when India is foreseen
towitness massive government spend to help transform the Indian
economy.EMERGING TRENDS FOR AIDC TECHNOLOGIES IN
INDIAAvastmajorityofIndias1.2billionpopulationresidesinvillages.
Thecentralandstate Governments formulate numerous welfare schemes
for the benefit of the
vastruralpopulation.However,challengesintheirimplementationresultinamajorproportionofthebeneficiariesnotavailingthebenefitsofwelfareschemes.
Thiscalls for use of technology to check pilferage in the
distribution system and also
toensurebettertransparencybymaintainingend-useridentitydataontoacentralgovernment
database. AIDC technologies in the form of smart cards and
biometricsarecomingtotherescueofvariousGovernmentprojectsrangingfromUniqueIdentificationAuthorityofIndia(UIDAI)toMahatmaGandhiNationalRuralEmployment
Guarantee Act (MGNREGA) to various Financial Inclusion Schemes.
IndiastelecompenetrationiswitnessingnewhighsintheformofMobileSIMadoptability
in rural areas. Assuming that India will not pass a regulation to
removeinactive SIM cards, the SIM card volumes are to reach 1.5
billion by 2015 from 640million in 2010, which is almost 2-3 times
the subscriber base in the U.S.
TheIndianGovernmentwouldembarkonamassiveinfrastructurespendtohelpbuildworld-classroads,airports,railwaysandportsallofwhichwouldleadtoanenhancedtransportationandlogisticsinfrastructure(forexample,afreightcorridor),
which would propel faster adoption of AIDC technologies such as
RFID.Chart 1: Mega Trend Impact on AIDC Industry in India,
2010-2020F R O S T & S U L L I V A N AIDC Market in India A
Sunrise Sectorwww.frost.com 2011 Frost & Sullivan6APPLICATION
AREAS FOR AIDCAIDC applications in India span various verticals
including
Logistics/Transportation,Government,Automotive,Retail,FinancialServices,ProcessIndustry,Healthcare,etc.Chart
2: Application Areas for AIDC Industry in IndiaForSmartCards,
MobileSIMcardapplicationgarnersthelionssharewiththemost phenomenal
growth coming in from multiple SIM card usage per
subscriberForRFID,primaryconsumersandtheearlymovershavebeenthesupplychainmanagement
applications followed by Government
procurementForBiometrics,GovernmentandLawEnforcementagencieshavebeentheprimary
users of this technologyFROST & SULLIVANS KEY FINDINGS ON AIDC
MARKETThe
AIDCMarketinIndiaisexpectedtogrowfromthecurrentUS$581millionto
nearly US $ 1.3 billion by 2014 at a Compound Annual Growth Rate
(CAGR)
of22.37percent.OfalltheAIDCtechnologies,SmartCardstakesthelionssharewith2010revenuespeggedatUS$510millionandexpectedtoreachUS$903million
by 2014.F R O S T & S U L L I V A N AIDC Market in India A
Sunrise Sector 2011 Frost & Sullivan www.frost.com7Chart 3:
AIDC Market Revenues Forecasts (India), 2010-2014
SomeofthekeyhighlightsexpectedtodriveadoptionofAIDCtechnologiesinIndia
include:
Aadhaarproject-UniqueIdentificationAuthorityofIndiahasatargettoenrol600millioncitizensby2014;over46millionenrolmentshavealreadybeendoneuntilAugust2011.AcombinationofSmartcardandBiometrictechnology
shall be put into use.
JawaharlalNehruSolarMissionhassetanambitiouscumulativetargetofgenerating20,000MWofsolarpowerby2022.Aspartofthisstrategy,theGovernment
has mandated that each solar or photovoltaic (PV) module
placedintousemustcarryanRFIDtag,sothatitcanbeeasilyidentifiedandtrackedthroughout
its useful life.
NationalHighwaysAuthorityofIndia(NHAI)hasmandatedtheuseofRFIDtechnologyfortollcollectionacrossallofits100+tollcentersthroughanelectronic
toll collection (ETC) system.
IssuanceofSmartCard-basedDriverslicenseandRegistrationCertificateinmany
states to ensure uniformity and inter-operability across the
country. Continually expanding mobile penetration and the growing
preference for multiSIM mobile phones is catapulting the demand for
smart cards in the SIM market.Similarly evolving compliance for EMV
cards is expected to usher higher growthin the smart cards segment.
TheCommerceMinistryandDrugsControllerGeneralofIndia(DCGI)havemandatedthat96Pharmaproductscomeundertrackandtraceumbrellaby2011
to help control the entry of counterfeit medicines in the market
and assistthe enforcement teams in carrying out faster checks.F R O
S T & S U L L I V A N AIDC Market in India A Sunrise
Sectorwww.frost.com 2011 Frost & Sullivan8MARKET DRIVERS AND
RESTRAINTSFactorsenablinganddisablinggrowthinthe
AIDCmarketarerepresentedinthechart below along with their influence
on a time scale.Chart 4: Impact of Drivers and Restraints on the
AIDC Market in India,2011-2020 KEY AREAS IN NEED OF IMPROVEMENTThe
AIDC markets in India are strongly propelled by various Government
programsaswellasdemandfromthebanking,hospitalityandtelecomsegments,tonameafew.
Efforts taken to create awareness of AIDC technology and its
benefits
amongstusershavecreatedapositiveimpactonitsadoption.Similartolowawareness,thereareafewotherchallengesthatneedtobeaddressedtoensureamoregloriousgrowthforthe
AIDCmarketsinthecountry.Someofthesearedetailedbelow. Chart 5:Areas
needing Improvement in the AIDC industry in IndiaF R O S T & S
U L L I V A N AIDC Market in India A Sunrise Sector 2011 Frost
& Sullivan www.frost.com9Lack of Financing ModelsSince the AIDC
Industry is still at a nascent stage, the scale of projects may not
bethathigh;consequently,financingoptionsarelacking.ThisisparticularlytrueincaseswhereacustomerwouldseektotryoutAIDCtechnologyfirstandthenevaluate
a possible full-fledged roll out for its remaining departments.
There is
alsoaneedforcompaniestoofferccustomizedROIframeworkstherebyreducingopportunity
costs and lowering liabilities.Absence of a local manufacturing
environmentLowyieldmanufacturingvolumesforproducing
AIDChardwareinIndia,resultinthe need to import or procure AIDC
hardware or technology, which adds up to thecosts. This in turn
leads to higher project costs along with longer delivery cycles
toimplementanAIDCsolutionwithlonggestationperiodstojustifyReturnonInvestment.
There is also a lack of framework from the Government circles that
canencourageindigenousproduction.Alsohighcostofmanufacturingsensorshasfuelled
the growth of assemblers in India.Size and
ComplexityInspiteofstandardsinplaceallowingenduserstomulti-source
AIDCsolutions,coupledwithpossessionofmatureICtechnology,technologyknow-howanddecentcompetencylevelsinthecountry,sizeandcomplexityarethebiggestchallenges
faced in the Indian market preventing massive rollout of the
technology.Threat from
SubstitutesAvailabilityofalternatetechnologiessuchasBarcodescausescompaniestoshyawayfromadoptinghigh-endAIDCtechnologiesinspiteoftheknownfactthatbarcodeswouldinvitelineofsight,forwhichmanualintervention,intheformoflaborwouldberequired.Hiringmanuallaborasagainstinvestinginhigh-endtechnology
may prove to be a cost effective
option.OutlookThemassivepopulationinIndiaandtheon-goingGovernmentdrivefornumerouswelfare
and ID programs portend a strong future for the AIDC industry in
India. BeitUIDorNREGSorRSBYoranycentral/stateprogram,
AIDCtechnologiesareexpected to be in demand at various stages of
implementation. The Department
ofIT,MinistryforcommunicationhasidentifiedacoupleofAIDCtechnologiesasthosewithsignificantpotentialinthedomesticmarketandisencouragingR&Dinthese
technologies for indigenous development of products that shall be
used in
thevariousidentificationprogramsintheensuingyears.PrivatesectorisalsobuoyantabouttheopportunitiesforAIDCwhichisevincedfromtheirincreasinginvestmentsinproductdevelopment,manufacturingfacilitiesaswellasbrandingactivities.
The chart below depicts the outlook for the AIDC industry in
India.F R O S T & S U L L I V A N AIDC Market in India A
Sunrise Sectorwww.frost.com 2011 Frost & Sullivan10Chart
6:Outlook for the AIDC industry in IndiaF R O S T & S U L L I V
A N AIDC Market in India A Sunrise Sector ABOUT FROST &
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