The European market for RFID (radio frequency identification) equipment for industrial, automotive and aerospace applications will more than quadruple over the coming six years. A new study of the market predicts that revenues will rise from $23.7m last year, to almost $110m by 2012.

"The rising need to accurately track valuable assets and products is creating significant scope for the use of RFID across a range of industrial sectors," says Rengarajan Srinivasan, a research analyst with Frost & Sullivan, who produced the report.

RFID can enhance product availability and boost productivity, the report suggests. And its ability to enable just-in-time inventory control and asset management will allow companies to reduce order turn-around times and manage fluctuating demand more effectively.

However, Frost cautions that the ROI (return on investment) from RFID installations is difficult to quantify, because the full benefits of the technology depend on its degree of integration into wider business processes. This, and RFID`s high implementation costs, pose a significant challenge to prospective entrants into the RFID market, the report says.

It warns that the excitement and euphoria surrounding RFID in recent years have created unrealistic expectations of the technology in many industries.

"As the RFID market starts the transition from technology trial stage towards early adopter phase, a key challenge will be to clearly identify the range of expected benefits," Srinivasan says.