CAMBRIDGE, U.K. -- Sales of RFID tags and related products will hit $2.71 billion this year, and rise to $12.35 billon by 2010, says research firm IDTechEx.

The firm says 600 million tags were sold in 2005, and 1.3 billion tags will be sold this year. Of that, the majority will be used for a range of diverse markets from baggage and passports to contactless payment cards and drugs. About 500 million RFID smart labels will be used for pallet and case level tagging.

In the short term large “closed loop” markets requiring high value RFID will remain very profitable and companies will seek to position themselves as the leader in hardware and integration in different vertical market segments, IDTechEx  said.

Many markets are being created, such as real-time location systems using active RFID.  Growth in passive RFID will be driven by the tagging of high volume items - notably consumer goods, drugs and postal packages, IDTechEx said.

The firm also predicts more use of different frequencies and increased interest in high frequency (13.56 MHz) tags and systems.