After a lengthy gestation period, 2022 is likely to be the year in which embedded SIM (eSIM) enters the mainstream. In the consumer market, adoption is virtually mandated with the announcement by Apple that its latest iPhone will utilise eSIM but the promise of being able to switch operator at will is not reality yet. There are several hurdles to be jumped over, not least operator reluctance to cede control of the subscriber identity, an important tool for charging and their means to keep ownership of the customer. Regulation and customer demand will ultimately take care of this but there will be several bumps in the road as adoption extends across countries and regions.
In the IoT market, the appetite for eSIMs that enable a device to change operator at the end of a contract or if a better deal or coverage is available is compelling. Doing so over-the-air without truck roll has the potential to positively impact IoT business cases that previously would have been ruined by the need for human intervention in the form of traditional SIM card replacement.
Effective eSIM management of both IoT and consumer devices is essential in order to access the benefits of eSIM but there is little expertise for service providers to draw upon. In this report, George Malim, the managing editor of IoT Now, explores the complexities of eSIM management and how they can be addressed by systems and services available in the market.
It might not look like it, but the era of the traditional SIM card has reached the beginning of the end. ABI Research projects that while 4.33 billion SIM cards will be shipped worldwide in 2022, this number is down 8.5% year-on-year. The pandemic, its impact on the semiconductor industry and increasing inflation leading to recession in 2023 are stifling uptake and the consumer market is set to be the hardest hit.
The research firm says its previous expectations of year-on-year growth of 7.2% in the SIM card market have now been trimmed to 1.8%. The macro-economic situation is only part of the reason for this.
“On top of these challenges is the anticipated impact of the first eSIM-only Apple smartphone devices,” warns Phil Sealy, the Digital Security Research director at ABI Research. “Although Apple will initially limit deployment of its Apple 14 eSIM-only devices to the US, it clearly outlines Apple’s intentions for an eSIM-only handset portfolio. The impact on the US market as it relates to removable SIM card supply will be clear and more evident in 2023, the first full year of Apple’s eSIM-only device shipments into the region.”
ABI Research estimates that the removable SIM card supply will be reduced by approximately 50-60 million units in 2023 because of the Apple launch and illustrates a clear direction of travel towards eSIM-only devices across Apple variants. Launches of products should hit Europe and APAC countries towards the end of 2023, reducing demand for removable SIM cards further.
Apple is not alone. In August 2022, Samsung released its Galaxy Z Fold4 and Flip4, the company’s first eSIM-enabled smartphones, in Korea. Korean carriers also started their support for eSIM smartphone activation in September 2022.
This move by the consumer market towards eSIM will play a key role in expanding the market. Kaleido Intelligence has estimated in a recent study that eSIM connections will exceed 4.5 billion in 2027, driven by consumer adoption. The firm foresees the number of active universal integrated circuit card (xUICC) connections, composed of eSIM and integrated SIM (iSIM) growing by more than 1,400% in the period 2022-2027, with smartphone users pushing growth upwards.
The firm expects that substantial uptake will also occur in the IoT market, predicting that more than 50% of compatible IoT devices will use eSIM in 2024. This growth reflects regulatory developments, heightened awareness of the benefits of eSIM and the generally strong business case that eSIM offers to many IoT deployments. Kaleido Intelligence thinks that more than 50% of cellular IoT devices will use eSIM in IoT or consumer specification by 2026.
Smartphones will contribute to the majority of eSIM-based devices over time, expects Counterpoint Research, but the number of IoT and M2M devices equipped with eSIM will grow faster across several applications and different flavours of cellular technologies from narrowband IoT (NB-IoT) to 4G and 5G. The eSIM activation rate in cellular IoT applications will remain high, lowering the usual costs of production and logistics involved in delivering and activating traditional SIMs, alongside savings on space and power.
“Smartphones will lead the charge in terms of eSIM-capable device shipments over the next five years,” confirms Ankit Malhotra, a research analyst at Counterpoint Research. “The launch of the eSIM-only iPhone should act as an inflection point for the industry with other original equipment manufacturers (OEMs) expected to follow suit soon after.”
The smartphone has been playing an important role in increasing consumer awareness of eSIM alongside consumer categories such as smartwatches, laptops and tablets. Cellular connectivity in smartwatches is growing, says Malhotra, which is also helping in increasing the penetration of eSIM-supported smartwatches.
“The adoption of entitlement servers by MNOs worldwide is a testament to the growing number of smartwatches and other companion devices powered by eSIM,” he adds. “Development of newer use cases such as remote work and remote learning will also increase the requirement for cellular connectivity in devices such as customer premise equipment (CPE), routers, laptops and tablets. eSIM capability allows users and service providers to activate and manage connectivity quickly, efficiently and seamlessly.”
Mind the adoption gap
GSMA Intelligence has reported that there is a gulf now developing between industry progress with eSIM technology and consumer awareness and adoption. The organisation says that good progress is being made on standardisation and the availability of eSIM management platforms and implementation of eSIM in flagship phones and companion devices to the extent that, as of June 2022, more than 260 operators, composed of both MNOs and MVNOs, have launched commercial eSIM service for smartphones. However, fewer than 30% of consumers – on average across eight major countries analysed – are aware of eSIM and this is a barrier to largescale adoption. Even so, GSMA Intelligence expects around 850 million eSIM smartphone connections globally by 2025, growing to 6.7 billion by 2030. This would account for 76% of the total number of smartphone connections.
Smartphone connections only tell some of the story as consumer IoT and the connected things that make up industrial IoT, start to adopt eSIM. The reasons for this are obvious because of the lower cost, greater flexibility and choice, and supply chain and operational efficiencies that well-managed eSIM-enabled devices provide. Counterpoint Research sees huge numbers of devices hitting the market over the coming decade. It predicts more than 14 billion eSIM devices will be shipped between 2021 and 2030, covering all form factors such as hardware-based eSIM (eUICC), iSIM (iUICC), nuSIM and Soft SIM.
Progress towards that figure is underway with 350 million hardware eSIM-capable devices shipped in 2021 across smartphones, smartwatches, tablets, IoT modules and connected cars. In the next five years, the firm says, hardware-based eSIM will remain the dominant eSIM form factor and will account for more than half of the shipments.
“The physical MFF2/WLCSP form-factor soldered eSIM chip has been the go-to standard for eSIM implementation even with the rise of alternative implementations such as soft SIM and nuSIM over the last decade,” says Neil Shah, the research vice president at Counterpoint Research. “However, the iSIM form factor will grow the fastest as the industry stakeholders move forward together to offer end-to- end support from the SIM enablement and management perspective later this year.”
SIMs get simpler in IoT
The industry is coming together to create that simplified SIM management capability that eSIM demands. The emergence of SGP.31/32, an extension of GSMA’s consumer embedded UICC specification, called the IoT specification, is forecast to accelerate adoption of eSIM within IoT because it can use the GSMA SM-DP+ architecture. This greatly reduces commercial complexity for customers wishing to switch between eSIM network operator providers. The new specification also provides a path for low power wide area network (LPWAN) devices to adopt standardised remote subscription management capabilities more easily. This IoT specification is anticipated to be completed by the end of 2023.
This simplified architecture is set to see active eSIM connections for cellular IoT devices growing at a CAGR of 80% between 2022 and 2027. “The new specification is on the right path to mitigate the complexity associated with M2M eUICC and will mean that eSIM for IoT is no longer simply for insurance model purposes,” says James Moar, the principal research analyst at Kaleido Intelligence. “However, broad consensus among service providers and enablers will be required for it to realise its potential.”
Beyond the established consumer devices, new opportunities for eSIM are emerging across extended reality, drones, PCs and connected devices in IoT. Counterpoint Research sees the automotive and smart mobility sectors as particularly aligned with eSIM. The firm says a connectivity experience for mobility applications is becoming paramount, particularly for safety use cases such as eCall, the mandated emergency calling capability embedded in all new cars, and the future rise of autonomous driving. Recent collaborations such as that of G+D and BMW demonstrate the adoption of eSIM by leading players with advanced features.
Managing the embedded estate
With five billion eSIM-capable devices set to be shipped in the next five years, according to Counterpoint Research, it’s clear that management will be needed to handle hundreds of millions of active eSIM devices. Service providers, enterprises with large mobile device fleets, IoT organisations, MNOs, MVNOs and device makers all need to be have visibility into eSIM activity and to have the capability to enable remote SIM provisioning (RSP) across millions of devices. The elegance and attractiveness of eSIM lies in it’s ability to support optimised connectivity at each location. This is particularly important for moving IoT devices, vehicles and transport and logistics operations. These traverse multiple countries and a single MNO may not be the provider of the best connection in any given location.
Therefore being able to switch providers easily is core to the eSIM proposition both in IoT and consumer devices. It also provides an opportunity to try new capabilities. For example, it is anticipated that eSIM could be a foundation for try-before-you-buy offers for 5G and there are immediate applications for roaming users in the consumer market.
“Several major IoT communications management platform (CMP) vendors have in recent time added eSIM management capabilities to their platforms as a tool to simplify logistics and localise connectivity,” explains Fredrik Stalbrand, a senior analyst at Berg Insight. “Enterprises in the utilities and security verticals are now following in the steps of the major automotive OEMs and adopting eSIMs in a broader set of IoT applications.”
That means an increased need for eSIM management around which a growing ecosystem of platform providers is maturing. “The eSIM management landscape went through continuous evolution in 2021 with several new players entering the market,” says Malhotra at Counterpoint Research. “In 2020, we evaluated 11 integrated eSIM management players, this has now doubled to 22. eSIM adoption continues to increase, with more eSIM capable smartphones in the less than US$200 price category being launched, and a similar trend in smartwatches. In IoT modules, shipments of eSIM-capable IoT modules increased by almost three times.”
This has resulted in a growing list of capabilities for eSIM management platforms to cover starting from the deployment model and GSMA certification through to handling entitlement, security, interoperability, the transactions, time to market, connectivity management and multinational reach. The more devices that are eSIM-enabled, the greater the demand being placed on management platforms.
“With the increasing number of eSIM-capable devices, the number of profiles managed by service providers has increased,” adds Malhotra. “Therefore, the need for features such as analytics, and campaign management has also increased. Another key trend worth noting was the double sourcing by MNOs and thus interoperability with other service providers, eUICC manufacturers (EUMs) and MNOs also became more important.”
The vibrant eSIM management market place is led by Thales and G+D which are followed by specialist vendors IDEMIA, Truphone, Workz and Oasis Smart SIM. A new breed of IoT eSIM specialists, such as Kigen and 10T Tech, have also entered the market. These are joined by in-house eSIM management platforms offered by MNOs, such as Telenor, Vodafone Idea, Jio, Airtel, STC and Tele2. Counterpoint Research says these are sometimes developed with the help of partners.
With Thales having deployed more than 300 platforms so far, the eSIM management platform business is maturing rapidly, delivering a choice and diversity of capabilities to the market place. “G+D is one of the pioneers of eSIM and offers an end-to-end solution for its customers,” says Shah. “It offers a guaranteed 99.99% server availability for eSIM downloads and management which has set a new benchmark for other eSIM providers. G+D has also secured more than 250 eSIM management deployments which demonstrates its success in the market.”
The confidence to offer platforms that have the resilience to support the billions of active devices both in the consumer and IoT markets is indicative of the importance eSIM operations have to the success of devices, business cases in IoT and the revenue generation capabilities of MNOs. The challenge now is to select the platform that best enables efficient eSIM management for your use case.
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