Traditional SIM cards have played a fundamental role in mobile telecommunications for over 25 years. These ubiquitous SIM cards have been providing a secure means for authenticating devices onto networks, all inside a removable component, which is easily transferrable between mobile devices. However, with the changing times, embedded-SIM (eSIM) technology has been catching up fast. An eSIM is a programmable SIM card embedded directly into a device. Instead of an integrated circuit located on a removable universal integrated circuit card (UICC), typically made of polyvinyl chloride, an eSIM consists of software installed onto an eUICC chip permanently attached to a device. Once an eSIM carrier profile has been installed on an eUICC, it operates the same as a physical SIM, complete with a unique integrated circuit card ID and network authentication key generated by the carrier.
The role of the SIM itself does not change when shifting to an eSIM – only the removable hardware component is done away with. The eSIM standard was first released in 2016, and since then eSIMs have begun to replace physical SIMs in domains such as cellular telephony. eSIMs improve reliability and network security, while also reducing space requirements and thereby increasing design flexibility.
eSIMs are gaining momentum in the consumer market, opening up new opportunities for mobile ecosystem players and enabling new benefits for consumers. According to GSMA forecasts, the number of eSIM smartphone connections is expected to reach 2.4 billion by 2025, globally (accounting for approximately 33 per cent of total smartphone connections), with 1.9 billion and 2.8 billion being the low and high adoption scenarios respectively. Moreover, the global eSIM market size was valued at $8.03 billion in 2019, and is expected to expand at a compound annual growth rate of 15.8 per cent from 2020 to 2027.
eSIMs are nearly ubiquitous in larger markets. Smartphones with eSIMs are available in most of the top 30 mobile markets in the world. In aggregate, over 70 per cent of the mobile network operators (MNOs) operating in these 30 markets offer eSIMs for smartphones. In many of these markets, eSIMs have been fully launched (meaning that all MNOs have made eSIMs available to their smartphone customers). Meanwhile, various mobile virtual network operators (MVNOs) have launched eSIMs for their smartphone customers in some of these markets.
Use cases across sectors
For automakers, being able to deliver cars to different countries without having to insert a physical SIM reduces costs and improves reliability and customer service. Rather than outsourcing connectivity to a specific network operator, automakers can handle eSIMs in their vehicles as a managed service. An eSIM enhances the value of connected cars. Changing network providers, by choice or by necessity of moving to another country, becomes a routine activity with eSIMs managing over-the-air (OTA) profile updates. Meanwhile, buying or selling a car with an eSIM is fairly simple, with a simple OTA download unlocking services for the new owner.
Shipping and logistics
With eSIM technology, tracked assets can be shipped anywhere and provisioned on any network across the world. There is no longer a need to physically swap SIM cards before and during transit, or to sign expensive roaming contracts. Moreover, service providers can change network profiles as needed from their management console using remote SIM provisioning. This greatly simplifies logistics, lowers tracking costs and puts more control in the hands of the application owner.
With the introduction of eSIMs, operators will have simpler ways to expand their businesses into emerging markets such as automotives, wearables and consumer electronics. Moreover, for operators, SIM card distribution costs will be eliminated, and eSIMs will enable new models for the distribution of devices and marketing of subscriptions.
Handset manufacturers can exploit the reduced space in their products after implementing eSIMs to make smaller devices. Their products could also be made more tolerant to environmental factors such as dampness, temperature and vibration. Further, manufacturers can leverage eSIMs to optimise supply chain processes.
For users, eSIMs provide security equivalent to removable SIM cards. This is vital, as the subscription credentials stored on a SIM card enable secure and private access to mobile networks. They also maintain the integrity of the billing process, especially in roaming scenarios.
The India story
Telcos in India are warming up to the concept of eSIM. Reliance Jio, Bharti Airtel, Vodafone Idea Limited and Bharat Sanchar Nigam Limited are already offering eSIM services to their customers in India. However, the decision to opt for an eSIM in India primarily rests on whether the user’s device supports eSIM technology. In India, only a few high-priced handsets support eSIMs. To this end, extensive debates are being held on the idea of mandating eSIM technology for all devices.
However, telcos and handset players are at loggerheads over eSIM smartphones. The Telecom Regulatory Authority of India had, in July 2022, floated a consultation paper on “eSIM for M2M Communications” in a bid to explore the opportunity for enhanced machine-to-machine (M2M) communications through the use of eSIMs. Separately, telecom operators had reached out to the Department of Telecommunications in July 2022, asking it to direct handset makers to introduce eSIMs in addition to physical SIM slots in all devices costing Rs 10,000 and above. This was because the price of physical SIM cards has increased by 4-5 times due to the semiconductor shortage and hoarding by some players. This demand has been contested by smartphone manufacturers, who are of the opinion that such a move would increase the cost of mid-range handsets (Rs 10,000-Rs 20,000), which account for around 50 per cent of the total volume of smartphones sold in India. Handset makers assert that the situation in the semiconductor space has been improving, and normalcy can be expected in six to nine months, while telecom operators believe that the SIM card supply situation is unlikely to improve before 2024.
Due to the demand from telecom operators, the Ministry of Electronics and Information Technology has reached out to handset manufacturers, seeking their feedback on the issue. Reacting to the demand, the Indian Cellular and Electronics Association (ICEA) has noted that implementing eSIMs in mobiles would entail product design changes as well as cost escalation, owing to the installation of extra hardware. Justifying its stand, the ICEA has noted that the increase in the price of SIM cards has been marginal, and even if the cost of a SIM card increases by five times, the cost of introducing eSIM features in mobile phones would still be higher (in terms of implementation and design).
Meanwhile, adding a different perspective, the Cellular Operators Association of India (COAI) has noted that the introduction of eSIMs will shave off a reasonable quantity of physical SIM cards. This move, according to COAI, will also help reduce the SIM wastage caused by mobile number portability, without compromising the flexibility of this feature. Some brands already feature eSIM support in their high-end smartphones, but mandating it for all devices in India may hamper the growth of the mobile industry.
To sum up
Now that many of the top original equipment manufacturers (OEMs) have introduced eSIMs in their smartphones, the next question is, when will most OEMs shift to eSIM-only design, at least for their newer models?
From a design perspective, eSIMs allow significant space reduction in a phone by eliminating the space required for removable SIMs. This is a crucial factor in the 5G era, as 5G requires more space for antennas and larger batteries, especially in early 5G devices. Meanwhile, global consumer surveys show that consumer intent to upgrade to 5G is growing in most markets. Therefore, for OEMs, MNOs and MVNOs, 5G device renewals represent an opportunity to push the pedal on eSIMs, as a larger number of 5G smartphones will have eSIM capabilities.
As eSIM uptake is poised to grow across a gamut of connected devices over the next decade, owing to its flexibility, cost efficiency, security and other myriad benefits, developing an eSIM strategy and externalising it to stakeholders and the wider mobile ecosystem is vital to support and drive eSIM deployments.
Anand Kumar Sah