The market for traditional SIM cards, currently on the decline, is ceding ground to the eSIM ecosystem. 5.53 billion SIM cards were shipped in 2018, compared to 5.54 billion in 2017. Challenging market conditions are expected to facilitate another shipment decrease of -0.1%, likely translating into another market contraction in 2019 due to several factors.
We're Buying Fewer Smartphones
As the cost of smartphone devices continues to rise, consumers are purchasing them less frequently, looking to spread costs in excess of $1,000 over a longer timeframe. Mobile service providers are compensating for those fewer purchase by extending the life of subscription contracts, from an 18-24-month period to 36-48 months. Smartphones are now lasting longer as well, so the mitigated need to replace a device correlates with a reduction in SIM card demand.
APAC Facing Challenging Market Conditions
In China, where owning multiple SIM cards was once considered typical, relaxed roaming fees have since mitigated such demand. In Indonesia, challenges were driven by ID registration regulations, where market consolidation among service providers in India led to the end of 4G promotions. However, the reduction of these three countries will be nearly offset by increased demand in the eSIM supply for newer smartphone models, most notably the Apple XR and XS and Google Pixel offerings.
The eSIM Market is Evolving Quickly
Utilizing several different device types, covering both the consumer smartphone and M2M/IoT markets via automobile integration, eSIM is a potentially transformative technology — changing the face of cellular connectivity and impacting the business models and processes across secure IC, smart card, MNO, MVNO, and OEM ecosystems. The eSIM market is also rapidly evolving in terms of form factor, with its true value residing in its remote provisioning capabilities. As such, mobile network operators will be able to offer new levels of flexibility, simplicity, and convenience to the end user. With eSIM, consider the possibility of toggling between a personal number and one that is used for business, or having a separate data plan for traveling to another country.
Total eSIM shipments reached 278 million in 2019, and are expected to increase by 300% in just four years. While smartphones will continue to be most utilized application for eSIM technology, others are primed to reap its benefits:
Asset Tracking/Track-and-Trace: High-value field assets required to ensure continued enterprise operations as well as containers/pallets to help track and trace items and in some instances used to provide further accuracy within supply chain and inventory management applications are primary drivers. Current examples where cellular connectivity is being used within an asset tracking or track-and-trace application include ThinkRace GPS tracking, Flex cargo tracking, UlikeKorea livestock tracking, Trimble for vehicle tracking, and CalAmp for asset tracking. Not only cutting across a variety of end verticals, but the ability to use traditional 2G, 3G, or 4G cellular alongside cellular LPWA technologies to address lower value, computing and processor-capable devices will see the eSIM asset tracking market grow from 1.6 million shipments in 2019, to near 50 million in 2023.
Energy Management: Significant movement in the energy management sector is already evident with smart meter initiatives already well established, including the Indian pre/postpaid electric smart metering project as one key example, paired with significant metering migration projects at various stages of completion in Sweden, Belgium and the Netherlands.
Automotive: The automotive sector received a significant boost in the wake of the eCall initiative, requiring all consumer vehicles within the European Union to integrate an eSIM in order to automate communication to emergency services in the event of an accident/emergency. Automotive eSIM shipments stood at 50 million in 2018, but the ability to utilize the eSIM for OTA firmware updates to help reduce product recall, as well as for infotainment purposes and for V2X via 5G for vehicle-to-vehicle and vehicle-to-infrastructure communications in future autonomous, ride hailing, safety, and smart city applications will help grow shipments to levels exceeding 105 million units in 2023, as the market moves from a singular to dual eSIM inclusion to address a combination of eCall, OEM, and consumer functions.
Laptops: In the short term, low-level cellular shipment numbers for eSIM-enabled laptops are expected, but moving forward, Microsoft, with a clear strategy of selling cloud services, looking to seed the market with cellular-enabled laptops, and its always connected PC program, will drive the market towards the 8 million mark by 2020.
Tablets: eSIM tablets are already available, with today’s market primarily driven by Apple’s cellular-enabled iPad Pro, alongside Amazon’s cellular range of Kindles. As MNOs continue to move to shared device subscription packages, enabling the use of a single subscription agreement and sharing across multiple devices, and as the cost of Wi-Fi and cellular tablets closes, shipments of eSIM-enabled tablets are forecast to grow to 11.4 million by 2023.
Wearables: Outside of tablets and laptops, wearable devices are where the eSIM started from a consumer perspective, with the first device, the cellular-enabled Samsung Galaxy S2 smartwatch, launching in 2014. Moving forward, Apple introduced a cellular-enabled smartwatch in 2017, its LTE series 3 device and the release of its eSIM-enabled XR and S range of smartphones in 2018, which further stimulated demand for its new cellular series 4 watch variant. The wearables market is considered one of great diversity, not only being dominated by vendors including Apple and Samsung, but also including other new innovative startups such as the doki smartwatch. In addition, the wearables opportunity will not be limited to the smartwatch form factor, encompassing wearable cameras, headphones, sports and fitness trackers, and smart clothing, which will help grow eSIM-enabled wearable device shipments from 13.4 million in 2019, to more than 58 million by 2023.