Is Apple’s eSIM Support the Beginning of the End for the Traditional Removeable SIM Card?

Subscribe To Download This Insight

By Phil Sealy | 4Q 2018 | IN-5266

It was always a case of when, rather than if, Apple would extend support of eSIM beyond its cellular-enabled smartwatches and select range of cellular-enabled tablets into its range of handsets. That when arrived on September 12, 2018, when it announced its XR, XS, and XS Max range of handsets, all of which include dual SIM support via a traditional removable SIM card slot, alongside an eSIM, with the exception of China where dual SIM functionality will be delivered via two traditional removable SIM card slots. September 2018 can now be considered a significant milestone in the development and deployment of the eSIM, moving the eSIM smartphone market from one that was solely occupied by Google and its Pixel 2 device, shipping a few million devices a year, towards, potentially, the hundreds of millions.

Registered users can unlock up to five pieces of premium content each month.

Log in or register to unlock this Insight.

 

Apple Moves the eSIM Market Bar 

NEWS


It was always a case of when, rather than if, Apple would extend support of eSIM beyond its cellular-enabled smartwatches and select range of cellular-enabled tablets into its range of handsets. That when arrived on September 12,2018, when it announced its XR, XS, and XS Max range of handsets, all of which include dual SIM support via a traditional removable SIM card slot, alongside an eSIM, with the exception of China where dual SIM functionality will be delivered via two traditional removable SIM card slots. September 2018 can now be considered a significant milestone in the development and deployment of the eSIM, moving the eSIM smartphone market from one that was solely occupied by Google and its Pixel 2 device, shipping a few million devices a year, towards, potentially, the hundreds of millions.

How Do Apple eSIM Handsets Impact the Market Outlook?

IMPACT


Apple’s annual device shipments total in the region of 225 million annually, and this alone will have a significant impact on the eSIM market. Despite this, Apple is just one OEM, and despite its ability to move the eSIM bar (within the consumer market) into the hundreds of millions of units, the bigger question remains: what will be the overall market impact, and how, if at all, can Apple’s eSIM support have a knock-on effect on other smartphone and consumer device OEMs?

Apple eSIM Handsets Impact the Market Outlook

Forecast assumptions:

  • The Google Pixel 2 with integrated eSIM shipped in the region of 1 to 2 million units in 4Q 2017.
  • It is also assumed that any new Pixel devices or other device models launched by Google (notably following the acquisition of HTC’s smartphone design team) will continue to support and include an eSIM, with Google generating unit sales in the region of 7 to 10 million units annually.
  • Apple announced its iPhone XR, XS, and XS Max in September 2018, each with eSIM integration (with the exception of variants for the Chinese market), which are forecast to ship approximately 40 million in 4Q 2018.
  • The year 2019 marks the first full year of XR, XS, and XS Max shipments, and expectations are that future iPhone launches will all include eSIM. Excluding sales in China and of non-eSIM legacy devices, ABI Research has assumed that Apple will ship approximately 142 million eSIM-capable handsets in 2019.
  • Also, in 2019, Samsung is expected to launch its first eSIM handset into its flagship Galaxy S range of handsets, which will add an additional 64.8 million units in 2019.
  • Apple, paired with Samsung and Google, will generate a 2019 eSIM smartphone market of approximately 225 million units.
  • In 2020, Samsung will add the eSIM functionality into its Galaxy Note range of devices, adding 15 million units. At the same time, the “Others” category will begin to grow, with Xiaomi and/or LG likely to begin deployment of eSIM smartphones.
  • By 2021, it has been assumed that China will begin supporting eSIM, and as a subsequent knock-on effect, Huawei will launch its first eSIM handset during the year in its flagship P and/or Mate ranges.
  • The year 2021 marks the first forecast year where all non-eSIM legacy Apple iPhones will have been phased out of the market. With China also expected to support eSIM by 2021, ABI Research believes that 100% of all iPhone sales will have eSIM from 2021 onwards.
  • The year 2021 has also been outlined as the year when Samsung will begin eSIM integration into some of its mid-range devices, most notably its A and C range.

Why the Traditional Removable eSIM Is Not Going Away Anytime Soon

RECOMMENDATIONS


The consumer eSIM market continues to rapidly evolve in terms of device support and component development. Apple’s XS, XS Max, and XR smartphone launch with eSIM capabilities is testament to this fact. The reason for its significance is that the eSIM form factor is one that is transformative in nature, undoubtedly impacting the entire SIM value chain in some way, shape, or form. Business models, sales channels, and processes across the smart card, secure IC, MNO, and OEM vendor landscape will all need radical reshaping. In turn, this marks the beginning of a significant required change in the SIM card hardware value chain, where the current leading vendors, including Gemalto, IDEMIA, G&D, and Valid will begin to see a revenue shift from their respective traditional hardware supply businesses towards supporting platforms viaservices, including secure OTA management, subscription, and life cycle management.

Arguably, Apple has now made eSIM integration into smartphones fair game, but it’s not all about Apple, and all eyes are now looking towards the next set of OEMs offering dual SIM smartphone models in their next-generation smartphone releases. Samsung is a clear contender for the next OEM likely to launch an eSIM handset. However, Samsung will likely adopt a tiered approach, integrating the eSIM into its S and Note ranges first, but it could extend that into its A, C, and J ranges at a later date. Huawei is another, but we should not dismiss other OEMs, including LG and Xiaomi, which both have a range of high-end smartphone devices, or even other more localized vendors, including OPPO, which is looking to expand beyond China. Despite the sudden buzz around the eSIM, it must be noted that the traditional SIM card is not going to disappear anytime soon, and Apple’s new range of iPhones are testament to this fact, given its dual SIM functionality.

 

Today the market is not ready to completely embrace the eSIM for a number of reasons, notably due to lack of MNO eSIM readiness, which OEMs will need to remain mindful of. ABI Research believes that the dual SIM approach, combining eSIM with traditional removable SIM slots, will remain the favored combination for some time. Although the ultimate goal might be to replace the traditional removable SIM, there will remain a significant transitional period where OEMs will have little choice but to support both. This places significant pressure on SIM card suppliers, which need to be mindful as to where to place resources. It will become a careful balancing act to ensure they can continue to support a traditional SIM card market that will continue to ship billions of units a year, while ensuring support for the growing area of the transformative eSIM solution.

Services

Companies Mentioned