Commenting on the global eSIM (embedded SIM) design landscape and the overall ecosystem, Counterpoint analyst Ankit Malhotra emphasized, “2022 is a milestone year for the global eSIM ecosystem. Today there are over 260 MNOs / MVNOs supporting eSIM and the average terminal support rate of operators is over 30%. Operators are also more serious and enthusiastic about eSIM than ever before. eSIM is no longer just an option, but also an important part of the digital revolution. Therefore, it is critical to ensure that eSIM designs are fast, reliable and consumer-friendly, with stable application scenarios to maximize the promise of eSIM.”

Source: eSIM CORE (Competition, Ranking and Evaluation) Scorecard and Analysis, March 2023

Previously TechhInsights reported that eSIM enables smartphone shipments to grow 15% annually through 2023. While the iPhone will continue to dominate the eSIM smartphone market in 2023, its share of the smartphone market will actually drop to 65 percent, reflecting greater participation from other smartphone vendors.

eSIM or eUICC is considered the next iteration of the SIM card, offering the ability to change service provider profiles through OTA without physically replacing the SIM card itself.

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Google announced at the MWC 2023 event that it will bring an eSIM switching tool to Android later this year. It will come with a newer version of Android (expected to be Android 14), which will be released in the fourth quarter of 2023. The feature is based on a standard developed by the GSMA and allows users to easily and securely transfer eSIMs from one device to another.

Google announced that Deutsche Telekom will be the first carrier to adopt Android’s eSIM switching mechanism, meaning users won’t have to sign up for a new eSIM and wait hours for it to activate each time they change devices. Apple already offers eSIM card transfers between iPhone, iPad and Apple Watch.

Once the feature is fully rolled out globally and all carriers begin to support it, expect more smartphones to drop their physical SIM slots. Apple already sells the iPhone 14 series without any physical SIM slots in the United States.

eSIM or eUICC is considered the next iteration of the SIM card, offering the ability to change service provider profiles via OTA without physically replacing the SIM card itself.

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What benefits does eSIM bring?

eSIM is actually an electronic SIM card, a data file that can be downloaded to mobile terminals through the network. With it, various electronic terminals can connect to the internet, receive calls, send text messages, etc., and are functionally the same as a regular SIM card.

Screenshot from the website of the Ministry of Industry and Information Technology

The highly integrated eSIM solution can, first of all, solve the problem of the SIM card slot taking up a lot of space on the phone. Although the Nano SIM card is now very small, the space saved by the card slot can lead to more innovation for the already thin and light mobile phones, where space is at a premium.

The history of the SIM card has been one of constant evolution to “smaller”, from SIM cards to mini SIM cards, to Micro SIM cards, and finally to the now familiar Nano SIM cards, each time with a reduction in size.

A white paper published by China Unicom in 2019 shows that the eSIM solution, integrated into the hardware, takes up 1/3 of the space of a Nano SIM and will evolve to a smaller size.

In addition, the SIM card slot affects the waterproof performance of the phone. The eSIM is integrated inside the phone and does not require a slot in the body, which can improve the waterproof rating of the phone.

The eSIM is easy to replace, with an online application, eliminating the need to go to a physical offline sales office and the hassle of mailing the SIM card. This method has been described by some analysts as “over-the-air card writing”.

In addition, eSIM makes it easy to use dual SIMs. For example, according to an early introduction on Apple’s website, users can install eight or more eSIMs on one iPhone and use two phone numbers at the same time, or even use separate numbers for voice and data.

A research report by a securities company points out that eSIM has the characteristics of low power consumption, high energy-efficiency ratio networking capability, stable operation, strong anti-interference capability, and low cost in IoT applications, and it is expected that eSIM will still be further enhanced in IoT industry applications.

Will eSIM completely replace SIM cards?

Many people may have questions, with so many benefits, will eSIM replace the traditional SIM card? Why is it that after so many years of development, although eSIM is widely used in various IoT devices, it is still slow to take over the mobile phone market?

“The core challenge at the mobile phone end of eSIM is operator interoperability. eSIM can be remotely configured through ‘over-the-air card writing’, allowing for batch opening, flexible change of sign-up and change of operator. However, for operators, the threshold for user switching is lowered and control over users is reduced.” A recent research report issued by Huaxi Securities pointed out.

However, previously, the approval issued by the Ministry of Industry and Information Technology on the three major operators to carry out eSIM technology application services in the Internet of Things and other fields mentioned that effective measures should be taken to ensure the management right of the eSIM platform and the writing right of the eSIM terminal, and other enterprises should not be authorized in any form to open relevant rights and functions.

The reporter notes that some operators are currently pushing super SIM cards, a solution that can integrate security, payment and other functions together to provide a one-card solution. For example, it can act as a school meal card, traffic card, access card, car key, bank U shield, electronic signature, etc.

Fu Liang, an independent telecom analyst, told CNA that eSIM will not completely replace the physical SIM card in a short time, and the super SIM card will not completely replace the traditional SIM card.

There are also views that eSIM is feared to have a huge impact on the mobile phone market. the US version of the iPhone 14 series to be released in 2022 will no longer have a reserved SIM slot and will be replaced by eSIM, which is the first time the iPhone has completely removed the physical card slot from some models. However, Fu Liang believes that Apple will not force iPhones without physical card slots in the Chinese market, after all, the standard is not something that a particular handset manufacturer can decide.

A recent research report released by Huaxi Securities points out that eSIM is developing rapidly in the field of the Internet of Things, but the mobile phone side still needs the cooperation of multiple parties. In particular, as a stock consumer market, eSIM policy promotion on the mobile phone side still requires policy and industry synergy compared to IoT applications.

According to Counterpoint Research, the annual shipments of eSIM devices will reach 6 billion by 2025. Among them, 45% of the eSIM devices will be shipped on the mobile phone side.

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However, with the release of the iPhone 14 series, the stable physical SIM card may become a “thing of the past” like the TF card. -This is also the first time Apple released an iPhone that only supports eSIM.

At present, mainstream smartphone manufacturers represented by Huawei, OPPO and Xiaomi are vigorously promoting the eSIM function on various smart wearable devices, especially smart watches, in the domestic market, while there has been no substantial progress in the huge volume of cell phone terminals. A senior brokerage analyst, who did not want to be named, told the Daily Economic News online that eSIM (not yet popular in China) is not for technical reasons, but for other factors because it is easy for users to switch networks after adopting eSIM.

However, the good news is that the Ministry of Industry and Information Technology recently said in a reply to a question from netizens that it is studying to promote the application of eSIM technology on tablet computers, portable computers and smartphone devices. When conditions are ripe, the scope of application of the technology will be expanded.

“In terms of policy, when the time is ripe, the country will definitely liberalize the application of eSIM cards in cell phones in the future. And the whole cell phone industry chain will also respond positively to promote the application of eSIM card on the ground.” Guo Tianxiang, the senior analyst of IDC China, recently told reporters online.

eSIM technology is more convenient

In the 1990s, Germany’s Jetter developed the world’s first SIM card, which stored information such as authentication and encryption, and algorithms. Over the next 30 years, the size of SIM cards has continued to shrink, from the original bank card-sized “standard SIM” in 1991 to the “Nano SIM” in 2011.

With the increasing integration of cell phones, especially for wearable smart devices (smartwatches, sports bracelets, smart glasses), even the size of Nano SIM is still too large. eSIM was officially born in 2016 when the GSM Association released the eSIM specification for smartphones.

The full name of eSIM is Embedded-SIM, which means embedded SIM card. Unlike the traditional plug-in SIM card, eSIM is directly embedded into the device chip. Although invisible and inaccessible, eSIM loads user information such as card numbers directly into the interior of the cell phone, which can activate traditional services such as calling and texting, and can also quickly connect terminal devices to local networks globally.

In fact, compared to traditional SIM cards, eSIM cards excel in several attributes, including configuration, size, flexibility, security, and customer experience.

Removable traditional SIM cards are often prone to wear and tear in use, such as changing and cutting cards, resulting in a short life span and taking up physical space on the device. In contrast, the volume of eSIM is only 10% of that of traditional SIM cards, and it is more resistant to vibration, high temperature and reliability, and more adaptable to harsh working environments.

From the process point of view, an eSIM card saves users from the opening procedure of going to the business office and can be freely activated over the air. At the same time, three years after the implementation of the portable number transfer policy, devices using eSIM cards can change operators remotely without changing cards, which is one more choice for users and will prompt competition among operators.

The reporter noticed that many overseas users have already shared tutorials on how to open an eSIM card on social media platforms. If you want to transfer the number on the old phone with a physical card to the new phone, you only need to place the two phones close to each other and click the cellular network in the new phone to add an eSIM card, transfer from the nearby iPhone and wait for a while, the signal will be transferred from the old phone to the new phone, and the original SIM card will be invalid.

There is no need to pull out the card, it takes about two minutes, and there is no need to go to the business office. And the eSIM service provided by iPhone 14 can support up to 8 carriers (only two numbers can be on standby at the same time).

In addition, the traditional SIM card has problems such as the card slot affecting water resistance and the reliability of contact connection between SIM card and terminal is poor. While eSIM is integrated inside the phone and does not require a slot in the body, which can improve the waterproof level of the phone.

The core challenge is carrier interoperability

In fact, eSIM is not a new technology. 4 years ago, Apple started to support eSIM technology in iPhone XR, and outside of Apple, Google also supports eSIM, and has included the Pixel 2 with eSIM as part of “Project Fi”.

Then after several years of development, why eSIM is still not popularly used in China? The difficulty of promotion does not lie in cell phone terminal manufacturers, but in operators.

The aforementioned senior brokerage analyst said: “At present, Asia generally has dual cards, i.e. one SIM and one eSIM, and the domestic eSIM is not popularized not because of technical reasons but because of operators’ willingness. Apple pushes eSIM in the hope that users can buy local packages to any country and region and switch directly so that operators’ roaming charges are reduced.”

In a recently released research report, Huaxi Securities also said that the core challenge at the cell phone end of eSIM is operator interoperability. “eSIM realizes remote configuration through ‘over-the-air card writing’, which allows batch opening, flexible change of contract and change of operators. However, for operators, the threshold of user switching is lowered and the control over users is reduced. Especially at present, as a partial stock consumer market, eSIM policy promotion on the cell phone side still needs policy and industry multi-party collaboration compared to IoT application.”

eSIM technology enables users to switch between different operators’ networks and no longer be bound to a particular operator, which brings convenience and more choices to users but also brings many challenges to operators.

For operators, the increase of user autonomy means their own passivity. Operators used to realize precise “control” of users through SIM cards, but now eSIM can realize remote configuration through “over-the-air card writing”, and can open in batch, change contracts and change operators flexibly. Now, eSIM can be remotely configured through “over-the-air card writing”, and it can be opened in batch, change the contract and change operators flexibly.

At the same time, the business process change brought by the card change also increases the staff training cost and time, the business hall traffic will continue to be lost, and the incidental in-store business when users do card will also disappear.

“The mode of plugging and unplugging SIM card is already very mature, and operators need to develop a series of new processes if they want to eSIM on the cell phone side, including security, account opening process, portable number transfer, etc.. The operator invests a lot of energy, but the benefit itself is not obvious. In addition, there is no trend of miniaturization of cell phone now, and the volume impact of SIM card is getting smaller and smaller under the large screen cell phone, which does not bring particularly obvious benefits to the user level.” Independent telecom analyst Fu Liang said in a recent interview with reporters online.

In addition, there are also views that the process of eSIM writing profiles over the air through OTA is not in a fully controllable state like handling cell phone cards in business halls, and the profiles are distributed through the public network, which can easily bring hidden risks of information security. If the card profile is held hostage and tampered with during the transmission process, the wrongdoers can easily get the cell phone SIM card of others.

In this regard, Guo Tianxiang said, “In addition to the difficulty of supervision for telecommunication fraud and the increased difficulty of real-name system supervision, there will also be the risk of data leakage during the process of data transmission and collection using eSIM card, and the supervision will still be cautious until the technology is independently controllable.”

He also pointed out, “When replacing cell phones, the entity card only needs to change the card to the new phone to use, while the eSIM card may need to wait for the operator to reactivate the number card, which is more troublesome, especially in emergency situations. Upstream traditional SIM card manufacturers will also form resistance when iterating the industry chain.”

In contrast, operators prefer to upgrade their SIM cards and continuously integrate functions to retain customers. 2020 saw the launch of “super SIM cards” by three major operators, which integrate SIM card and storage functions and have a capacity of up to 100G.

On NFC-enabled cell phones, the super SIM card can also be used as a public transportation card. In Wuhan, Hubei, the mobile operator announced that it will integrate functions such as digital RMB wallets and electronic ID cards in the future, and apply them to various scenarios such as medical services, travel, accommodation, etc.

The development of eSIM is late, but not absent. Recently, a netizen left a message on the official website of the Ministry of Industry and Information Technology (MIIT) asking whether there is a plan to promote eSIM cell phone cards in China, as the use of eSIM cards has recently caused more discussion.

In response, the Ministry of Industry and Information Technology responded: “The Ministry attaches great importance to protecting the legitimate rights and interests of consumers and insists on actively promoting the application and promotion of new technologies and equipment on the basis of ensuring the legitimate rights and interests of users and information security. At present, the Ministry is organizing relevant units to study and promote the application of eSIM technology on tablet computers, portable computers and smartphone devices, and expand the application of eSIM technology when the conditions are mature.”

Once eSIM technology is liberalized in China, what impact is expected to be brought to operators? Are they worried about the decrease in stickiness with users? In this regard, the reporter recently contacted the three major operators to understand the situation, but no response has been received as of press time.

Will reshape the role of operators in the industry chain

From the policy point of view, as early as 2018, the three major operators started the pilot and layout of the eSIM business, and in October 2020, all three operators have been approved to provide eSIM technology application services in the field of the Internet of Things. Among them, China Unicom was the first operator to make efforts in the field of consumer electronics, and its first batch of open eSIM functions cooperated with Apple Apple Watch3.

In fact, Unicom has been carrying out an eSIM wearable independent number and No. 1 dual business pilot in seven cities in six provinces since March 2018 and has opened an eSIM wearable independent number business nationwide since March 29, 2019.

While Xiaomi, Huawei and other watches already support the eSIM function, Unicom also started to implement the “eSIM One Dual Terminal” service, which means users can add an eSIM subsidiary terminal card under the account and package of the main cell phone number, sharing one cell phone number and package. In other words, when the main number calls, both terminals will vibrate at the same time, and any terminal can make calls, breaking the constraint of a cell phone as the only mobile communication carrier.

At the same time, using the eSIM solution, each mobile terminal can independently use a mobile network to access the Internet. Smartwatches, bracelets and other devices will no longer become “bricks” without WiFi. Research firm Counterpoint said in its eSIM device market outlook report that eSIM hardware device shipments will exceed 350 million units in 2021, driven by smartphones, IoT and other areas. And there will be cumulative shipments of more than 14 billion eSIM devices from 2021-2030.

According to Fu Liang, “Smart devices equipped with eSIM cards can obtain more stable and secure communication services than WiFi, and also allow the devices themselves to have independent networking capability and more functions.”

eSIM has the characteristics of low power consumption, high energy-efficiency ratio networking ability, stable operation, strong anti-interference ability and low cost in IoT applications, which makes IoT eSIM is being widely used in various fields such as wearable devices, vehicle networking, industrial internet and smart city.

However, even though domestic mainstream telecom operators are now actively promoting and laying out eSIM to strengthen their service capability in this field, they are all focusing on IoT terminals, and there is always no substantial progress in the cell phone terminals with huge volumes.

However, judging from Apple’s ability to define product standards in the industry very simply, eSIM technology may usher in an inflection point of development under the leadership of the iPhone 14 series.

At the same time, eSIM will also reshape the roles of ICs, OEMs and operators in the industry chain. In fact, compared with traditional SIM cards, the core of eSIM is the introduction of a remote SIM configuration (RSP) platform. In the past, operators controlled the customization and issuance of SIM cards, but now some terminal customers can simplify the process of interfacing with operators and even find chip manufacturers directly.

At present, China’s layout SIM card chip manufacturers mainly include Ziguang Guomei (SZ002049, share price 146.52 yuan, market value 124.48 billion yuan), Datang Microelectronics and CEC Huada Electronics, etc. Among them, Ziguang Guomei occupies up to 60%-70% share in the domestic SIM card chip market, “Super eSIM ” supports all GSMA standards from 3G to 5G, as well as the highest international security level CC EAL6+ certification and State Secrets Level 2 certification, and its subsidiary Ziguang Tongxin has won the eSIM wafer procurement large order for many times, while Datang Microelectronics has the ability from chip design, COS development and terminal product design, and had successfully developed China’s first GSM cell phone dedicated SIM card.

From the upstream, midstream and downstream of the industry chain, the upstream is mainly CA certification authority, eSIM chip maker and terminal chip maker, the midstream includes eSIM platform supplier, telecom operator, eSIM terminal and module maker, and the downstream is mainly enterprise users and consumers.

In addition, the reporter noticed that many listed companies laying out eSIM in A-share have disclosed their progress in eSIM one after another recently. Among them, Chengtianweiye (SZ300689) said that the company has eSIM production capacity and can provide eSIM core data processing, data writing and personalized processing services to customers; Tianyu Information (SZ300205) said that the company is providing eSIM products and related services to telecom operators, IOT industry and other customers; Hengbao (SZ002104) (S002104) said that the company has achieved batch supply of eSIM cards.

Looking ahead, Huaxi Securities believes that with the cooperation of the industry chain and relevant policy bodies taking the lead in research, eSIM terminal application is expected to be promoted continuously, and the breakthrough from IoT devices to tablet PCs, portable computers and smartphone devices is expected to be completed in the future.

The post MIIT study to promote eSIM phones, physical card to become history? appeared first on TechGoing.

Counterpoint highlights that while onboard integrated eSIM (eUICC) is still dominant today, as exemplified by the iPhone, SoC on-chip integrated iSIM (iUICC) will grow exponentially starting in 2022 and will greatly accelerate adoption in IoT devices as it further reduces the space footprint and power consumption of SIM cards.

Counterpoint also predicts that emerging areas such as extended reality (XR) and drones will be the fastest penetration of eSIM cellular IoT, and access to cellular networks will accelerate the adoption of drones in areas such as express logistics, emergency management, education, agriculture, and construction.

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