eSIM: calling at all stations
The last few years have been crucial to driving eSIM developments worldwide, making the technology mainstream. Most recently, Apple’s launch of eSIM-only iPhones in September 2022 in the US market was a new major milestone for the eSIM industry, as demonstrated by an acceleration of operator eSIM deployments and commercial launches since then. As a new year starts, it’s time to review where we are with eSIM and what to expect in 2023.
eSIM in smartphones
After a slow start in 2017-2019, eSIM smartphone launches have accelerated in recent years. The number of eSIM smartphone models commercially available for purchase reached 69 in June 2022. Most flagship smartphones are now eSIM-enabled, and more than 60% of eSIM smartphone models have 5G technology. While Motorola was the first to launch an eSIM-only phone (the Razr 4G model in 2019), Apple’s launch of eSIM-only iPhones in the US got more attention (unsurprisingly).
What about operators? As of June 2022, more than 260 operators (MNOs and MVNOs) had launched commercial eSIM service for smartphones across 88 countries; this shows growing operator support but also that a majority of MNOs have yet to launch eSIM services.
Apple’s eSIM-only strategy in the US has accelerated the pace of eSIM launches over the last couple of months – 2023 will take these even further.
eSIM for IoT
eSIM technology has long been seen as a substantial enabler of IoT deployments across vertical sectors such as automotive (e.g. connected vehicles), utilities (e.g. smart meters and smart grids), logistics (e.g. tracking systems) and beyond. However, beyond automotive, eSIM adoption has yet to reach critical mass.
The potential for growth is significant; our research shows that 83% of enterprises consider eSIM as an important technology to achieving success in their IoT deployments, with best-in-class security and scalability seen as the top two eSIM benefits. That means there is an opportunity for operators and other providers of eSIM and IoT solutions to fulfil unmet enterprise demands.
While the industry is currently focused on eSIM, iSIM technology is also being explored both as integrated eUICC and integrated UICC. The first builds on eSIM progress, going a step further to embed the eSIM functionality into the device’s main processor while still using trusted hardware that passes all the security checks applied to traditional SIM cards and eSIM chips. eSIM versus iSIM is not an either-or scenario and there is overlap (e.g. integrated eUICC). Both are valid options that will coexist to meet the requirements of the varied IoT use cases.
What to expect in 2023
- Turning eSIM availability into consumer adoption – For consumers, the transition to eSIM will be gradual (we forecast it will take until 2026 to see an adoption rate of 20% globally), but 2023 will certainly be the long-awaited turning point. We expect operators and OEMs to do more to raise consumer awareness of eSIM while explaining and promoting its benefits. We also expect more work at an ecosystem level to enhance the user experience for eSIM activation/onboarding and beyond (e.g. service management).
- eSIM on the agenda for everyone – Our eSIM vendor survey revealed that the transition to eSIM-only by smartphone manufacturers as well as operators prioritising eSIM when onboarding new customers (‘eSIM first’) are the top two factors that could accelerate consumer adoption of eSIM in the smartphone market. On the first point, Apple has made its move in the US, but timelines for similar launches in other regions by Apple or other OEMs (in the US or globally) are unclear. As a minimum, all OEMs will need to make their internal considerations and ideally start planning for the transition.
- Wider deployments in IoT – While individual initiatives help build momentum, sector-wide deployments (e.g. those seen in connected cars) are needed to scale eSIM adoption. But how do we get there? Covid-19 and 5G are important factors to leverage. The pandemic has accelerated the digital transformation of verticals, fuelling demand for connectivity and value-added services, including IoT, cloud and security. Similarly, the success of eSIM in the enterprise IoT market is linked to the future adoption of 5G in vertical sectors, which requires product/service innovation and the ability to match 5G benefits with enterprise requirements. GSMA Intelligence forecasts that the number of licensed cellular IoT connections will reach 5.3 billion globally by 2025, up from 2.6 billion in 2022 (10% CAGR). eSIM and iSIM are targeting an increasing share of cellular IoT connections.
- Greater evidence of how eSIM helps address enterprise pain points – To reach critical mass, eSIM solutions need to address some of the top challenges that enterprises face when deploying IoT solutions, such as integration with existing technology and legacy systems, data security concerns and cost of implementation (the top three challenges according to our research). Also, given the multitude of new features and applications that enterprises need for their digital transformation, developing end-to-end solutions that integrate those features in a seamless and cost-efficient way is increasingly key to lower entry barriers, especially for SMEs.
- Clearer strategies – Beyond the technology factors, future eSIM deployments at scale will also depend on IoT companies having a clear eSIM strategy alongside their main IoT proposition. Many major companies in the wider IoT ecosystem believe that eSIM is crucial to driving enterprise IoT developments, but few have a clear eSIM strategy. Embracing eSIM at scale undoubtedly takes time, but it’s an important requisite to fully realise the eSIM benefits for enterprise digital transformation.
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