News of the first proof of concept of an iSIM-enabled smartphone being unveiled by Qualcomm, Thales and Vodafone, using a modified Samsung Galaxy Z Flip 3, has sparked much supposition and discussion of the demise of eSIM (as well as traditional SIM cards). Below is a quick summary of our thoughts on this, both the positive and the negative and what this means for the future market outlook.
Reasons Why It Will Happen
- The fact that three major stakeholders worked together to deliver this demonstrates a degree of market readiness; this is not an in-house concept cobbled together in a backroom lab. Notably, Vodafone was involved –probably the biggest surprise for me – which suggests that the general lack of enthusiasm that (major) MNOs have exhibited for eSIM (or iSIM) in smartphones may be overcome.
- From a technological perspective, it is a near-inevitable outcome. I said this when I saw the first eSIM activation demo from G&D Mobile Security in 2013 (I think) and also when I saw Qualcomm’s first iSIM demo in 2017. Once the box has been opened, it is very difficult to close again.
- If you were to design a way for identifying and managing devices on networks in the 5G era, you would not choose a removable chip holding the network keys to do this. You’d look for a more decentralised and flexible approach, something that ties in with digital sales channels and means of identifying subscribers.
- The practical and financial benefits outweigh the drawbacks, from design to distribution, from activation to add-ons and added value tie-ins. If MNOs do not get on board and move the market forward, it is likely that someone else will look to take advantage of these developments and the opportunities they offer to give more consumer-centric customer service.
Reasons Why It Will Not Happen (Yet)
- The business relationships and positioning/responsibilities of the various categories of company involved will take time to be identified and established. This changed with eSIM and changes even more with iSIM as the traditional roles of semiconductor companies, smart card vendors and service providers is disrupted.
- Since the advent of eSIMs, and subsequently iSIMs, MNOs have been torn between the opportunity of driving new revenue channels and the fear that they will be exposing themselves to greater competition and/or weakening their position in the (smartphone) ecosystem. This has seen them push ahead with both M2M and IoT use cases (as these are new, greenfield markets) while dragging their heels in consumer/mobile applications.
- It will take a seismic shift for an OEM to risk going against the MNOs and the established distribution channels in terms of handling airtime service contracts (and all the customer service responsibilities that come with it) – but it is not completely out of the question. I have written in the past that Google posed the bigger threat, not Apple, but Google has been building up its partner relationships for its Pixel devices over the past few years while Apple has built up its direct sales to a level where it could become an option if the MNOs do not get on board.
- The chip manufacturers will be keen to continue to add value to their products and SIM functionality and the additional security for related functions is an obvious way for them to do this but it will take time for rest of the ecosystem to both catch up and evolve before this becomes a mass market commercial proposition. Given it has taken almost a decade to get this far, and there are no established GSMA specifications for iSIM in consumer devices, the market will not suddenly leap forward to the next generation of integrated connectivity.
EDIT – it has kindly been brought to my attention that iSIM features in some of the latest GSMA specifications, notably: GSMA SGP22 spec v2.4 covers integrated fully. SGP08 for certification as well as latest SGP24 for GSMA accreditation. This will be checked and confirmed for future reference and to ensure that there are no remaining aspects lacking specification and standardisation.
What This Means for the Market
Trying not to repeat what I have previously stated…this creates an opportunity for MNOs. It can modernise and simplify their business processes and sales channels. If managed correctly, it can enhance the opportunity for them to provide connectivity to more consumer devices.
iSIM opens up new applications where eSIM may have had less success, especially for smaller, lower power devices. For those where OEMs and/or users want more hardware-based security then eSIM will continue to be a feature, especially if combined with an embedded secure element to offer a full set of secure storage and cryptographic capabilities for the device and trusted apps.
It will still take time for the market to evolve, from standards to internal infrastructure for billing and device activation/management. With these disruptive advancements will come a “re-balancing” of the supply chain as stakeholders (i.e., chip and card vendors, MNOs and service providers, infrastructure partners and device OEMs) adapt to their new roles in delivering and managing hardware and software to support the deployment of devices with embedded/integrated connectivity.
In late 2021, P.A.ID Strategies joined forces with Valour Consultancy. Together, we provide insight and intelligence on payment, authentication, identity, security and connectivity applications, services, technologies, and vendors.
If you have an interest in related domains such as eSIM and iSIM-enabled devices, applications and sectors, or associated platform and service revenues and would like to discuss our research further, please contact our team.