eSIM Evolution: From Barriers to Breakthroughs

According to Counterpoint, 70% of all devices shipped by 2030 will have an embedded or integrated SIM (eSIM or iSIM). By midyear 2024, there were almost 600 million eSIM smartphone connections globally, about one-fourth of which are in the United States, but forecasts predict this will have increased by 67% to one billion eSIM smartphone connections by 2025. In fact, by 2028, more than half of smartphone connections are expected to be eSIM-enabled.

The publication of the Internet of Things (IoT) eSIM specifications, which enterprises and original equipment manufacturers are finding easier to implement than machine-to-machine or M2M SIM, is also driving IoT eSIM connections. Currently at 165 million, IoT eSIM connections are expected to increase to 1.3 billion (a total growth of 680%) by 2028.

The above will tell you that eSIM has well and truly broken through the barrier, real or imagined, that prevented its widespread adoption earlier.

eSIM: Barriers to Adoption

On 18 November 2010, GSMA first introduced the world to the idea of an embedded SIM that can be remotely activated and provisioned over the air by announcing the formation of an eSIM task force of mobile operators. It would take six years before GSMA would approve the use of eSIM for consumer devices and another year before an eSIM smartphone (Google Pixel 2) would be released.

You see, eSIM has many 'moving parts', so adoption was (and continues to be) determined by an interplay of many factors.

• OEM: Original equipment manufacturers must be convinced about the technology's viability to make eSIM devices. Yes, it would be great to have only a single stock-keeping unit and to provide enterprises with a perfectly blank slate that clients can configure with network credentials on their own. However, if there are no mobile network operators (MNOs) providing eSIM connectivity, who would want their eSIM devices?

• MNOs: In theory, eSIM makes the customer experience better. Imagine not needing to visit an MNO branch to get a physical SIM card and get mobile service? That would be highly convenient for subscribers, wouldn't it? However, MNOs were concerned that making the process of procuring mobile service that easy would lead to churn—a loss for MNOs who rely on a consistent subscriber base. Additionally, MNOs found the technology complex and the capital expenditure required prohibitive. Getting eSIM infrastructure approved also used to have a lead time of two years.

• eSIM Management Providers: This is why there was a need for orchestrators and providers of subscriber management solutions. MNOs willing to provide eSIM connectivity just wanted to adopt the technology now, see how it goes, and build their own infrastructure later, if needed. Therefore, they needed eSIM management providers with GSMA-approved and certified platforms from which MNOs could provision subscribers with eSIM profiles, manage their eSIM subscriptions from deployment throughout their lifecycle, deliver over-the-air campaigns and value-added services, provide eSIM support to next-generation devices, and orchestrate various types of connections (consumer, M2M and IoT) via a unified platform and a single interface, and procure as many profiles as required by fluctuating demands. eSIM providers did exist and offered excellent products and services, but MNOs were slow on the uptake.

• Governments: Governments also had (and have) a say. They determined matters of data privacy policies and regulations that enabled or prevented MNOs from adopting cloud-based eSIM solutions.

• Consumers: Consumers might have liked the idea of eSIM, but they did not have an incentive to switch. They shopped for the phones and plans they liked and would shift to eSIM only if they came with eSIM.

• Enterprises: While eSIM was initially conceptualised for M2M and IoT applications, the M2M eSIM specification was too technically involved and complex that adopting it required creating proprietary systems and entering into restrictive contracts with MNOs and other technology providers. This made M2M eSIM quite expensive and time-consuming to set up.

eSIM: On Its Way to Mainstream

From dismal adoption figures to today's numbers and optimistic projections, what changed? As mentioned earlier, widespread eSIM adoption requires the alignment of many factors. As the actual history of eSIM adoption would tell you, for such alignment to occur, there needed to be decisive action from OEMs. This makes sense, actually, because consumers would shift only to eSIM if their devices gave them no choice.

As earlier mentioned, eSIM smartphones started coming to market in 2017 with the Google Pixel 2. Before then, consumer eSIM devices consisted primarily of smartwatches: Samsung Gear S2 Classic 3G in 2016 and Apple's Apple Watch Series 3. Apple only started making iPhones with eSIM support in 2018.

However, it was when Apple introduced the eSIM-only iPhone 14 in 2022 in the United States market that eSIM adoption truly took off. The Apple iPhone has a considerable loyal user base, so when iPhones shipped without a physical SIM card tray, U.S. iPhone users who wanted the latest iPhone had no choice but to transition to eSIM. Check out the current eSIM smartphone numbers, and you'll see that the United States still tops the list when it comes to consumer eSIM adoption numbers.

Such a decisive move from Apple and its resulting impact on eSIM adoption among consumers triggered a snowball effect among other OEMs. It was clear consumers were willing to use eSIM if they had no choice, so smartphone manufacturers confidently added eSIM support to their gadgets. By 2023, 72 new eSIM consumer devices were introduced, approximately 60% of which were smartphones.

How about enterprise IoT? GSMA introduced the IoT eSIM standard, offering a highly usable, easy-to-implement alternative to M2M eSIM. This increased the eSIM uptake in IoT, leading to the expectation that there will be greater than a billion IoT eSIM connections by 2028.

At this point, MNOs had no choice but to go where the wind blew. Fortunately, the churn they feared did not materialise.

Throughout all this, it helped considerably that eSIM providers were waiting in the wings with innovative solutions and platforms that facilitated the smooth adoption of eSIM by MNOs and OEMs.

eSIM: On to the Future

eSIM (and iSIM) will eventually replace physical SIM cards. With key players like Apple leading the charge, GSMA innovating eSIM standards, and eSIM providers simplifying orchestration and rollouts, eSIM is on the fast track to becoming the default for mobile connectivity in both consumer and enterprise markets.