Traditional SIM cards: It’s time to say goodbye

Key Points

1. The existence of SIM cards has partially restricted the evolution of mobile terminals, limited the space and design of devices, and increased the process difficulty and manufacturing cost of devices.
2. With the popularization of eSIM technology, competition among operators, mobile phone companies and Internet giants in data labeling and acquisition will become more intense.
3. eSIM technology will gradually enter cellular handheld devices this year, and will be launched by companies like Samsung, Apple, and Huawei in 2019, and will be widely used in smartphones.

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On May 25, China Mobile released the first domestic eSIM chip C417M, which can provide "chip + eSIM + connection service". In March, China Unicom took the lead in promoting eSIM cards in six cities: Shanghai, Guangzhou, Shenzhen, Tianjin, Zhengzhou, and Changsha. Some careful users also found that China Telecom's mobile phone business hall also opened eSIM communication services.

What exactly is eSIM? eSIM card, or Embedded-SIM, is the concept of an eSIM card, which is to embed a traditional SIM card directly into the device chip, rather than adding it to the device as an independent removable component, so users do not need to insert a physical SIM card.

Simply put, taking a mobile phone as an example, before using it, you need to insert a physical SIM card of the operator, eject the card slot, replace the SIM card, and accidentally put it in the wrong place. The process is cumbersome. The eSIM card is a virtual card that can be written directly into the mobile device.

It is worth mentioning that traditional SIM cards are limited to a certain operator's service network. If you want to change operators, you must also change the SIM card at the same time. In the future, eSIM cards can be switched freely between different operators.

At present, the smart devices that support this function in China include Apple Watch Series 3, Huawei's HUAWEI Watch 2 Pro and Lenovo's Miix 630. With the advancement of domestic eSIM card business, more and more devices will support this function.

Even the three major operators have started to work on eSIM technology. Perhaps it’s time to say goodbye to traditional SIM cards!

The general trend

The first commercial SIM card was born in 1991. With the continuous development of technology and changes in market demand, the size of SIM cards has become smaller and smaller. It can be said that SIM cards have gone through four stages: Standard SIM (original card), Mini SIM (standard card), Micro SIM (small card), and Nano SIM (ultra-small card). Currently, the latter two types are most commonly used on the market.

Although the card body has become smaller, its functions have basically not changed. They are mostly used for user data storage and identity authentication. If you count, the smallest Nano SIM card has been around for six years since it was born in the iPhone 5 era. In today's world where digitalization and virtualization are flourishing, the digitalization of SIM cards is an inevitable trend, and the launch of eSIM cards is to completely digitize SIM cards.

The reason why eSIM has been so popular recently is that it has many new features that traditional SIM cards do not have.

From the most intuitive aspect, if you use an eSIM card, the traditional SIM card slot in the phone can be eliminated, and the saved space can make the phone even slimmer; and there is no need to worry about damaging the SIM card and card slot due to frequent card replacement and insertion.

Not only that, it also brings greater freedom in switching operators. Users can change the operator's network without having to go through the complicated process of canceling their number and re-joining the network. They also do not have to face high roaming fees after going abroad. They only need to choose the local operator's network.

For the three major operators, after the development of eSIM cards, operators do not need so many people to make and write cards. Users can handle everything by themselves online, reducing the operator's labor costs. On the other hand, it also prompts operators to make changes. The reduction in users' number changing costs will prompt operators to improve their own service quality.

Judging from the current development trend of smartphones, the existence of SIM cards has partially restricted the evolution of mobile terminals, limited the space and design of devices, and increased the process difficulty and manufacturing cost of devices. For this reason, major smartphone manufacturers have also begun to vigorously promote eSIM technology.

However, these services and changes did not happen overnight. Most operators initially resisted eSIM technology because they were worried that this technology would reduce consumers' dependence on operators. If operators "did not give in", terminal testing would be futile. Therefore, the game process will inevitably be long.

The next blue ocean

eSIM can effectively save internal space, which is already very valuable. With the advent of 5G, the development of the Internet of Things will require various devices to be applied. Among them, IoT devices with built-in eSIM can be bound to the same mobile phone number as the user's mobile phone and share the same traffic service, which allows these devices to be used anytime, anywhere without being restricted by usage scenarios.

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According to forecasts by McKinsey, IHS, GSMA and others, eSIM will achieve explosive growth in 2018, and the number of global connections will reach 5 billion in 2021; with a compound annual growth rate of 95%, the eSIM market size will reach US$5.4 billion in 2022. In terms of the connection scenarios where eSIM can be applied in 2020, consumer electronics, Internet of Vehicles and public facilities will be the three main application directions of eSIM in 2020.

Due to its chip product form, the eSIM card can fully meet the automotive industry's needs for high temperature resistance, vibration resistance, and oxidation resistance; and the eSIM has the ability to write cards over the air, which also meets the automotive industry's needs for changing numbers without changing the card. Today, the eSIM card has become the industry-recognized SIM card form that best fits the in-vehicle scenario.

From another perspective, the three major operators are actively deploying eSIM and promoting the construction of the Internet of Things in order to lay the foundation for future 5G competition. In addition, there are also mobile phone manufacturers and Internet giants in this market.

Previously, Lenovo and Xiaomi both launched 4G versions of their notebooks, which supported 4G networks through integrated eSIM cards. Lenovo was one of the first manufacturers to apply eSIM services to its smart devices.

Dr. Wang Shuai, Vice President of Lenovo Group and General Manager of Connected Communications, told Tencent Deep Web that eSIM will be the first to achieve a full-scale explosion in the field of consumer electronics, and it can meet the high requirements of IoT devices for communication security and stability. Since GSMA officially released the eSIM standard, Lenovo Connected Communications has been actively developing and promoting the commercialization of products as soon as possible.

A few days ago, Tencent and China Unicom released the TUSI SIM card, promoting new identity authentication standards for the Internet of Things industry. At the same time, Tencent TUSI Internet of Things Joint Laboratory released an identity blockchain product to provide cross-authentication services for the identities of the same user in different scenarios.

TUSI SIM card is a secure SIM card product used in the field of Internet of Things. It can not only effectively identify the identity of IoT devices using cellular communications, but also ensure the security of uplink and downlink data. It also provides a trusted identity for the smooth transition of Tencent ecological content to the device end.

Obviously, with the popularization of eSIM technology, the competition among operators, mobile phone companies and Internet giants in data labeling and acquisition will become more intense.

When is it used on mobile phones?

The promotion of eSIM technology has been going on for a long time, but the most anticipated wish of users to apply it to mobile phones has not yet been realized. At present, it is only used in wearables, IoT devices, and consumer electronics. A common scenario on mobile phones is that many mobile phone manufacturers such as Huawei and Xiaomi have built-in foreign roaming services. Users can directly obtain a virtual SIM card by applying on the mobile phone and use it abroad in the short term. This is also an eSIM technology.

There is still considerable resistance to completely replacing SIM cards with eSIM cards.

In the past few years of operation, the three major operators have firmly grasped the dominant position in the industry. Mobile phone numbers have become the only link between operators and users. If eSIM cards replace SIM cards, eSIM technology is likely to make this link fall into the hands of terminal manufacturers. In addition, the original value-added services and charging models of operators based on SIM will face a complete subversion, and the free choice of users will cause fierce price competition among operators.

At the end of July last year, China Telecom made it clear at its "Tianyi Smart Ecosystem Expo" that due to security issues, real-name system issues, and regulatory issues, China Telecom currently opposes mobile phone eSIM.

The growth of any new technology or new thing is bound to go through some ups and downs. But the good news is that eSIM cards may enter smartphones in 2019.

IHS analysts believe that eSIM technology will gradually enter cellular handheld devices this year, and will be launched by companies like Samsung, Apple, and Huawei in 2019, and will be widely used in smartphones.