SIM card replacement rates are set to shrink for the second year in a row, and a primary cause isn’t the rise of eSIMs but higher handset prices, according to new figures from ABI Research.
Last year marked the first time in five years that SIM card shipments saw a global year-on-year reduction (with just 5.53 billion SIM cards shipped). ABI is expecting that trend to continue when 2019 wraps up with another -0.1% YoY contraction. And for both years, the SIM market has been marred by challenging market conditions in the APAC region.
In China, the challenges were due to the relaxing of roaming fees, which had been a primary driver behind multiple SIM ownership per person. In Indonesia, challenges were driven by ID registration regulations and, in India, because of MNO market consolidation and the end of 4G promotions.
However, the marked SIM card reductions in these three countries will be near offset by increased demand in the supply of eSIMs for hybrid smartphones, most notably within Apple’s range of XR and XS (and later this year the new 11 range) and Google’s Pixel range of smartphones. There will also be continued growth within the M2M/IoT sector thanks to increasing eSIM integration into automobiles.
The success of eSIM and activation rates are areas in which ecosystem players, including Gemalto, (a Thales company), IDEMIA, G+D, Valid, Samsung, and Infineon are monitoring closely, looking to understand eSIM’s potential impact on their respective removable SIM card businesses.
In the short term, however, ABI doesn’t see eSIM as problematic for the SIM replacement market, says Phil Sealy, Research Director at ABI Research.
“Any eSIM impact in the shorter term will be minimal. The eSIM should be considered a longer-term market concern, with a reduction in SIM replacement rates driven more in the near term by increasing smartphone prices,” Sealy, says.
Overall, ABI Research envisions that the market for removable SIMs will only marginally be impacted by the eSIM in a forecast period ending 2024, due to a continuation of dual SIM device issuance (encompassing a removable SIM slot and eSIM) and low-level eSIM readiness from an MNO perspective.
“The greater threat for the removable SIM card form factor in the shorter term [the next three to five years] is being presented by the handsets market,” says Sealy. “Mobile devices are becoming increasingly more expensive, some of which are now above the $1,000 mark. As a result, consumers are looking to spread the cost of a device over a longer period. MNOs have also taken note and are beginning to lengthen subscription contracts from the traditional 18-24 month period, to 36 48 months.”
The increase in device life and contract lengths will reduce replacement rates and thus SIM card demand, Sealy adds.
ABI forecasts removable SIM card shipments to shrink from 5.2 billion in 2019 to 5.0 billion in 2024.