eSIM's slow path to mainstream adoption received a major boost recently when Apple announced that its latest smartphones, the iPhone XS and XS Max, would support both nanoSIM and eSIM. Apple has been a pioneer for eSIM, using the technology on its tablets since 2016 and bringing eSIM to its smartwatch range last year.
Despite Apple's support of eSIM on its other devices, eSIM has been slow to gain acceptance from both competing manufacturers and operator partners. Apple's own website lists only 16 operators across 10 countries supporting eSIM for its latest iPhones. The iPhone, however, will provide critical mass like no other product ever could. This will likely spur other manufacturers to include eSIM, but operator support will remain a contentious issue. Ovum now expects eSIM device sales to grow to 42 million in 2018, driven almost entirely by the new iPhone range, and is increasing the 2022 forecast for eSIM from 148 million to 538 million as we expect more premium handset brands to follow Apple over the next few years.
The big question though is "what is prompting Apple to push into eSIM so quickly compared to the rest of the market?" Apple is not generally an early adopter of most emerging technologies, particularly when it comes to network technology. Its early moves in eSIM for tablets and watches were not market-moving in any way, as those segments are relatively small, and using eSIM over nanoSIM for wearables makes plenty of sense, given the space constraints and the desire to easily build fully waterproof watches due to the exercise focus of smartwatches.
Ovum believes that Apple is focused on smoothing out the user experience as much as possible and on trying to ensure that the process of changing operators or adding any additional subscriptions while travelling remains simple, straightforward, and – most importantly – handled by Apple. iPhone is now at the point where there is very little organic growth left, so Apple is focusing on customer retention – seen here by Apple handling the switching/onboarding of the subscription and so minimizing the mental load for its customers.
Operators may be worried that eSIM will lower the barrier to switching, but iPhone users are of course on some of the most expensive contracts, and most are also tied to device-financing plans – these customers are already tied in for a considerable period of time. There is a threat that Apple could use eSIM to try to emulate Google's Project Fi and start offering its own mobile services, but Ovum believes that this is unlikely, due to how reliant Apple is on its operator partners to provide financing and support for iPhones.
eSIM Device Sales Forecast: Smartphones, Tablets, and Wearables, 2017–22, CES004-000052 (October 2018)
Consumer eSIM Devices Forecast Update, CES004-000038 (July 2018)
iPhone Xs points to the service provider future with eSIM and Gigabit LTE support, GLB007-000133 (September 2018)
Daniel Gleeson, Senior Analyst, Consumer Technology