Decoding a key piece of India’s growth jigsaw

eSIMs are a vital piece of networking infrastructure that will soon be found in pretty much everything. This makes it a sub-sector worth tracking.

In 2016, Samsung launched a smartwatch called the Gear S2 Classic. While this was just another smartwatch in the overall consumer electronics scheme of things, this gadget became the first in the world to come with an eSIM, a little chip that simulates what a physical SIM card has historically done. This, though, wasn’t an overnight incident, for talks about creating and adopting eSIMs, in both consumer and enterprise industries, have been happening since the start of the decade.

Today, seven years since the very first consumer gadget with an eSIM, the world stands at a point where eSIM adoption is set to become ubiquitous across nearly every industry.

WHAT IS AN eSIM, AND WHY UBIQUITY?

A SIM card, as is well known, is a small physical chip that comes with hard-coded network information on it. This information is unique globally and becomes the identification that lets any person, anywhere in the world, be able to reach a mobile phone, as long as the network connectivity allows it.

An eSIM essentially serves the same purpose but with key differences. While a SIM is a physical chip that is generally removable from devices, an eSIM is an embedded chip. This chip comes in two variants: one that, like a conventional physical SIM, is hard-coded to a single network, and two, the one that can be reprogrammed as necessary. This is where the biggest benefit and flexibility of eSIMs lies. For instance, in consumer devices such as smartphones and smartwatches, the eSIM can sync with any eligible network that supports the technology without the need to get new physical SIMs when swapping networks.

Juniper Research estimates the global eSIM market to grow nearly 3.5x in value in four years — up to USD 16.3 billion by 2027, from USD 4.7 billion today.

An eSIM is also less prone to physical damages, and due to its reprogrammable nature, becomes a vital part of connected enterprise infrastructure today. Take connected cars and smart appliances at home, and power grids and oil pipelines in enterprises. Every infrastructure today requires eSIMs to be able to maintain consistent and constant network connectivity. While the adoption of captive 5G networks and digitisation sagas of operational technology (OT) frameworks get all the limelight, it is the humble eSIM that powers it all.

POTENTIAL FOR STEEP MARKET GROWTH

India, especially since the beginning of this decade, has been on an expedited path of digital transformation. This journey, interestingly enough, involves upgrading or connecting a lot of old public infrastructure in companies and public services. Doing this requires eSIMs to be embedded and programmed into networks, to realise the true potential of real-time connectivity, big data, and analytics.

This impact is even bigger in connected cars. According to a recent media report, an increasing number of tech-laden cars in the country is likely to drive the demand for an additional three million eSIMs in India, within the next 12 to 18 months. This has already started happening, with advanced connectivity and smart car features coming to consumer vehicles that are increasingly in the affordable ranges.

Tech-laden cars in the country are likely to drive the demand for an additional three million eSIMs in India, within 12 to 18 months.

Commercial vehicles are also a key benefactor of the spread of eSIMs. Since fleet management systems require trucks and buses to be equipped with new-generation telematics, eSIMs can serve as the key foundation to power connectivity in commercial vehicle fleets. Finally, there will also be uniform adoption of eSIMs in consumer devices such as smartphones and smartwatches, which will yet again represent a massive market opportunity for eSIMs around the world. A report by Juniper Research pegged the global eSIM market to grow nearly 3.5x in value in the next four years, up from the present-day USD 4.7 billion market to USD 16.3 billion by 2027.

India, in this regard, can serve as a key contributor, having accounted for nearly 12% of all smartphone shipments last year. Smartwatches and wearables are growing exponentially too, all of which will push up the demand for eSIMs. It is this that leaves the industry primed for growth.

THE ONE KEY CHALLENGE

While consumers stand to significantly benefit, telecom operators have not been proactive in consumer eSIM adoption, thereby stalling growth. A key reason for this is that adopting eSIMs requires an upgrade in the overall networking architecture stack from the telcos’ end, which in turn is a sizeable capital expenditure. Telcos have so far shied away from making such expenditures at scale. With the Indian market already operating at wafer-thin per-user revenue and margins, it remains to be seen if eSIM adoption brings additional value for telcos. While there will be a natural course of adoption and progression of technology, eSIMs will continue to play a key role in it, heading towards ubiquity across all appliances, modalities and technologies by the end of this decade.

additional value for telcos. While there will be a natural course of adoption and progression of technology, eSIMs will continue to play a key role in it, heading towards ubiquity across all appliances, modalities and technologies by the end of this decade.

By- Vernika Awal

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