Rising device costs are expected to lower SIM card replacement rates, contributing to an already challenged SIM card market. In 2018, 5.53 billion SIM cards were shipped, marking the first global YoY reduction in SIM card shipments in over five years. Moreover, the continuation of challenging market conditions will likely translate into another market contraction in 2019, down by approximately -0.1% YoY.

“However, any eSIM impact in the short 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.”

2018 and 2019 have 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, by Mobile Network Operator (MNO) market consolidation and the end of 4G promotions. However, the marked SIM card reductions in these three countries will be nearly 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.

eSIM impacts SIM Card Market

The success of eSIM and activation rates are areas in which leading ecosystem players, including Gemalto (a Thales company), IDEMIA, G+D, Valid, Samsung, and Infineon, are monitoring closely, looking to understand eSIM’s potential impacts on their respective removable SIM card businesses. “However, any eSIM impact in the short 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,” states Phil Sealy, Research Director at ABI Research.

Overall, ABI Research envisions that the market for removable SIMs will only marginally be impacted by the eSIM in a forecast period ending in 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 to the removable SIM card form factor in the shorter term (3–5 years) is being presented by the handset market. Mobile devices are becoming increasingly expensive, some of which are now above the US$1,000 mark. As a result, consumers are looking to spread the cost of a device over a longer period of time. 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,” concludes Sealy.

Over the course of the forecast period, these dynamics are expected to have an impact on removable SIM supply, with ABI Research forecasting removable SIM card shipments reducing from 5.2 billion in 2019 to 5.0 billion in 2024.