eSIM card, where is the future?

On March 29, 2019, China Unicom held a joint first-sale cooperation launch conference with the theme of "Unicom eSIM cardless and more freedom". At the conference, China Unicom announced that it would expand the eSIM wearable device independent number business from the pilot to the whole country, and announced the first batch of eSIM product cooperation brands, including JD.com. Some people say that eSIM bundles companies and operators to penetrate, and JD.com and Unicom are just a drop in the bucket. It has to be said that a storm about eSIM cards is slowly forming.

Looking around the world, eSIM is seen as the EUICC solution that replaces future SIM technology. Because it complies with the GSM Association (GSMA) specifications, it has been approved by major global operators such as AT&T, Deutsche Telekom, Vodafone, Telefonica and Orange. Despite these honors, eSIM still seems to face many challenges.

Although operators in Europe, North America, and Asia have already implemented eSIM technology, 60% of mobile users around the world are still using traditional phones or devices that are not eSIM-compliant. This means that although you may have an eSIM-enabled device, in some parts of the world, no mobile operator may support it. So, will the era of being able to travel the world with one SIM card, without having to remove it, ever come?

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1. The E-era of SIM cards is the inevitable evolution of SIM cards

The iteration of smart devices is one of the main drivers of SIM card upgrades. In 2007, Steve Jobs held the first generation of the 3.5-inch iPhone and redefined the mobile phone at the press conference. This phone removed the keyboard and replaced it with a home button. The 11.6mm thick device smoothly combined mobile phone communications, audio and video playback, and web browsing, ushering in the trend-setting Apple era. The upgrade of aesthetics has made mobile phones become thinner and lighter, with a higher degree of integration. People are more concerned about whether smart devices are easier to operate, more concise and beautiful, and more intelligent. Making mobile phones more in line with popular aesthetics has naturally become the top priority for mobile phone manufacturers.

When button phones were popular, people wondered whether the buttons could be removed, and thus the touch-screen smart era of mobile phones came; when mobile phone cameras could not always meet people's needs for selfies, people thought that the camera could be placed in the front to make it more convenient for selfies, and thus the frequency of use of mobile phone front cameras was sometimes even higher than that of rear cameras, especially among women; when the headphone output port and power input port occupied different physical spaces in different places of the phone, manufacturers wondered whether they could be integrated into one external interface, and obviously, mobile phone manufacturers did it.

When people change their mobile phone numbers, they need to go to the operator's business hall to purchase a SIM card for activation, take out the card pin (sometimes you can't find it when you need it), open the phone card slot, take out the SIM card, put it back into the slot, and then turn on the phone. Everyone is wondering if these steps can be omitted to make it more convenient for you and me. So, eSIM technology came into being.

In 2011, Apple applied for a patent for a virtual SIM card and tried this concept on the iPad Air 2. Then in 2019, it was further promoted on Apple's iPhone X series of mobile phones. eSIM has gradually entered the public eye and is about to bloom. So, what exactly is an eSIM card? Let's start with the SIM card that everyone is familiar with.

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SIM card is a Subscriber Identification Module, also known as a user identity card. It is a chip with a microprocessor. When mobile phones first came out, they had to be installed with this card before they could be used. Otherwise, the mobile phone would become a decoration, and it could neither make calls nor send text messages, let alone surf the Internet. It can be seen that its role is very important for mobile phones, because only when the mobile phone is connected to the SIM card can it use the operator's communication network and enjoy communication services.

With the coordinated development of smart devices, SIM cards have been shrinking from the standard original cards the size of bank cards, going through Mini-SIM cards, Micro-SIM cards and Nano-SIM cards. At present, eSIM cards are the best solution for the development of SIM technology, embedding smaller SIM cards into the integrated module of mobile phones. This is the eSIM card we will talk about next.

eSIM card, or Embedded-SIM, is an electronic SIM card. Compared with the original SIM card, eSIM technology brings three major changes:

• First, after removing the card slot, the problem of connection reliability is solved, which brings freedom to terminal design. Since the chip is embedded in the device, the waterproof and shock-resistant performance of the device can be comprehensively improved;
• The second is that the SIM card can be remotely configured and programmed through OTA (Over the Air). The advantage of this is that users can flexibly choose the networks of multiple operators and freely access the network anytime and anywhere without going to the business hall;
• The third is that eSIM will bring about multi-scenario application scenarios, making access to pan-terminals more convenient and bringing more possibilities for the application of the Internet of Things.

Behind every change is the concentrated reflection of user pain points. Mobile phone manufacturers want to make simpler, more beautiful and stable mobile phones to improve user experience, and users want more convenient and flexible Internet access processes, which naturally promotes the upgrading of SIM cards. Although eSIM may not be the end of the evolution of SIM cards, there is no doubt that with the trend of embedded Internet of Things and the development of 5G ecology, the evolution of SIM cards must go through the eSIM era. However, the evolution process is still full of challenges and opportunities.

2. The evolution of eSIM is full of challenges and opportunities

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(1) Reluctance of mobile operators

Mobile operators are worried that the high-stickiness user dependence created by SIM cards will be destroyed by eSIM technology that can switch operators freely. This is the main reason why mobile operators have not made up their minds to promote it in a large scale for so many years. In fact, operators have always relied on physical SIM cards and signed "long-term contracts" with users to make huge profits. Obviously, the emergence of eSIM has destroyed the long-term validity of such contracts and broken the balance between operators and users. The long-term business model of operators may be disintegrated due to coercion.

On the other hand, cost considerations are also one of the reasons why mobile operators are reluctant. For operators, the large-scale promotion of eSIM card technology requires adjusting user data, which requires necessary transformation of the network and operation systems of the three basic telecommunications companies. Operators also need to make technical preparations, build databases, transform networks, expand and transform existing equipment, and handle management issues such as billing and number query.

This is not the end. Now our mobile phone numbers are widely used in various industries, such as banks, securities, insurance and many other third-party platforms. Therefore, in order to ensure user experience, these third-party platforms must also be transformed at the same time. This is a huge project. Although it is convenient for the people, it is only troublesome for enterprises.

It is expensive and laborious, and it is likely to reduce its own user stickiness. If you were in my shoes, would you still insist on eSIM cards? Although this is the case, as mentioned at the beginning, it seems that domestic and foreign operators are awakening and starting to deploy eSIM technology. However, experts speculate that operators are not promoting eSIM for mobile phones at all. Their focus is on the Internet of Things. According to professional organizations, by 2025, the number of M2M (Machine to Machine) connected devices in the world will reach 30 billion. These devices rely on eSIM-related network technologies to connect to the Internet, which is a huge piece of cake for mobile operators.

(2) Terminal equipment vendors are ready to go

It is hard to say whether the eSIM card storm that has been launched under the banner of "no card, more freedom" is just a carnival for terminal equipment manufacturers. However, the development of eSIM cards is more beneficial than harmful to terminal equipment manufacturers. First of all, due to the reduction of the physical space of the eSIM card and its embedded integration, eSIM is simply too cool for many mobile phone manufacturers - it saves space, facilitates design, and reduces difficulty and cost. In the world of mobile phone manufacturers, product technology is updated and iterated very quickly. When a new technology is integrated into the mobile phone industry, it becomes a stepping stone that mobile phone manufacturers keep chasing, which is bound to form a fierce competition situation of "if he has it, I must have it too".

With the popularity of eSIM card technology, there is more room for imagination in the future form of mobile phones or other electronic devices. The early deployment of this function is beneficial to the future development of such products. Terminal equipment manufacturers such as Apple and Huawei continue to introduce new mobile phones and smart wearable products, proving that they are using the imagination given by eSIM. However, for domestic mobile phone manufacturers, they seem to be a little powerless in the face of imagination.

If a mobile phone with integrated eSIM card is launched, not all cities in China will have eSIM service, so the sales are worrying. If the traditional SIM card slot is retained in addition to the integrated eSIM, it is a bit of putting the cart before the horse. In short, in China, eSIM cards may serve wearable devices in the early stage for some time to come, focusing on "eSIM one number two terminals", that is, a mobile phone with a physical SIM card installed and a smartwatch with an integrated eSIM card share a phone number, which can receive calls and text messages at the same time and share traffic. When exercising outdoors, you can leave the cumbersome mobile phone at home, and use a smartwatch to solve emergencies.

Although domestic terminal equipment manufacturers have not yet made great efforts in the face of the trend of eSIM cards, eSIM cards have given them imagination and made them ready to go. With eSIM cards, terminal equipment manufacturers can bypass operators and connect directly with users, which is why terminal equipment manufacturers are willing to vigorously promote eSIM.

Undoubtedly, this has always been the pipe dream of terminal equipment vendors, but it seems unlikely at present, so they began to imagine another way: since they can't beat them, they can become them. 15 companies including Xiaomi and Alibaba have obtained virtual operator licenses with the approval of the Ministry of Industry and Information Technology. They have become operators from terminal equipment vendors. Of course, the scope of their business cannot be compared with the three major domestic operators, but in the face of imagination, would you still say it is impossible? Let's wait and see.

(3) Users who call for freedom are both excited and afraid

In the south, during typhoon days, because of the hot and humid weather, people have a saying about typhoons: they are afraid that they will not come, but they are also afraid that they will come randomly. Users also have this feeling about eSIM cards: they are both looking forward to and afraid of them. They look forward to the freedom and convenience that eSIM cards bring, but they are also afraid of the IoT security issues that come with eSIM cards.

The eSIM card breaks down the barriers between operators. Users can freely choose the network with one card, forcing operators to make changes and provide better and more reasonable services. It combines technologies such as facial recognition to complete the online interaction between users and operators, saving a lot of time and resource costs for both parties. Users do not need to go to the business hall every time they have something to do.

At the same time, due to the accelerated penetration of the eSIM card industry chain by terminal equipment manufacturers, more products integrating eSIM card technology will flow into the market. Users can use simpler and more beautiful mobile phones and more imaginative smart devices. For users, these changes brought by eSIM are indeed worth looking forward to.

The biggest threat to the IoT world is security, and this is no exception for eSIM. With the development of eSIM technology, there are a lot of different terminal equipment manufacturers, including large and small companies. Can users trust them with their contract information with various operators? How can they ensure that it is not tampered with or leaked? These are all questions worth thinking about.

All data exchanged from the end device to the server (and vice versa) must be handled in a secure manner, and although the IoT industry is mature enough to solve this problem, new technologies still bring new security vulnerabilities and gaps. For example, for eSIM-equipped devices that eventually become waste, there is a high risk of illegally reusing or reverse engineering devices that were previously associated with a personal identity.

If the legitimate owner does not properly disassociate the user credentials, the device and user credentials may still be available to hackers. Since the ESIM will be programmed remotely, all user credentials will essentially be shared over the air, which makes the ESIM architecture open to side-channel attacks. If hackers are able to penetrate the communication between the ESIM and the platform, they can access the actual carrier profile, which can be used in many fraud cases.

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3. The interconnection of all things is the essence of evolution and will eventually lead to a dynamic balance

Mobile operators are reluctant because they are afraid of losing users, while terminal equipment vendors are ready to take action not only because of cost reduction but also because of user preferences, but they are also limited by the development plans of mobile operators.

Users' call for freedom has triggered competition among terminal equipment manufacturers. However, the lack of adequate supervision may make users worry about security issues. Meanwhile, user feedback is closely related to the business development of mobile operators. It can be seen that in the evolution of eSIM cards, every role is indispensable. The direct or indirect connection between mobile operators, terminal equipment manufacturers and users constitutes the dynamic evolution of eSIM cards.

When eSIM was not yet familiar to people, softSIM, vSIM and iSIM gradually surfaced. Various technology pioneers were ahead of the eSIM card. Will this trigger a new round of evolution? If eSIM is at least a hardware, then softSIM, vSIM and iSIM simply go all out and completely eliminate the hardware.

For example, softSIM relies on operating system software to implement SIM functions. There is no actual physical chip. After the baseband is modified, the baseband redirection directly interacts with the operating system layer through other interfaces, and there is no need to access the SIM hardware. Huawei's Skylink is developed based on HiSilicon's softSIM technology.

The biggest constant in the world is that things are constantly changing. Precisely because they are interconnected, one move can affect the entire body. The eSIM card is currently the first move. It is undeniable that there will always be someone involved in this move, whether it is a mobile operator, a terminal equipment manufacturer, or even a user. No matter how it evolves, it will eventually reach a dynamic balance.