Removable SIM Card Shipments Will Remain on a Downward Trajectory; Pricing Pressures Have Returned, with Market Positives Coming from eSIM and SGP.32

By Phil Sealy | 4Q 2024 | IN-7551

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The Subscriber Identity Module (SIM) card market continues to be one of turbulence. Although the issues of chip shortage and allocation, which hindered the market post-COVID-19, can now be considered over, the Embedded SIM (eSIM) impact is really beginning to take hold. Removable SIM card shipments continue on a downward trajectory and 2024 marks the beginning of removable SIM card pricing pressures returning to the market.

At the same time, eSIM continues a positive growth trajectory, primarily driven by the consumer market in the shorter term, with an expectation that improved Internet of Things (IoT) growth will commence in the midterm, driven by the release of SGP.32. But what does this mean for the ecosystem, how will the market develop, and what should be top of mind from a smart card vendor strategy perspective?

SIM card shipments (a combination of removable and eSIMs) hit 4.09 billion in 2023, representing a Year-over-Year (YoY) decline of -7.2%. The year 2024 will be mixed, with some opportunity countered with negative market dynamics, but overall expected to achieve minor growth of +2.5% YoY. These positive and negative dynamics are outlined below, but will result in a market that can be described as one of consolidation and recovery:

1. Slow recovery in China
2. Continued impact from eSIM in the United States
3. Positive adoption of 5G SIMs in India
4. Continued pressure on the removable market as Consumer Electronics (CE) device churn rates reduce

Although slightly recovering in 2024, removable SIM card shipments will experience a steady decline over the forecast period from 3.73 billion in 2023 to 3.69 billion in 2028. This reduction will primarily be driven by an expectation that Apple will begin expanding its eSIM-only smartphone devices into select countries, including Canada, France, Germany, the United Kingdom, South Korea, and Japan, alongside China and an expectation that Mobile Network Operators (MNOs) will begin supporting smartphone eSIMs. Both will likely start in 2026.

The overall trend of Average Selling Prices (ASP) increases can now be considered over and 2024 is marking the first year when significant pricing pressure returns. This has partially been driven by a concerted effort by Chinese vendors to expand outside of localized markets with most of the pressure noted in select regions, most predominately within Southeast Asia and Latin America. Despite significant ASP pressures beginning to hit the market in 2024, the fact remains that pre-COVID-19 pricing is not expected to return in the shorter term. In 2029, SIM card ASPs will have dropped by -16% compared to 2023 ASPs, but will still be 5% higher than 2019 levels. The trend in ASP decreases will need careful monitoring. As prices decrease, foundry prioritization will shift toward higher margined solutions, which, in turn, could put pressure on supply and result in a potential repeat of the supply shortage experienced post-COVID-19.

eSIM continues its positive trajectory, although slightly halting in 2023, driven by macroeconomic conditions related to the consumer market and lack of specification for IoT devices. A return to more significant eSIM growth is expected within the consumer market in 2024, as the smartphone market continues a path of recovery, then joined by a secondary growth channel in 2025/2026 as the SGP.32 specification becomes fully ratified and commercially available, finally helping unlock the elusive IoT opportunity.

From an IoT perspective, the release of SGP.32 (currently expected in late 2025/2026), will have an immediate and positive impact on the IoT market, with two growth vectors. In the shorter term, growth will be driven by net-new connection types in the form of asset trackers and water and gas metering applications, and then a secondary vector for the automotive industry, which will switch over to SGP.32 over the mid to longer term to future-proof their respective connectivity solutions.

The business transition to eSIM is now in full swing and smart card vendors need to be fully ready. Within the United States, the eSIM impact has been immediate, driven by the Apple eSIM-only smartphone range of devices. This should be used as a case study to help SIM card vendors understand the potential impact eSIM-only devices will have on their removable SIM market businesses within other countries/regions.

SIM card vendors also need to be fully aware that significant pricing pressures are returning to the market and vendors need to be mindful of market share gains versus margin protection strategies. Chinese vendors are aggressively targeting regions outside of their home market, and a selective approach to project support might be the best way to avoid a further acceleration of margin and pricing erosion.

As for the IoT, the full ratification of SGP.32 is nearing, and smart card vendors need to be fully monitoring the SGP.32 specification. Although the standard has yet to be fully ratified, industry confidence is extremely strong. Subsequently, pre-certified solution development is not considered a significant risk. In fact, it is the opposite, and those with pre-certified solutions will be in a stronger position to transition to a fully-certified SGP.32 solution once it becomes commercially available.

From a platform perspective, SIM card vendors need to create a simplified eSIM IoT journey, setting up partnerships or capabilities that span chipset and module vendors, Mobile Virtual Network Operators (MVNOs) and MNOs, and Original Equipment Manufacturers (OEMs). Although SGP.32 is designed to help simplify IoT eSIM adoption, there is no getting away from the fact that it is still complex with multiple relationships and partnerships required for an enterprise to fully launch, manage, and maintain.