Mobile World Congress - Samsung May Leapfrog Apple with eSIM Phone Launch
Apple May Go Its Own Way
Sources said negotiations between Apple Inc. and network operators in 2015 and in early 2016 had originally targeted this year's Mobile World Congress in Barcelona (Feb. 27 to March 2) as a potential launch for the world's first mobile phone with eSIM technology. The embedded SIM card would enable consumers to switch service providers without needing a new SIM card. Apple, however, has gone quiet on its role in this new technology. A telecom executive said he believes the ongoing delays by GSMA to finalize specifications (see OTR Global's May 25, 2016 note) and severe security issues during test runs of devices (see OTR Global's Oct. 5, 2016 note) prompted Apple to go its own way and prepare a launch at a later date.
Multi-Carrier Tablets Already in 2017
Engineers who specialize in remote provisioning of customer data for mobile phones said Samsung Electronics Co. Ltd. (005930 KS) is expected to drive devices with embedded SIM cards into the market in Apple's absence. Three sources said they expect launches of eSIM tablets this year, followed by the first eSIM smartphone at Mobile World Congress 2018 (late February 2018). One high-ranking operator source said he believes both Samsung and Huawei Technologies Co. Ltd. plan to start selling eSIM tablets this year, though Samsung is expected to be the sole company to launch an eSIM phone at next year's Mobile World Congress.
Small Group of Operators
Tablets (iPads from Apple) and wearables (smartwatches from Samsung) with eSIM cards were already on the market last year, but only as operator-exclusive devices that did not allow consumers to switch between operators. This time, sources said, services on the tablets can be provisioned remotely over the air and from several service providers without getting stuck with just one carrier. When it comes to the smartphones, though, sources expect the first device to most likely be limited to a small group of operators. "This has nothing to do with exclusivity; this is more about the lack of skills. Some carriers are simply not ready to do this yet, and so maybe just a handful of names will move ahead with this," one source said, adding he believes two network operators in Europe and one each in the United States and China most likely have the overall process of provisioning, billing and security ready for the first eSIM phone launches early next year.
Special Setup for China Likely
Another source said discussions between operators and handset manufacturers on some technical details are ongoing. Both sides agree on the need for two secure elements in an eSIM phone (one for the embedded SIM card and one for other secure services like mobile payments). Samsung, as the new strong force in eSIM launches, prefers to use Infineon Technologies AG's secure element in its high-end Galaxy devices globally, with the exception of in China, where Samsung is believed to use NXP Semiconductors N.V. instead. (Apple's sole supplier to date is NXP.) Sources expect European and U.S. operators to insist on manufacturers using eSIMs from established Western vendors Gemalto N.V., Oberthur Technologies S.A. or German-based Giesecke & Devrient GmbH, though Chinese network operators are expected to insist on Chinese players Eastcompeace Technology Co. Ltd. (002017 CH), Watchdata System Co. Ltd. or market leader Hengbao Co. Ltd. (002104 CH). "Samsung is relatively weak in China, so they will just go with what the carriers want, I think," a manager from a network operator said. Sources expect G&D to win the eSIM contract for the tablets in 2017 and for the eSIM phone launch at Mobile World Congress 2018 due to a technological lead over its major two competitors in Western markets.