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Gone are the days of wrestling with tiny SIM cards–welcome to the world of eSIMs, where switching networks is as easy as a tap on your screen.
eSIMs, or embedded SIMs, are digital SIM cards that integrate directly into mobile devices, eliminating the need for physical SIM cards. First introduced in 2016, they gained significant attention in 2022 with the launch of the first eSIM-only smartphones in the U.S. and continue to grow in popularity due to their convenience, portability, and travel-friendliness. The global eSIM market, valued at approximately $9 billion in 2023, is expected to grow 11% YoY, reaching nearly $14 billion by 2027. Projections estimate that 75% of all smartphones will be eSIM-connected by 2030.
This growth is driven by the rising adoption of IoT-connected devices in machine-to-machine applications and consumer electronics, which account for around 70% and 30% of the market share for each respective technology. Eventually, most devices will be eSIM only—this revolution is not optional. As it further impacts the telecommunications value chain and transforms the user experience, manufacturers and telco companies must adjust to shifting needs.
How eSIMs both benefit and disrupt the telecommunications value chain
The shift towards eSIM cards is causing a gradual decline in market position for physical SIM providers, although demand still persists in developing markets. However, eSIMs provide substantial opportunities for device manufacturers, mobile virtual network operators (MVNOs), and end users.
Leading mobile device manufacturers like Apple, Google, and Samsung have quickly adapted, integrating eSIM technology to enhance phone and tablet functionality while boosting the user experience. eSIMs have also allowed manufacturers to eliminate SIM card slots, freeing up design space.
MVNOs are leveraging eSIMs to streamline the customer onboarding process, enabling users to switch carriers and plans digitally without needing a physical SIM card. This flexibility allows MVNOs to offer more dynamic and tailored service options, improving customer satisfaction. Additionally, eSIMs help MVNOs reduce operational costs.
For consumers, eSIMs provide enhanced connectivity, better network management, and greater flexibility in choosing and switching mobile operators without a need to visit stores. The largest use case to date has been around travel, as travel eSIMs provide savings of up to 35% over traditional roaming plans. This trend has prompted telcos to enhance their offerings or partner with providers in popular destinations. Even users with telecom providers that do not offer roaming eSIM services can buy travel eSIMs or use eSIM apps that offer these services from companies such as Airalo or Holafly. If this trend continues, operators are projected to lose $3.9 billion in roaming spend to travel SIM and eSIM packages by 2028.
How eSIMs will continue impacting telco operators
Traditional telcos have been hesitant about eSIM technology as physical SIM cards provide an additional hurdle for customers looking to switch carriers. As switching becomes much easier, telcos need to up their game when it comes to understanding and retaining customers. The rise in eSIMs at the same time that large operators double down on fiber may not be a coincidence.
The residential space will soon see an uptick in customer-centered integrated offerings to drive loyalty and prevent switching. Thanks to GenAI, telcos can understand and hyper-segment customers with such granularity that each can be treated as an individual. This “industrialized customization”—which many other industries have already adopted—allows telcos to offer tailored messages with specific value propositions at the individual customer level, without complicating delivery.
eSIMs also present a significant opportunity to offer improved services and capitalize on emerging markets like IoT and private networks. The biggest commercial opportunity for telcos lies in the IoT market, where worldwide revenue is expected to double from approximately $330 billion in 2023 to around $740 billion by 2030.
And this is just the connectivity part. Industry standards for operating and orchestrating the IoT ecosystem have yet to be established. eSIMs enable seamless remote provisioning and device management—it is now up to the operators to define what role they wish to play. They can stay in the connectivity space and hope to expand revenues, knowing that large chunks will be stolen by third parties operating in the wholesale realm. Or they can finally step up and provide solutions to customers desperately waiting for these new eSIM offerings.
With private networks, eSIMs improve connectivity and network management through over-the-air programming, creating a space for telcos to provide customized solutions for government facilities, manufacturing sites, and academic campuses.
Overall, we believe that leading telco operators have matured to a point where they can become the ultimate solution for many of these small- and medium-sized business (SMB) customers. By partnering with satellite communications services, starting to integrate with fiber offerings, and creating new alliances to expand their ecosystem, telcos are moving in the right direction. Their fundamental challenge will be to accomplish the above without becoming a reseller—it will be interesting to watch upcoming consolidation trends in the B2B space.
The future of mobile connectivity is digital
The arrival of eSIM technology marks a significant digital transformation in the relationship between subscribers and device and network providers. As eSIM capabilities increasingly integrate into devices, networks, and user ecosystems, they will revolutionize the telecommunications industry.
However, in the grand scheme of things, this is yet another wake-up call for telco operators that the good old days are over. But they do not need to fight change—they can use these new capabilities to their advantage. Change is always scary for large corporations, but those that embrace it with a growth mindset can successfully reinvent themselves and evolve rather than grow obsolete.
