eSIM for IoT Automation | Pipeline Magazine

By: Chris Jahr

The expansion of 5G networks is expected to enable an explosion of new IoT devices that require cellular authentication. Currently, cellular authentication is performed via SIM technology, which is itself undergoing a transformation from physical SIM cards to digital eSIMs.

But regardless of the form factor, the reality is that the SIM card industry is not equipped to scale to meet the expected growth in volume, especially when it comes to the needs of the ever-increasing number of IoT companies that will require smaller volumes of eSIM cards.

Let’s take a closer look at the causes of the coming eSIM crisis and consider what alternatives might exist for enterprises, IoT platform providers, and IoT device manufacturers.

For years, IoT ubiquity has been heralded as “just around the corner.” Yet somehow that corner seems to stay that way. One reason is that today’s IoT market is fragmenting in many directions, with the primary dividing line being how IoT devices communicate.

Today, many connected devices communicate via Ethernet, Wi-Fi, and other local area networks, including Zigbee, Z-Wave, Bluetooth, Thread, and Matter. IoT devices that use these communication channels include smart light switches, HVAC systems, security systems, irrigation systems, and a variety of smart home products.

The most popular network, Wi-Fi, presents several limitations, especially in industrial applications. To overcome these limitations, more and more companies are investing in private 5G cellular networks and deploying remotely connected devices such as water and gas meters and street lights, as well as connected scooters, e-bikes, and cars. As the demand for private cellular networks and remote IoT devices grows, the demand for 5G connectivity also grows, which in turn increases the demand for SIM cards.

From an operator perspective, IoT device cellular volume and transmission frequencies fall along a spectrum. At one end are streaming data, such as in always-on security applications. At the other end are devices that send small pieces of data at programmed intervals, such as smart gas meters that report usage hourly or daily.

The spectrum ranges have significant implications for operators’ ARPU (average revenue per user) calculations. For example, a remote video security camera using a 5G modem requires a high-volume data plan that could set an operator back $25 plus per month in subscription fees. An IoT device sending occasional bits of data might generate as little as 50 cents a month in revenue, which is too little to attract the attention of operators. Operators’ business models require them to focus primarily on the core users of mobile networks—the big spenders—rather than the more modest users.

A similar difference in attention occurs in the eSIM market.

First, a little background on the subscriber identity module (SIM) market. A SIM chip—technically a UICC, or Universal Integrated Circuit Card—is a specialized security device with a microprocessor, memory, and I/O functionality. Along with the carrier-specific information stored on it, a SIM card contains a unique identifier tied to a specific user account, which allows the device to securely access the cellular network. The purpose of a SIM card is to authenticate a device on the network, to ensure that the cellular resources the device consumes are tied to the actual subscriber who is paying for them.

SIM cards have been a part of mobile telephony since the first GSM cellular networks were deployed in 1991. An electronic SIM, or eSIM, is a digital version of a physical SIM; the UICC is now embedded in the device itself. Every IoT device that connects to a cellular network needs SIM technology. And that’s where the problems begin.

Since the early days of physical SIM cards, the expertise and processes for designing, developing, and deploying SIM cards—including receiving mobile network operator secure authentication keys, International Mobile Subscriber Identities (IMSIs), and other files for creating profiles and generating individual, secure SIM content—have been in the hands of a small handful of SIM card suppliers. These SIM card suppliers, located in Europe, Asia, or Brazil, also control the generation and deployment of digital eSIMs. (There are also a number of SIM card suppliers in China and India, but they mainly serve their local markets, operating much like European suppliers.)

The GSMA, a trade association representing the interests of the global wireless network operator community, estimates that the number of companies creating eSIMs is limited to fewer than 20, with three of these having a combined market share of more than 70 percent. This limited number of SIM card suppliers is accompanied by a serious shortage of SIM card expertise. Creating SIM profiles is a particularly complex undertaking that requires highly specialized expertise. It is estimated that only about 2,000 or 2,500 people worldwide can be considered SIM card experts. In North America, only 150 people have the expertise to profile and generate SIM cards.