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What are eSIM and iSIM, and why do they matter?

November 13 2019
by Brian Partridge, Raymond Huo


Introduction


Cellular networks are becoming a more attractive option for IoT device connectivity globally; diverse industries are starting to realize how virtualizing the physical world can achieve significant business outcomes. While most of the attention in the IoT market is focused on the applications, outcomes and advanced analytics of IoT sensor data, the connectivity layer is often overlooked because it is viewed as a commodity to be sourced from the lowest priced provider and thus lacking real innovation. This is far from reality, however. Over the past three years there has been significant innovations in cellular IoT connectivity at the network and identity management layers. Connectivity technologies such as LTE-M, NB-LTE and soon, 5G, have all been developed with a purpose-built approach to support IoT workload requirements such as supporting long battery life and lower costs.

According to a 451 Research IoT: Budgets and Outlook 2019 survey, 61% of organizations are turning to licensed cellular wide-area high-bandwidth connectivity (e.g., 4G-LTE, 5G, LTE-M) to support IoT initiatives. Most devices that connect to public cellular networks globally today use a physical subscriber identity module (SIM) card for device authentication. These removable cards take up a relatively large amount of physical space; i.e., dedicated real estate in a place where users can get to it. Outside of space, the physical SIM card has other limitations because it is easily damaged and more subject to theft and/or fraud. Moving forward, physical SIMs are ultimately heading to the annals of mobile history as more flexible alternatives have appeared, namely as embedded SIMs (eSIM) and integrated SIMs (iSIM) have emerged with a clear value proposition that we expect will overpower any resistance it may face from mobile network operators (MNO) that appreciate the physical SIM as a control point.

The 451 Take

The physical SIM card is today's equivalent to a DVD, while eSIM and iSIM present the next generation of cloud-based video streaming services. In 10 years, you might be able to find a few lying around, but the majority of the mobile industry we expect will have moved on. The value of embedding or integrating SIM functionality within the innards of mobile devices delivers value to both the device OEMs and device users. Excelling in both cost and physical space efficiency within a device footprint and providing individual or fleet users ultimate flexibility, the presence of eSIMs and iSIMs can make or break an IoT business case. The ability to use remote software update 'over the air' removes the need to physically remove a SIM card from a device in the event of switching network providers. The cost of said physical interventions are exacerbated when considering IoT device fleets that may be all over the world. The reason that eSIM hasn't taken off as fast as expected is because mobile network operators have been reticent to embrace the approach because they lose a key control point. We expect that ultimately this resistance will cede to logic and strong customer demand and the support of eSIM by Apple and iSIM by ARM are just what was needed to drive massive shifts in the SIM card mix.

What are eSIM and iSIM?


Embedded SIMs, or eSIMs, are physical SIMs that are embedded within a device's motherboard. Due to their relatively smaller size, eSIMs reduce overall bill-of-materials (BOM) costs. Promoted for at least the past five years by the GSMA (Global System for Mobile Association), 451 Research believes that eSIMs will spearhead the future of device and subscriber authentication throughout the industry.

A more recent evolution of the SIM that has yet to become an industry standard is the iSIM, which takes the e-SIM concept one step further by embedding the SIM into a system on a chip (SoC), further reducing device manufacturing costs. SoC leaders like ARM now include eSIM and iSIM support in their chip designs (Kigen family). ISIM is particularly relevant for IoT security applications because its SoC format prevents hardware tampering by securely locking in sensitive data on designated hardware.

In terms of similarities, eSIM and iSIM can both be used to perform remote SIM provisioning, allowing users or administrators to remotely monitor and change the profile of a SIM without human intervention. This feature is particularly crucial in the world of IoT, where there could be thousands or even millions of devices in remote locations that need to be managed.

Use cases and applications


ESIM and iSIM technologies are being driven by a series of use cases, applications and industry players. The impact of this technology for consumers is positive because it provides the flexibility to switch mobile operators without removing any hardware. For MNOs, remote SIM provisioning and management can deliver real operational benefits and cost reductions (i.e., reduced distribution costs) over the long run. For this reason, we've seen several operators step up to support eSIM including Verizon, AT&T and T-Mobile and all the major wireless carriers in Canada. Although eSIM and iSIM technology is universally recognized as the future of SIM technology, it's not practical to expect them to replace physical SIMs entirely overnight.

Since existing SIM technology and infrastructure has already been deployed and will be around for the foreseeable future, MNOs will need to support eSIM and iSIM technology alongside physical SIMs. Perhaps the largest barrier to success is the fact that MNOs will need to collaborate with each other in order to help customers maintain and manage different eSIM/iSIM profiles and ensure a smooth transition when switching between different providers. This itself raises a different set of concerns for operators because the increased flexibility of switching between different providers might potentially lead to an increase in customer churn.

In the B2B space, eSIM and iSIM will be a key enabler for enterprise IoT when cellular connectivity is viable. Since IoT modules have long lifecycles and are expensive when replaced, eSIMs and/or iSIMs allow manufacturers to standardize processes without having to accommodate multiple physical SIMs, resulting in significant cost savings. Enhanced security is another benefit, as manufacturers want to ensure that the heavy machinery they operate is not prone to attacks, which would result in downtime and loss of revenue for the company.

Security features


IoT devices need to have adequate security protocols in place to ensure privacy and both public safety and trust. According to 451 Research's IoT, Budgets and Outlook 2019 survey, security concerns are the #1 inhibitor to IoT success, and this has been a consistent headwind. Because eSIMs and iSIMs can't be physically removed in the same way as a traditional SIM card, they don't present the same security issues as physical SIMs; namely, theft or tampering. ESIMs leverage multi-factor authentication (MFA) to create a more secure method for authenticating access to data through means such as biometrics, tokenization or smart cards. ISIMs promise an extra layer of security since they rely on an additional layer of authentication called an IoT root of trust, which is a set of functions and mechanisms that must be met in order to be deemed trustworthy. This is accomplished through the integration of unchangeable security domains and standardized APIs that create a pre-defined level of trust. By enabling or disabling a SIM profile remotely, eSIMs or iSIMs provides a stronger layer of protection against device hacking, a key concern for IoT stakeholders.