Could a new kind of SIM card change everything in the mobile industry?

It’s time to bid physical SIM cards farewell.

In 2016, a 16-year-old girl from Thrissur in India swallowed a SIM card. She was excited about a news item on the TV, and she was removing the SIM with her teeth at the time. It got quite serious, as the girl ended up in the hospital. Fortunately, doctors succeeded in removing the card, and she made a full recovery.

What’s interesting about this story is the detail about the teeth. In short: the SIM card was located so inaccessibly in the mobile, the girl had to bite it out.

Why is it so hard to change SIMs? Well, the cynical answer is that mobile operators designed it this way. They don’t like churn. They want to make it more difficult for you to change networks. One way to do this is to make the SIM card small and fiddly, with a slot that’s hard to open.

This might explain why the SIM is still a physical card when nearly everything else on a phone has turned into software.

Think about it. Your camera, your MP3 player, your address book, your alarm clock. All software.

But your SIM card? Still a tiny bit of plastic you have to remove with your incisors.

Well, maybe not for much longer.

Interestingly, at around the same time as the Indian SIM swallowing incident, Samsung began shipping its Gear S2 watch. Why is this relevant? Because the S2 was the first smartwatch to ship with a GSMA-compliant eSIM.

When it was unveiled, the eSIM represented a major change of heart by the world’s mobile networks. As the name implies, eSIM is not a physical card. Instead, it is a programmable module that is soldered into place. Rather than being fixed to one carrier, it can connect to a wide number of networks worldwide.

Strictly speaking, the eSIM is not entirely software. It is physical, but it is embedded (hence ‘e’). However, it still kickstarts the process of letting people switch more easily between networks.

So why would carriers support this?

There’s a simple answer: The Internet of Things. Mobile operators know that there’s a huge opportunity to connect everything from cars to watches to lightbulbs.

The Ericsson Mobility Report projected that the number of cellular IoT connections is projected to reach 5 billion by 2025. Clearly, in a world of flatlining mobile subscriber growth, mobile operators want to make sure IoT takes off. They also know that IoT manufacturers are not going to build fingernail-sized SIM slots into smart luggage and connected pet collars. The eSIM gives these companies a chance to build smart connected products they can ship and sell anywhere in the world.

So the obvious question is: what about phone makers? Have they switched to eSIM too?

Not really. The transition to eSIMs has been slow. Some Google Pixel models, Samsung Galaxys and iPhones support software-based SIMs, but all of them support a physical SIM setup too.

The mold was broken by Motorola when it announced its Razr phone in November. The foldable handset doesn’t have a SIM tray at all. It connects only with an eSIM. To sync with a network, Razr owners will (usually) scan a QR code sent to them by their chosen network. One ‘snap’ and they will be connected.

Time will tell if all phones go this way. If they do, how could that change the balance of power in the mobile space? Well, it depends. On the one hand, the carriers could still lock people in. The eSIM might make it technically easier to switch, but people could be unable to do it until the end of the contract.

At the other extreme, consumers might be able to choose their carrier connection at a moment’s notice. They could swap around all the time by simply browsing a menu of networks – like they do with wifi.

In the latter case, power might move towards companies such as Truphone that host the menus. Handset companies might also get stronger. After all, they wouldn’t need to enter into partnerships with carriers or even get their phones in shops. They could sell handsets online.

The embedded SIM will make all these scenarios possible. What would make them even more feasible is an entirely software-based SIM.

Soft SIMs are not embedded. They are just code. For now, they are pretty rare. Their main challenge is security. SIM stands for ‘Subscriber Identity Module’. It contains highly sensitive information about the user. Turning the SIM into just another line of code on a phone makes it more vulnerable to hacking. Nevertheless, whether eSIM or soft SIM or some other variant, some insiders think that the old physical card is on the way out.

Last month, Truphone predicted that, by 2024, seven billion eSIMs will be activated in consumer and IoT devices around the world. Anticipating this, the company has already launched an app that lets any user of an Android phone with an eSIM easily connect to operators in more than 100 countries.

For app developers, any change in SIM format will probably have few short term consequences. That said, if eSIMs and soft SIMs succeed in connecting billions of ‘things’, this could open up opportunities for developers to create new apps that help people manage their smart homes and workplaces.

Similarly, there might be demand for products that let consumers manage their network choices and keep track of their connection histories.

Where there is change, there is opportunity, right?