Is eSIM the missing link for chipset manufacturers?
The eSIM is poised to radically transform modern connectivity. It won't just improve the devices we use, but the processes through which they are created.
An embedded SIM chip (eSIM) is soldered onto a device's motherboard during manufacturing. Users can then download a SIM profile as soon as they switch on.
It's entirely rewritable, removing the need for a consumer to procure an external SIM card every time they want to change their network provider. With an embedded chip, all the internal elements of a device are self-contained and don't need to be removed, saving space and allowing for more durability and water-resistance. For the consumer, it's nothing but good news.
But before a device makes it that far, a long and complex process of manufacturing, software design, and industry cooperation must be completed. The production chain for something as small as a smartphone or a connected watch consists of multiple different elements, all of which are essential but largely separate.
An Original Equipment Manufacturer (OEM) will design and assemble the final product, but SIM vendors, software designers, and chip foundries must also play their part.
The eSIM and the Chipset
So how does the eSIM change this? Two ways: by simplifying the production process, and by opening new channels of cooperation and collaboration between the disparate links of the connected device industry.
One of the first links in the production chain for any 'smart' device is the chipset manufacturer. These are the companies that assemble the essential information processing systems – silicon-mounted chipsets – that OEMs will need to make their devices function. Their role has always been essential but limited—until now.
In June 2018, STMicroelectronics – a Geneva-based company – became the first chipset manufacturer to gain GSMA-certification for eSIM integration. This means they can now sell chipsets with a rewritable eSIM built in. When an OEM buys their chips for a device, that package will include instant connectivity.
However, the eSIM won't just simplify things—for chipset manufacturers, it could be the basis for new partnerships and increased relevance within the value chain.
A New Role to Play
If chipset companies want to, they can still sell their product to OEMs, who would then decide how best to provision the connectivity in their devices. However, the chipset manufacturers could also take on the connectivity question themselves, by striking deals directly with SIM operating system (OS) providers and MNOs.
By working with SIM OS providers, network operators and cutting out the middleman, a company like STMicroelectronics could make their eSIM-enabled chipsets compatible with specific connectivity partners, giving them increased power within the connected device market.
Instead of losing their relevance as soon as the chips have been shipped to the OEM, deals made at this early stage could reverberate all the way to the consumer's experience.
What Comes Next?
There's an understandable concern that having a device locked to a specific network might deter users from picking that product.
However, promoting certain 'preferred' networks is likely to become an initial industry standard. Device makers like Apple have already started establishing partnerships with specific connectivity providers—the Apple Watch 3 carries an embedded SIM chip that is only compatible with EE in the UK. Chipset manufacturers can safely take the lead and enjoy the advantages that this move offers them. As this practice becomes more pervasive – which we expect – SIM manufacturers can benefit from recurring revenue streams.
In every aspect of the production chain, the eSIM can give manufacturers new ways to simplify and streamline the process. Chipsets could soon be shipped to an OEM with the SIM OS and full connectivity enabled, and the MNOs can gain cast-iron assurances that their services will be promoted in any device that carries their partners' chips.
Once again, it's a chance to build dynamic connections between previously isolated sections of the value chain—to create a simpler, more effective structure within connected device production. For OEMs, SIM OS providers, MNOs, and chipset manufacturers alike, the eSIM presents an opportunity that can't be missed.
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