A new report from ABI Research says that SIM card replacement rates have gone down in recent years. The increasing price of smartphones is considered the main reason behind this. For the first time in over five years, SIM card sales went down in 2018. In all, 5.53 billion SIMs were shipped and a 0.1 percent Year on Year decline is also expected this year.
Consumers Are Holding On To Their Pricey Phones For Longer
These days, it's not unusual for flagship smartphones to carry a price tag of around $1,000 and as a result demand has been impacted. To make the most of their purchase, consumers are holding on to their handsets for longer. Wireless service providers have adapted accordingly by increasing subscription contracts from 18 – 24 months to 36 – 48 months. As a result, SIM card replacement rates have also decreased.
The problem has further been exacerbated by market conditions in the Asia Pacific region. For instance, roaming fees in China have been relaxed and thus, there is less of an incentive for consumers to own multiple SIMs. In Indonesia, the government has mandated SIM card registration and this has affected demand. In India, mobile operator mergers, and the end of 4G marketing has proved to be a challenge.
eSIMs are expected to pick up some of the slack and offset the reduction in SIM card demand to some extent. eSIMs are currently supported by a handful of smartphones, including the iPhone XR, iPhone XS, iPhone 11, and Google's Pixel range.
According to a report by Transparency Market Research, the eSIM market will grow at a CAGR of 13.5 percent between 2017 and 2025. eSIM edges out the conventional SIM cards in various areas. For instance, changing the mobile operator is much simpler with this technology.
eSIMs Are Unlikely To Impact SIM Card Replacement Rates Significantly
eSIMs are not perceived to be a threat to removable SIMs until 2024 at least. That's because dual SIM smartphones which feature a removable SIM card as an eSIM slot are expected to sustain demand. Moreover, it will take some time before eSIMs take off.
Overall, ABI Research believes that demand for SIM cards will reduce from 5.2 billion this year to 5.0 billion in 2024.
According to the analytics firm Gartner, smartphone shipments will decline by 3.2 percent this year. The firm says the market has never been hit this hard. However, with the introduction of 5G handsets, the situation is expected to improve slowly. In fact, the market is finally forecasted to grow by 2.9 percent next year. That being said, shipments aren't likely to reach 2018 levels until 2021. By 2023, more than half of smartphones are expected to offer 5G connectivity.
As major carriers all over the world roll out the next generation of wireless networks, we can also expect 5G promotions to intensify. This may give a boost to SIM card replacement rates marginally, as more people will be enticed to upgrade.
Furthermore, 5G handsets are expected to become more accessible from next year. Qualcomm has already announced that its upcoming Series 6 and Series 7 SoC will offer 5G support. This means entry-level 5G-handsets will also be announced next year.