SIM slidin’ away

SIMalliance, the industry association that includes most major SIM card vendors, has just published its annual data on SIM card shipments. The most significant points highlighted by SIMalliance include:

• SIM alliance members shipped 4.9 billion SIMs in 2017,

• The total available SIM market is estimated at 5.6 billion units, representing a 2.75% growth vs. 2016,

• Growth is unevenly spread between geographies: China still has a 25.5% year-on-year volume increase while Europe is now a static market,

• M2M is gaining momentum with a 106% increase in volume of soldered SIMs designed for M2M applications in 2017,

• eSIM technology becomes a key enabler for IoT applications.

Even if these figures appear as positive, old timers in the industry remember the 1990s and earl 2000s when annual growth figures surpassed 40% for many years in a row. The SIM card, remains the largest market segment in volume for the secure transaction industry, but, due to heavy competition, prices have been squashed and the segment no longer represents the major source of income of the industry.

Leading secure transactions industrialists are no longer heavily investing in SIM developments. For instance, if one reads carefully the project drafted by Thales for the future of the Gemalto entity, SIM cards seem to have an insignificant place, and some analyst anticipate Thales might divest totally from this market segment to concentrate on cybersecurity.

At the same time, IDC published market figures showing a 1% decrease in smartphone unit shipments in Europe: only 361 million smartphones were sold in 2017 while 374 million units were sold in 2016.

Analysts also agree on a drop in the smartphone shipments in China. Canalys estimates 91 million units were delivered in Q1/2018 vs. 114 million units in Q1/2017, representing a stunning 21% drop in volume. Other analysts have different positions: GfK estimates the year-on-year drop in volume to be only 6% while Counterpoint estimates it to reach 8%.

The drop in smartphone shipments goes hand-in-hand with the SIM card slow growth to indicate the market has changed forever. Two factors remain on our horizon to anticipate a return to a better situation: the IoT, but we all know the market is developing slower than initially anticipated, and the switch to 5G that is still a few years away in terms of significant volumes for handsets and SIMs.

The shift away from a SIM-centric industry is defining an era change. Future will tell whether industry analysts and company strategists are right in their decisions to focus on cybersecurity as their future core business to recover and achieve better revenues and margins.