The Growth and Challenges of eSIM in Smart Wearable Devices

TapTechNews September 16th news, eSIM, as one of the key connection methods for smart wearable devices to achieve independent communication, enables smart wearable devices to have the possibility of becoming the second independent smart terminal.

In the second quarter of 2024, Canalys smart wearable data shows that the US market has become the country with the largest shipment of eSIM devices in the watch category of smart wearables, with 1.9 million eSIM devices, accounting for 33.9% of the SIM connection method. The Chinese market is second only to the US, with the shipment of eSIM devices reaching 1 million, accounting for 10.8% of the connection method.

But from the perspective of category proportion, in the US market driven by Apple, the eSIM shipment mainly comes from smart watches, while in the Chinese market it is different. The eSIM basic watches of Chinese manufacturers also add momentum to the growth of eSIM watch shipments.  

The report mentioned that the players providing eSIM basic watches in the Chinese market mainly include vivo, Honor, and Xiaomi, all of which belong to the players in the mobile phone manufacturer ecosystem, and all have released one or more eSIM basic watches, but each has different strategies:

vivo, as an earlier player in the eSIM basic watch, targets the mid-to-low-end consumer group and continuously iterates. The currently available eSIM basic watch WatchGT can have the lowest price of 799 yuan and brings AI elements and long battery life in conjunction with the mobile phone, providing consumers with a cost-effective choice.

Honor focuses on the mid-market. In addition to integrating the eSIM function into its Watch4 series, it also adds dual standby (for receiving SMS and missed call notifications from two lines), ECG (available for the Watch4Pro model), and WeChat functions to distinguish it from other competing products.

Xiaomi goes to the high-end, combines the eSIM function with sports watches, and applies it to the WatchS4Sport sports watch, aiming to attract those users who pursue a high-quality life and focus on technological experience, bringing users a more intelligent and more convenient smart wearable choice.

In the short term, adding the eSIM function to basic watches provides consumers with a more affordable wearable device product with networking capabilities, helping more consumers get in touch with and consider purchasing such products and promoting the penetration rate of eSIM devices in watches. But in the medium and long term, the long-term growth of eSIM in basic watches still faces some challenges, and TapTechNews summarizes the report content as follows:

Limited application scenarios still exist: Currently, eSIM smart wearable devices in general user application scenarios still will not completely break away from smart phones and become an independent second terminal. The eSIM can only meet the communication problems in individual specific use scenarios or when it is inconvenient to use mobile phones, and the usage frequency is limited. And for basic watches, basic watches usually do not have a complex application ecosystem and strong processing capabilities, and it is still a bit difficult for applicati ons with high-frequency usage potential such as real-time navigation, streaming media, and ride-hailing, which requires manufacturers to further develop the platform to expand the application scenarios of the eSIM function and improve the stickiness of users to this function.

Cost-benefit considerations: Cost-benefit considerations are on the one hand for manufacturers and on the other hand for consumers. For manufacturers, although the eSIM is delegated to more affordable basic watches, it can bring about an increase in shipments for the manufacturer in the short term. The introduction of the eSIM technology requires continuous investment in the background support system and platform research and development to ensure the stability and innovation of the service. Therefore, overly compressing the price of eSIM watches may limit the investment ability of the manufacturer in subsequent product iterations and affect technological upgrades and market competitiveness. Secondly, for consumers, the popularization of the eSIM technology in basic watches undoubtedly reduces the threshold of this function and makes it closer to the mass consumption capacity. However, in practical applications, considering that the eSIM currently mainly meets limited communication scenarios, consumers need to bear the additional fixed package cost every month, which to some extent increases the cost burden of long-term use. In the current context of the wearable device market mainly based on one-time purchases, the long-term cost investment characteristics of eSIM watches require manufacturers to provide matching or even exceeding the expected supporting services and experiences, thereby attracting users willing to invest in the eSIM function continuously for a long time.

Operator restrictions: Chinese operators are still relatively conservative in promoting the eSIM service, and there are still restrictions in the package model, brand, and degree of independent online handling, and the services provided by different suppliers are also different, which not only affects the usage experience of consumers but also limits the expansion of the market. Especially for the basic watch market, with a low pricing and limited profit space, operators may lack sufficient motivation to promote relevant services, resulting in limited assistance to the eSIM for the basic watch operation channels.

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