A requisite of the mobile phone age, produced in the billions, is disappearing from the first mobile phones: the SIM card. Developed in 1991 by the Munich-based company Giesecke Devrient, the company now also sells a digital version called eSIM, which is built into the phone as a chip without a plastic card. “In the USA, the iPhone 14 no longer has a slot for a SIM card, only a built-in eSIM,” says DG CEO Ralf Wintergerst.
SIM stands for “Subscriber Identity Module”. The original purpose of the cards was the clear authentication of users in the mobile network, but many security functions have now been added. One of the practical benefits of the eSIM is that no physical card has to be inserted into the slot – a more or less difficult finger exercise depending on skill. Vacationers or business travelers overseas have often bought a second SIM to prevent an astronomically high telephone bill. Several contracts can run simultaneously on an eSIM.
Target group of the eSIM mainly machines
But with the eSIM, the company primarily has a target group in mind that neither makes calls nor writes Whatsapp: machines. “Today, the eSIM system is also installed in BMW models, for example,” says Wintergerst. “We are investing heavily in IoT solutions to expand connection services between the connected devices.”
The “Internet of Things”, known as “IoT” in the industry for short, is now the actual growth market. The Hamburg-based market research and consulting company IoT Analytics estimates that there were 14.3 billion networked devices worldwide by the end of 2022, of which almost 2.9 billion via mobile communications, as a spokesman explains. Most of the other machines are connected to the outside world via WLAN or Bluetooth.
According to a forecast by IoT Analytics, by 2027 there could already be 27 billion networked machines and devices, six billion of them via mobile communications. And one day in the not too distant future, the number of machines with cellular connectivity is expected to exceed the number of people on the planet.
Many applications conceivable
There are many conceivable applications – primarily equipment and machines that move or are remote from a server. Cars are just one example. “Our newly acquired subsidiary Mecomo, for example, offers track and trace” – meaning “search and find” – “and services for large logistics companies,” says Wintergerst.
“It can be used to determine where a product is currently located. I thought this would be a problem that had been solved long ago, but it isn’t.” Even at airports, luggage containers are often left lying around – “and the staff have to search for fifteen minutes before they find the right one. That’s relatively easy to solve,” says the manager.
As another example, the G D CEO cites digital agriculture. “Sensors can be used to measure the state of irrigation and plant growth.” Since the sensor has to transmit the measurement results to a server, a connection is required. In fields, pastures and in the orchard, Bluetooth or WLAN cannot be used due to insufficient range; the obvious solution is a mobile phone connection.
Desirable market for telephone providers
Due to their rapid growth, machine customers are naturally also a popular market for telephone providers. According to IoT Analytics, Deutsche Telekom was in fifth place in 2022 with a global market share of a good five percent. Compared to some human customers, machines are presumably pleasant to deal with: They don’t complain angrily about dead spots, but at most transmit error messages.
“We delivered our first SIM card to Mannesmann, virtually sawing it out by hand,” says Wintergerst. “Over the years we’ve made about nine billion units. It used to be a physical product that we were paid a monetary amount for per unit.”
According to the manager, the eSIM chip is installed during the manufacture of the phone – “and we receive fees for activation and software licenses from the customers in a completely digital business model.”
Other SIM card manufacturers besides G D
There are now other SIM card manufacturers in addition to G D. It is no longer possible to determine how many cards have been produced worldwide since the first mobile phones were launched in the 1990s. According to the International Telecommunications Union (ITU) in Geneva, at the end of 2021 there were 1.7 billion mobile phone contracts in China alone, 361 million in the USA and 106 million in Germany. In many other countries, too, there are more mobile phone contracts than inhabitants.
Mobile phones have comparatively short product cycles, and many people like to buy the latest models. This becomes visible in the figures from the German digital industry association Bitkom: Since 2006, more than 284 million mobile phones have been sold in Germany.
Since often only the phones are changed while the contract is still running, this cannot be equated with SIM sales. But there can be no doubt that the number of cards is still increasing.
But the days of rapid growth in the human market are over. 2015 was a record year in Germany with over 26 million smartphones sold in Germany. In the meantime, annual sales have leveled off at a good 22 million units. Bitkom expects smartphone sales to remain stable at a very high level in the coming years, according to a spokeswoman. “In particular, smart devices such as smart watches and other wearables continue to grow.”
