Frost: Will High Capacity SIM, Near Field Communications Buoy Traditional SIM Market?
February 7, 2008 // Published as a news service by IHS
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The price and subsequent revenue decline in the subscriber identification module (SIM) smart card market urged silicon and SIM manufacturers to explore new revenue streams or find novel ways to milk the existing ones, according to Frost & Sullivan.
Silicon and smart card manufacturers are hoping that the increased adoption of innovative technologies, such as near field communication (NFC), mobile TV and high capacity SIM cards, will increase their unit shipment and revenue.
Recent analysis from Frost & Sullivan of the world SIM smart card market found earned revenues of $2.07 billion in 2006, with estimates to reach $4.58 billion in 2012.
The issue of continuously falling prices has been compounded by the influx of low-cost products from China, analysts said. Although companies are turning to NFC and mega SIM cards, they are still apprehensive about the high costs involved in the migration.
SIM managers at the operator level need to have a thorough understanding of the use of the additional memory, analysts said. Mobile operators are also reluctant to make the transition to mega memory SIM cards, as it would require investments in a completely new base of universal serial bus (USB)-enabled handsets that can support these new cards.
Analysts said SIM managers also have to make an extra effort to educate end-users about the various applications' content. Once the shift is made, however, silicon and smart card manufacturers should respond to mobile operators' demands and develop products and applications for these mega SIM cards.
The operators will have to rely on new subscriptions or upgrades of second generation (2G) to third generation (3G) handsets, as the cost of replacing a SIM card is usually 10 times the cost of the card itself, analysts said. The second option would be to issue lower cost cards to 2G customers and high-end 3G cards only to new subscribers in order to sell a greater number of cards.
Since high capacity SIM smart cards have no concrete cost structure, early movers will have an advantage, analysts said. They can generate healthy revenue growth rates before the market attains mass market status and prices stabilize.
A migration to high capacity SIM cards and applications is likely in the next few years, analysts said, as greater convergence of mobile phone applications is hiking the demand for more secure complex SIMs.
With the increasing number of multimedia applications, mobile network operators (MNOs) now seek SIM-based multimedia solutions to better serve their customers. For this integration, the SIM requires greater memory, analysts said. Applications, such as address book, calendar backup, messaging, teleconferencing and file transfers, as well as entertainment through gaming and chat services, encourage the migration process for a sustained professional and personal convenience.
This focus on solutions gained significance with card vendors branching out into other areas of operations, such as the Internet. The SIM smart card has integrated greater levels of support and security with cellular networks evolving from voice to data. Analysts said market participants can also persuade mobile operators to adopt advanced SIM technology by demonstrating how subscriber loyalty depends on the innovations in the SIM card.
Source: Frost & Sullivan.