Analyst: Hard-wired Apple SIM in iPad Pro could lead to one in iPhone

The cellular-enabled version of the new 9.7-inch iPad Pro will include an embedded Apple SIM, just as other recent models have. Rather than a physical SIM card, though, the new SIM won't be removable.

And that could signal bigger plans for Apple's iPhone.

Apple (NASDAQ: AAPL) has packaged a removable SIM in its tablets since 2014, enabling users to switch between operators and to access cellular networks in foreign markets. The responses from U.S. carriers have been predictably mixed about Apple giving its customers the chance to jump from carrier to carrier on their iPads: Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) have supported it out of the gate, while cellular-enabled iPads sold at AT&T's (NYSE: T) retail stores are tied to its network. And Verizon (NYSE: VZ) packages a separate SIM in the iPad, disabling the Apple SIM that can access multiple networks.

The smaller iPad includes both a removable SIM and one that's hard-wired to the tablet and can't be removed. And that's an indication that Apple may extend its SIM strategy to its iconic iPhone, Ken Hyers of Strategy Analytics said.

"In itself the new iPad's eSIM isn't such a big deal," Hyers wrote on his Strategy Analytics blog. "However, it likely presages an eSIM in an upcoming iPhone, something that operators have been bracing for, for some time. Short of offering its own MVNO, from a carrier perspective an eSIM iPhone would be the most destabilizing change Apple could make to their existing iPhone business model."

Just a few weeks after the Apple SIM was introduced in 2014, Apple's Greg Joswiak said the company hadn't discussed using the SIM in the iPhone because most phones are sold through carrier channels. "I don't think you're going to go to the Verizon store and say, 'Can you hook me up with AT&T?," he said.

But times have changed for Apple's smartphone business. Sales of the iPhone are flattening, and the company is increasingly emphasizing revenues from its mobile services as well as its hardware. Apple still doesn't want to infuriate its carrier partners, but the benefits of offering an Apple SIM with its iPhone may outweigh the risks.

"With an eSIM equipped iPhone a customer need never directly interact with an operator again, instead provisioning service and switching from carrier to carrier at the customer's whim," Hyers concluded. "Adding an eSIM to the iPhone would be a direct shot across the bow of carriers. With eSIM, Apple's grip on the customer will become even tighter."

For more:
- see Ken Hyer's Strategy Analytics blog post

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