According to the smart wearable data from Canalys in the second quarter of 2024, the United States became the country with the highest shipment volume of eSIM devices for smart watches, reaching 1.9 million units and accounting for 33.9% of the SIM connection method. China ranked second to the United States, with eSIM device shipments reaching 1 million units and accounting for 10.8% of the connection method. However, in terms of category proportion, the U.S. market is driven by Apple, with eSIM shipments mainly coming from smart watches. The situation is different in the Chinese market, where Chinese manufacturers' eSIM basic watches also provide additional momentum for the growth of eSIM watches.

The main players in the Chinese market that provide eSIM basic watches include Vivo, Honor, and Xiaomi (01810), all of which are players in the ecosystem of mobile phone manufacturers, and each has released one or more eSIM basic watches. However, each company has different strategies.

Vivo, as an early player in the eSIM basic watch market, targets the mid-to-low-end consumer group and iterates continuously. The currently available eSIM basic watch, Watch GT, is priced as low as 799 yuan and comes with AI elements that are connected to smartphones, as well as long battery life, providing consumers with a cost-effective choice.

Honor focuses on the mid-range market and incorporates eSIM functionality into its Watch 4 series, as well as adding dual standby (for receiving text messages and missed call notifications from two lines), ECG (available on Watch 4 Pro models), and WeChat functionality to differentiate it from other competing products.

Xiaomi, on the other hand, targets the high-end market by combining eSIM functionality with sports watches, applying it to the Watch S4 Sport sports watch. This aims to attract users who pursue a high-quality life and value technological experience, providing users with a smarter and more convenient choice for smart wearables.

In the short term, adding eSIM functionality to basic watches provides consumers with a more affordable, internet-enabled wearable device product, which helps more consumers to consider purchasing such products and promotes the penetration of eSIM devices in watches. However, in the medium to long term, the long-term growth of eSIM in basic watches still faces some challenges:

The application scenarios are still limited: Currently, eSIM smart wearable devices still do not completely replace smart phones in general user scenarios, and remain an independent 'second terminal'. In most cases, eSIM can only meet specific usage scenarios or communication problems in situations where using a phone is inconvenient, with limited frequency of usage. Moreover, for basic watches, they usually lack a complex application ecosystem and powerful processing capabilities. For applications with high-frequency potential use, such as real-time navigation, streaming media, and ride-hailing, they still face some challenges, requiring manufacturers to further develop the platform to expand the application scenarios of eSIM functionality and increase user stickiness to this feature.

Cost-effectiveness considerations: Cost-effectiveness is a consideration for both manufacturers and consumers. For manufacturers, although integrating eSIM into more affordable basic watches can bring short-term growth in shipments, the introduction of eSIM technology requires continuous investment from manufacturers in backend support systems and platform development to ensure service stability and innovation. Therefore, excessively reducing the price of eSIM watches may limit the investment capabilities of manufacturers in subsequent product iterations, affecting technological upgrades and market competitiveness. Secondly, for consumers, the popularization of eSIM technology in basic watches undoubtedly lowers the barrier to this feature, making it more accessible to the general consumer. However, in practical use, given that eSIM currently mainly meets limited communication scenarios, consumers need to bear the monthly fixed additional package costs, which to some extent increases the long-term cost burden of usage. In the current wearable device market, which is generally dominated by one-time purchases, the long-term cost investment characteristics of eSIM watches require manufacturers to provide corresponding, and even exceed consumer expectations of supporting services and experiences, in order to attract users to be willing to make long-term and continuous investments in eSIM functionality.

Operator restrictions: Chinese operators are still relatively conservative in the promotion of eSIM services. There are still some limitations in package modes, brands, and the degree of independent online processing, and different suppliers provide differing services. This not only affects the consumer's user experience but also limits market expansion. Especially in the basic watch market, with limited profit margins due to lower pricing, operators may lack sufficient motivation to promote related services, resulting in limited benefits of eSIM for the basic watch operation channels.

To sum up, in the Chinese market, the application of eSIM to basic watches injects new vitality into the Chinese basic watch market. However, in the medium to long term, the penetration of eSIM in basic watches still faces challenges such as limited application scenarios, cost-effectiveness considerations, and operator restrictions. In the future, with the continuous maturity of technology and optimization of the market environment, eSIM basic watches are expected to further expand their application boundaries and bring a more diverse and rich smart wearable experience to users.