Apple Working With Gemalto For Special iPhone SIM Card

There is speculation that Apple could be considering offering future versions of its mobile phones with an Apple contract thereby cutting out the mobile operators, after a report suggested that Apple is working with SIM card maker Gemalto.

According to an 27 October report from GigaOm, Apple is working with Gemalto to create a special SIM card for the iPhone.

The website cited several sources from inside several European carriers.

Activation Via Apple?

The integrated SIM would enable customers to purchase iPhones directly from Apple, whether in-store or over the web, and to choose their carrier at the point of purchase. Reportedly, the activation of the smartphones – normally the role of the carrier – could be accomplished via a download from Apple’s App Store.

The Gemalto SIM, reports GigaOm,

…is embedded in a chip that has an upgradeable flash component and a ROM area. The ROM area contains data provided by Gemalto with everything related to IT and network security, except for the carrier-related information. The flash component will receive the carrier-related data via a local connection, which could be the PC or a dedicated device, so it can be activated on the network. Gemalto will provide the back-end infrastructure that allows service and number provisioning on the carrier network.

Carrier Elimination

With Apple providing the SIM and activation, the customer contract could be with Apple, not the carrier, which would eliminate much of the carrier’s muscle and guaranteed two-year revenue, as well as create more options to customers – and revenue for Apple.

If successful and eventually brought to the United States, the model could let Apple succeed where Google failed with the Nexus One, which it tried to sell directly through its website.

“Unlike with the Google Nexus One, customers could go to an Apple store and check it out… and walk through activation at the Genius Bar, instead of trying to do it on the web,” Ken Hyers, an analyst with Technology Business Research (TBRI), told eWEEK. “I can see this working in the US, and it would be a real game changer. The carriers currently have had a strangle-hold on phone distribution, but Apple really does have the heft, the ability, to shift the market.”

While handset manufacturers traditionally teamed up with software makers, Apple made the move to offer – and control – both, a trend that Nokia, with MeeGo, Hewlett-Packard, with webOS, and Samsung, with Bada, have worked to copy. Taking on part of the carriers’ current role would be consistent with Apple’s desire to control all aspects of the iPhone ecosystem.

Operator Fightback

Feeling their control waning, the top five operators in Europe are currently in discussions to create a new operating system, which would provide them with more control, as well as additional revenue through applications. Were Apple to begin infringing on their turf with its own SIM, the move would provide greater impetus to pursue their own OS, as well as to more aggressively court other handset makers, says Hyers.

“The potential impact for US operators could be huge, since Apple will hold a significant amount of leverage and be able to negotiate preferential pricing. Whether it actually passes on those price-savings to its customers is an open question, but it would have an opportunity to do so as needed to fend off competition from Android OS devices and RIM BlackBerry,” explains Hyers.

While Apple dominates the US smartphone market, data shows Android to be quickly gaining on it. According to comScore, from July through August, Apple’s iOS ran on 24.2 percent of smartphones, while Android ran on 19.6 percent – putting the newcomer within 5 percentage points of the leader. In April, the report continued, iOS held a solid 25 percent of the market, showing Android to be eating away at Apple’s lead.

If Apple is already feeling competitive pressure from Android, a new model with the Gemalto SIM would likely force the market to further team up against it.

“I think that if Apple moves to this model,” said Hyers, “operators will more readily embrace other handset vendors in an effort to reduce Apple’s influence in the smartphone market.”