What does the UE (User Equipment) consist of in UMTS?

The UE consists of the ME (Mobile Equipment) — the physical hardware — and the USIM (UMTS Subscriber Identity Module) — a smartcard containing all subscriber-specific data.

ME (Mobile Equipment):

• The physical device: phone, USB modem, laptop with UMTS module, mobile hotspot
• Contains the radio transceiver, processor, display, etc.

USIM (UMTS Subscriber Identity Module):

• A smartcard (the SIM card) that stores all user-related data
• Contains: subscriber identity (IMSI), authentication keys, phone book, service preferences
• Portable — you can move your USIM to a different device and keep your identity/number
• More advanced than GSM's SIM — supports mutual authentication (the network proves itself to the phone too, not just the other way around)

Compared to GSM: UE = MS (Mobile Station). The terminology changed, but the concept is the same. The key upgrade is the USIM's enhanced security capabilities — GSM's SIM only authenticated the user to the network, while USIM also authenticates the network to the user, preventing fake base station attacks.

Go deeper:

• USIM (Wikipedia) — the USIM application on the UICC smartcard: how it stores the IMSI and keys and adds mutual authentication over GSM's SIM.