Samsung's Foldable Future: AI and Innovation as Defenses Against Smartphone Stagnation

The global smartphone market has stagnated, with shipments declining for three consecutive years. Amid this slump, Samsung's foldable phone strategy has emerged as a beacon of growth, driven by premium pricing power, AI-driven differentiation, and bold technological bets. While near-term headwinds—such as niche market constraints and looming competition from Apple—pose risks, Samsung's focus on high-margin segments and ecosystem synergies positions it to capture value in a shrinking landscape. Here's why investors should pay close attention.

The Case for Premium Pricing Power

Samsung's foldables now command 16% of all smartphone sales priced above $800, according to Canalys, despite representing just 1.5% of total smartphone sales. This disproportionate influence underscores their premium pricing success. In Q2 2025, the Galaxy Z Fold 7 launched at $1,999, a 5% price hike over its predecessor, while the Z Flip 7 FE entered at $899, broadening accessibility without diluting flagship margins.

Chinese rivals like Huawei and Oppo dominate 76.6% of China's foldable market with subsidies and aggressive pricing, but Samsung's global reach and brand equity allow it to sustain higher prices. Its 32.9% global foldable market share (vs. Huawei's 23.1%) reflects a strategy of prioritizing profitability over volume in saturated regions.

Technological Bets: Tri-Foldables as a Niche Differentiator

Samsung's delayed global rollout of the tri-fold Galaxy G Fold—a $3,000+ device targeting 200,000 units in 2025—is a calculated gamble. While technical hurdles (e.g., hinge durability, battery capacity) exist, the model's limited launch in South Korea and China aims to test demand without overextending. Competitors like Huawei's Mate XT tri-fold have already gained traction, but Samsung's 40% share of foldable panel procurement in 2024 (down from 52% in 2023) highlights its supply chain prowess.

The tri-fold's potential lies in its “tablet-like” 10.8-inch display and integration with the Galaxy ecosystem. By focusing on enterprise users and hybrid work scenarios, Samsung avoids commoditization, a strategy that contrasts with Chinese rivals prioritizing affordability.

AI as a Strategic Moat

Samsung's partnership with Google's Gemini AI marks a pivotal move to future-proof its devices. The Z Fold 7 and Z Flip 7 feature AI-powered camera enhancements, contextual search, and productivity tools, such as Gemini Live's real-time translation and note-taking. This integration creates a sticky ecosystem, reducing price sensitivity among high-income users.

AI also addresses a key weakness: app compatibility. By leveraging Gemini's contextual understanding, Samsung mitigates concerns about foldable screen usability, a hurdle that has historically limited mainstream adoption.

Risks: Niche Markets and Apple's Shadow

The foldable segment's small size—under 2% of global smartphone sales—means Samsung cannot rely on volume growth alone. Chinese competitors are aggressively targeting this niche, with subsidies and faster innovation cycles. For example, Huawei's Magic V5 (priced at ¥8,999/ ~$1,260) offers a thinner form factor and larger battery than Samsung's Flip 7, threatening mid-premium pricing tiers.

Apple's anticipated 2026 foldable iPhone looms as the largest overhang. Its brand equity could redefine premium pricing benchmarks, but Samsung's early mover advantage and ecosystem depth—DeX platform, S Pen, and multi-device sync—provide a buffer.

Investment Outlook: A Long Game in a Shrinking Market

Samsung's near-term challenges—Q2 2025 foldable shipments down over 20% YoY due to panel overproduction—are outweighed by its structural advantages. Its 12x forward P/E valuation reflects skepticism, but investors should focus on margins. Foldables now account for 4% of total smartphone sales but 35% of operating profits, per Samsung's Q2 earnings.

Investment Thesis: Hold Samsung for the long term. The $30 billion foldable market (projected to grow 30% in 2026 with Apple's entry) will reward companies that innovate at the premium edge. Samsung's AI-driven differentiation and ecosystem lock-in make it a leader in a segment where hardware meets software value creation.

Final Take

Samsung's foldable strategy is a masterclass in premium market defense. By balancing technological boldness (tri-folds), strategic pricing discipline, and AI-driven ecosystem depth, it's turning smartphone stagnation into an opportunity. While risks remain, the playbook for sustained growth is clear: dominate the niches where value—not volume—reigns.