Samsung's Foldables: Betting on AI and Premium Pricing to Defy Smartphone Stagnation

The smartphone market is in a rut. Global shipments have been declining for years, with only one segment showing consistent growth: foldable phones. Samsung, the pioneer of this category, has staked its future on these devices, but is the bet paying off? With competitors nipping at its heels and Apple preparing to enter the fray, Samsung's foldable strategy hinges on two pillars: premium pricing power and AI-driven differentiation. Let's unpack whether this is a sustainable growth lever or a risky gamble.

Market Leadership in a Niche, but Margins Are the Prize

Samsung's foldables account for less than 2% of the global smartphone market, yet they contribute significantly to its bottom line. Analysts estimate foldables generate roughly 16% of Samsung's mobile division revenue, thanks to sky-high price tags—like the Galaxy Z Fold 7's $2,000 starting price. This premium strategy is critical because:
- High margins: Foldables command a 30-40% gross margin, versus 10-15% for mid-tier phones.
- Brand prestige: Samsung has successfully positioned foldables as a status symbol, converting 8% of U.S. foldable buyers from iPhones in early 2024.

But here's the catch: Samsung's global foldable market share dropped to 45% in 2024 from 54% in 2023, as Chinese rivals like Honor and Oppo undercut prices. Meanwhile, Motorola's Razr series gained traction in Europe, growing sales by 58% year-over-year. The question is: Can Samsung maintain its premium pricing while competitors eat into its volume?

AI: Samsung's Secret Weapon or Overhyped Gimmick?

Samsung's latest foldables aren't just about hardware—they're software battlegrounds. The Galaxy Z Fold 7 integrates Google's Gemini AI for features like real-time noise cancellation in video calls and AI-generated outfit suggestions. This contrasts sharply with Apple, which is still mired in delays for its own AI assistant, Apple Silicon-driven models.

The bet here is that AI integration will become a must-have, turning foldables from a novelty into a productivity tool. Analysts at Counterpoint Research note that 43% of foldable buyers cite AI features as a key purchase driver, suggesting this could be a meaningful growth lever.

But there's a risk: If AI adoption stalls, Samsung's focus on software could backfire. Competitors like Huawei, despite U.S. sanctions, are already rolling out homegrown AI coprocessors to rival Gemini. The stakes are high—dominating this space could lock in long-term customer loyalty.

Competitive Threats: China's Charge and Apple's Shadow

Samsung's biggest vulnerability is its shrinking lead over rivals. Chinese brands now control 55% of the global foldable market, with Huawei's struggles (due to chip shortages) offset by Oppo's aggressive pricing. Even worse, Apple's rumored foldable iPhone launch in 2026 could shake the entire ecosystem.

Analysts at DSCC warn that Apple's entry could double foldable market size by 2028, but Samsung needs to act fast. Its response? Targeting ultra-premium segments with models like the Z Fold 7's $2,000 price tag—a bet that Apple's entry won't cannibalize its top-tier market.

Supply Chain Resilience: Navigating Tariffs and Rare Earths

Samsung's supply chain strategy is another layer of its defense. The company has diversified its component suppliers to mitigate U.S. tariffs, while stockpiling rare earth metals to counter China's export controls. For example, its Galaxy Z Flip 7 FE (the budget model) uses local South Korean manufacturers for hinges and displays, reducing reliance on Chinese suppliers.

This diversification isn't just about cost—it's about speed to market. Samsung's ability to launch new models quickly (like its 2025 tri-fold prototype) could keep it ahead of competitors stuck in supply chain bottlenecks.

Investment Thesis: Overweight If AI Fuels Mainstream Adoption

Case for buying Samsung (SSNLF):
- Foldables are a high-margin growth engine in a stagnant market.
- AI integration (via partnerships like Gemini) creates defensible moats.
- Supply chain agility shields against geopolitical risks.

Case for caution:
- Apple's 2026 entry could disrupt pricing and innovation.
- Chinese competitors are closing the gap in both price and features.

Recommendation: Overweight Samsung if you believe AI will mainstream foldables by 2026, pushing adoption beyond the current 1.5% of the global smartphone market. If AI fails to deliver, Samsung's bet could become a costly distraction. The stock's P/E of 12x leaves room for upside if foldables hit $25 billion in annual revenue by 2025 (vs. $14 billion today).

The verdict? Foldables are no longer a niche—Samsung's success now depends on whether AI can turn them into must-have devices before Apple's entrance. Investors willing to bet on that should buy now.

Disclosure: This analysis is for informational purposes only and does not constitute investment advice.