A Samsung Group Foldable Phone Shouldn't Scare Apple Inc.

By Markets Fool.com

Samsung , which recently launched curved smartphones like the Galaxy Note Edge and Galaxy S6 Edge, could unveil foldable smartphones by 2016, according to Business Korea. However, Samsung promised the same thing last year, claiming that it would launch foldable phones by 2015.

Continue Reading Below

Why is Samsung fascinated with curved screens and foldable phones, and can these devices actually widen its defensive moat against Apple and cheaper Android rivals like Xiaomi?

Samsung's dire situation
Samsung's global smartphone market share slipped from 29% to 20% between the fourth quarters of 2013 and 2014, according to IDC. Last quarter, Samsung's mobile profits plunged 64% year-over-year.

Samsung is stuck between a rock and a hard place. Apple negated its big-screen advantage with the iPhone 6, while low-margin rivals undercut its flagship Galaxy devices with powerful but cheap Android devices. Samsung continued launching a wide variety of phones at all price tiers, but it still sold fewer smartphones worldwide than Apple during the fourth quarter.

To diversify away from smartphones, Samsung launched six smartwatches in less than two years to expand into the wearables market. It also launched a VR headset with Facebook's Oculus VR, expanded its presence in smart home devices, and installed Tizen, its own OS, across smartwatches, smart TVs, and a smartphone.

Betting big on bending screens
In the smartphone market, Samsung looked for a way to get ahead of Apple again, as it did with big-screen phones like the Galaxy S3, the top-selling smartphone of 2012.

Continue Reading Below

Samsung's solution was to tap into the bending AMOLED displays which it had been developing for years. That experiment produced curved devices like theconcave Galaxy Round, the Galaxy Note Edge, and the three-sided Galaxy S6 Edge. It also applied the same screen-bending technology to its new curved TVs. Fully foldable smartphones would seem like a logical next step.

The S6 and S6 Edge. Source: Samsung.

Samsung isn't the only company to adopt this strategy. Its South Korean rival LG, which was overtaken by Xiaomi as the world's fifth-largest smartphone maker in 2014, has also launched several curved smartphones and TVs.

Why Samsung's foldable phones won't arrive in 2016
Samsung might believe that it can launch a foldable smartphone by next year, but there are some major problems with that plan.

Although Samsung has developed foldable displays, other smartphone components -- like the mainboard, camera, and battery -- certainly aren't as flexible. Therefore, a foldable smartphone would still need to contain unfoldable parts.

Another issue is the price. Curved screens are pretty, but they're pricey. Samsung's 32GB Note Edge initially cost $1,130 unlocked. The 64GB S6 Edge will reportedly cost about the same. By comparison, an unlocked iPhone 6 Plus costs between $749 (16GB) and $949 (128GB). Therefore, Samsung's curved devices depart from its standard strategy of selling flagship devices at slightly lower prices than Apple. Fully foldable phones would likely cost much more.

Lastly, Samsung might be developing products for a non-existent market. Just as with TVs, Samsung will have a tough time convincing consumers that an expensive foldable smartphone is anything more than a gimmick.

More realistic applications
A foldable phone definitely wouldn't be the silver bullet Samsung needs to shoot Apple with, but foldable displays have other noteworthy applications.

Samsung could enhance its smartwatches with full wraparound displays, which could make the Apple Watch look dated. Samsung could use those flexible touchscreens on smart appliances like microwaves, refrigerators, and washers, which it intends to connect to its smart home network via Tizen and its new SmartThings hub.

The Kickstarter-backed Moment wraparound smartwatch. Source: Kickstarter.

Foldable smartphones, however, probably won't arrive until after foldable screens appear in mainstream ultramobile laptops, hybrids, or tablets.

Samsung's future doesn't depend on gimmicks
Samsung's scattergun strategies and gimmicks loom large in tech headlines, but its mobile business can't recover if it doesn't address the core problems.

Samsung has to match the prices of low-end rivals like Xiaomi in China and Micromax in India. Like Microsoft, it needs to link the feature phone and smartphone ecosystems to encourage users to upgrade to Samsung smartphones. To offset lower margins, it needs to imitate Xiaomi and reduce its marketing budget by relying more on e-commerce partners than brick-and-mortar ones across Asia.

Lastly, Samsung should avoid launching pricier phones than Apple, since it arguably lacks the latter's high-end appeal. That's a tough balancing act to pull off, which could be disrupted by pricey curved and foldable screens.

The article A Samsung Group Foldable Phone Shouldn't Scare Apple Inc. originally appeared on Fool.com.

Leo Sun owns shares of Apple and Facebook. The Motley Fool recommends Apple and Facebook. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.