I was wrong about folding phones: They are going to change the mobile industry after all

I was wrong about something. We might as well get that out of the way. It happens, and when it does, it’s usually a good thing. Being wrong is always a learning moment for me, and I usually come out the other side smarter and wiser for it, so everybody wins.

Anyway, what I was wrong about this time was folding phones. They actually serve a purpose, and they are very significant to the mobile space, and I will explain why.

 

The problem with folding phones

Let me backtrack a bit though: I wasn’t wrong about the insanity of folding phone price points (at least currently), especially given that the price elasticity of smartphones for the vast majority of the public seems to have reached its breaking point at or about $1,200. With most smartphone customers no longer upgrading their phones every year (the upgrade cycle seems to be inching its way from two years to three), it was inconceivable to me that so many handset makers would choose this time to introduce folding phones no one asked for, and at $1,800 to $2,600 a pop. As my good friend Christopher Penn put it: “You’re getting two devices in one, for the price of three.” The economics of that product strategy just didn’t make sense.

“But Olivier, it’s a brand new technology! They’ll get cheaper!” But will they? Have iPhones gotten cheaper now that they aren’t a new technology? The point is that currently, being a folding phone doesn’t appear to be a built-in feature of flagship phones. Folding phones are a separate, new device category, and they cost 1.5x to 2x the price of an already overpriced flagship smartphone. That is a problem.

 

The other problem with folding phones

My other concern was that folding phones didn’t address a pressing consumer need: Ask any smartphone user, and what they actually want from a smartphone falls more along the lines of longer battery life, faster charging, more horsepower, more memory, faster downloads, unbreakable screens, wireless charging, and even the return of the phone jack. I know for a fact that consumers will pay a premium for those features. I don’t know that anyone, save for tech enthusiasts with money to burn on the latest gadgets and fads (formerly referred to in media circles as “Glassholes”), would drop two bills on a phone just to be able to fold it. The question that kept coming up was “But why?” And to me, especially as a former product manager, that was the most pertinent question of all.

 

But then, the rubber started hitting the road…

I went to Mobile World Congress looking to have someone – anyone – change my mind about this. Maybe I was wrong. Maybe I was missing something. For three days, I walked the show floor, checked out Samsung’s folding phone, Oppo’s folding phone, Huawei’s folding phone, Xiaomi’s folding  phone… all the folding phones in all their splendor. And you know what? Some of them really are gorgeous feats of design and engineering. I heard people complain that they were too thick when folded, but I don’t really think so. The product design teams behind some of these phones did a pretty stellar job. But… I still wasn’t convinced: As well made as they were, why would anyone want one, especially for a premium+ price? I was still missing the point of the whole thing, other than that handset makers wanted to inject something new and exciting into the smartphone space this year to reinvigorate the market, and that they did it because they could.

But then, I had dinner with my friend Pete, and Pete provided me with the insight that made me understand why folding phones were a lot more revolutionary than I originally understood. And indeed, folding phones might just be significant enough to give Apple some very serious headaches in the next few years… IF a couple of things happen. Let’s not get too far ahead of ourselves though. We’ll come back to Apple in a moment. First, I need to point out what Pete clued me in on.

So… Pete and I are having dinner with a bunch of mobile industry folks, and the subject of folding phones comes up. Naturally, I start pontificating about the silliness of the whole thing, and for a while, he listens, but then he grabs his bag, opens it in front of me, and pulls out a phone and a tablet, and knots of wires and dongles. He holds this all up and says “I’m okay paying extra not to have to carry all that crap everywhere. Put all of this into just one device and I’m there.”

And you know what? After a week of hopping around airports and days of walking the length of Gran Fira and back, the thought of being able to consolidate phone and tablet into one device that fits into your pocket and doesn’t require a bag made a lot more sense than when I was comfortably sitting in my office, sipping espresso at my desk in front of a laptop the size of a small surfboard.

So… Eureka! A purpose finally emerges.

But that wasn’t what changed my mind. That was just the first step. The problem of price still remained, and Chris’ math still applied: Two devices in one, for the price of three. Convenience or not, price is still a problem. Or is it? We will come back to that.

 

… And a picture of Android vs Apple started to emerge that was a lot more relevant than I originally realized.

Right about then, it also started to occur to me that there was an Apple vs Android dimension to this discussion, and that was when things started to get more interesting. Let me break down the building blocks of what I am about to share with you, because unless you were sitting in the same briefing rooms as me during MWC19, you might have missed two or three little pertinent details:

1) Apple is always notably absent from Mobile World Congress, and 2019 was no different. And while that might have been a way to seem cooler than the rest of the class in the days of Steve Jobs, it is just plain dumb for Apple to skip MWC today. There is zero advantage whatsoever to staying home when every other mobile and mobile-adjacent company in the world meets to show the world where the future of mobile is going. Apple should attend and dominate it. Both figuratively and physically though, Apple being absent from Mobile World Congress sends the message that Apple is also absent from the future of mobile. This is especially true now that Apple’s dominance and influence are waning. 

2) Apple has, thus far, failed to catch the 5G train. Android owns 5G right now, in no small part because of Qualcomm, whose solutions (modems, RFFE, and even XR) Apple has inexplicably decided to cut itself away from. Meanwhile, Apple is still a 4G company, and that’ a problem. You can argue that “it’s too soon to get into 5G” until you are blue in the face, but that argument just doesn’t hold water. No company deliberately opts to fall years behind the rest of the market because it can “win later.” That’s nonsense. Here is the score: While the rest of the mobile ecosystem is racing forward, Apple is still stuck in the past. It’s sad, it was unnecessary, and it doesn’t exactly spell leadership or relevance, particularly for a company currently being accused of patent infringement and dealing with injunctions relating to the iPhone in multiple countries. You will understand why this matters in a moment.

3) Lastly, Apple failed to catch the folding phone train. While I originally considered that to be a good decision, the fact is that by not developing the same engineering capabilities and technical competencies that will allow android handset makers to develop future generations of folding phones and other folding devices, Apple is falling even further behind the industry. In short, the longer it remains entrenched inside of its own bubble, the more Apple loses its ability to design for the world outside of it. Apple already no longer has a finger on the pulse of cool, fast, new, remarkable, or relevant. The company that Steve Jobs built now seems stuck in a vicious time-warp in which it spends 12 months out of the year squandering stellar engineering talent on bringing incremental improvements to 2012 products.

Apple should have had a folding phone, it should have had it this year, and it should have been the best folding phone on the market, period. And Apple should have also been the first handset maker to announce a 5G phone. Unfortunately, these things did not happen, and we are about to dive into why that matters.

 

Folding phones are game changers, not because they fold but because they unfold, and that essentially makes them tablet killers.

Here’s the thing: Folding phones don’t fold shut. That’s a diminutive way to look at what they do, and the wrong way to understand their value to users. What those phones actually do is expand into tablets. They aren’t folding phones at all. They are unfolding phones. Two devices in one. A tablet that doubles as a phone and that folds to fit into your pocket. That’s what they are. And so the moment that folding phone prices drop to within $100 of the price of a flagship smartphone + the price of a tablet, that is when folding phones will become a viable commercial product.

Here’s the challenge for Apple: Folding phones are tablet killers. That’s what they are. There aren’t two ways about it. And so Apple is now confronted with an impossible choice: If Apple chooses to remain relevant, cutting edge, and competitive in the mobile market by jumping into the folding phone arena, it will do so knowing that a folding iPhone will cannibalize its iPad revenue. But if Apple decides to try and protect its iPad business by not releasing a folding iPhone, it runs the risk of making not only iPad but iPhone irrelevant to savvy and fickle mobile consumers who want more from their mobile devices than decade-old functionality.

In other words, Apple now has to decide if it is ready to challenge its own iPad business from the inside or if it would rather just watch its Android competitors kill it from the outside. If Apple doesn’t figure this out by the time folding phones drop to within $100 of the total price of a flagship phone + a comparable tablet, Android folding phone makers stand to take a considerable bite out of the old Apple.

Another way to look at it is to think of folding phones as Android’s way to Marie Kondo the pockets, purses and bags of mobile users everywhere. Apple, in comparison, runs the risk of becoming an ecosystem of bulk and clutter, and that does not spark joy.

 

In closing…

I was wrong about folding phones. They aren’t useless. They aren’t a fad. They aren’t insignificant or stupid. They are still too expensive for what they are, but that is a hurdle that can be overcome.

Folding phones could very well be the future of smartphones – or at least their next chapter. And the faster pricing gets down to where it needs to be, the faster folding phones will become the new mainstream form factor for handheld devices, with or without Apple.

Cheers,

Olivier