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A Foldable iPad Wouldn't Be the Right Fit for Apple

Apple (NASDAQ: AAPL) could be developing a foldable 5G-ready iPad, according to IHS Markit analyst Jeff Lin (via Taiwan's Economic Daily News). The July 4 report, which cites supply chain sources, claims that the tablet could arrive as early as next year.

The launch of a foldable iPad wouldn't be surprising. Apple filed several patents for foldable devices and industry peers Samsung (NASDAQOTH: SSNLF) and Huawei recently launched foldable phones. But as an Apple investor, I'm not convinced that it would be the right move.

Apple's iPad Pro.
Apple's iPad Pro.

Apple's iPad Pro. Image source: Apple.

Why Apple might want a foldable iPad

A folding iPad might appeal to Apple for several reasons. First, it would diversify the company's business away from the almighty iPhone, which is struggling with a saturated smartphone market, long upgrade cycles, and tougher competition in key markets like China.

Apple's iPhone revenue fell 16% annually in the first half of 2019, but still accounted for 58% of its top line. However, its iPad revenue rose 19% during those six months and accounted for 8% of its top line. The iPad unit's 22% revenue growth in the second quarter also marked its strongest growth in six years.

Apple attributed that growth to a rebound in China, robust gains in South Korea, Japan, Mexico, and Thailand, and strong market demand for the iPad Pro. It also cited a study by 451 Research that found that, among customers who plan to buy tablets, 77% of consumers and 75% of businesses plan to buy iPads.

Based on those numbers, it makes sense for Apple to expand its lineup of iPads with fresh designs, and the latest moves by Samsung, Huawei, and others suggest that foldable screens are a design whose time has arrived.

Foldable screens could either make existing iPads more compact or allow them to fold out into larger desktop-like screens. Turning one of those screens into a keyboard could also make it a better replacement for traditional laptops.

Why it wouldn't be the right fit at the right time

A foldable iPad might appeal to certain customers, but the technology doesn't seem ready for prime time. Samsung's Galaxy Fold's launch flopped earlier this year after several screens broke, and the smartphone device was only recently relaunched after an embarrassing recall. Many consumers also scoffed at its lofty price tag of $2,000.

Samsung's Galaxy Fold.
Samsung's Galaxy Fold.

Samsung's Galaxy Fold. Image source: Samsung.

Huawei's Mate X smartphone launch went more smoothly, but it costs even more than the Fold at $2,600. Those high price tags indicate that foldable screens are still far too expensive to produce. Since Apple usually sells its products at much higher margins than Samsung or Huawei, a foldable iPad -- which would require a much larger screen than the Fold or Mate X -- could easily cost thousands of dollars.

For comparison, the highest-end iPad Pro still costs less than $2,000. When paired with a keyboard folio, the iPad Pro is already a more reliable laptop replacement than a foldable tablet with a touchscreen keyboard, which isn't ideal for serious typing or productivity tasks.

Launching a foldable iPad next year also doesn't fit Apple's tried-and-true strategy of letting other companies work out a new market's kinks before introducing a streamlined device. That's the pattern Apple followed with the MP3 player, smartphone, tablet, and smartwatch markets, so it wouldn't make sense for Apple to abruptly jump into the uncharted waters of foldable screens.

Lastly, Apple is reportedly developing its own MicroLED screens for next-gen iPads and Macs to reduce its dependence on Samsung's displays. It's unclear if these new types of screens will be foldable like OLED displays, which further contradicts the notion that a foldable iPad is on the way.

As always, a grain of salt

Investors should always take rumors about Apple products with a grain of salt, since they're a dime a dozen and frequently off the mark. I'm not saying that Apple won't eventually launch a 5G foldable iPad, but it just doesn't seem to be the right strategy for now.

More From The Motley Fool

Leo Sun owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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