The new “must have” is a smartphone.
No, wait. That can’t be right. They have been around for 14 years. (Can you believe it?!)
Okay, then the new “must have” is a tablet.
No, that can’t be it either. The iPad came out over a decade ago.
That leaves us with one conclusion …
The new “must have” is both a smartphone and a tablet.
Now we’re on to something.
In an industry that can struggle to maintain innovation, the buzz is building over the next big thing …
How can one device be both a phone and a tablet?
It’s actually quite simple. The next generation of smartphones will be foldable.
I’m not talking foldable like the old flip phones that opened and closed on a hinge — with a screen on one side and buttons on the other. I’m talking about an honest to goodness smartphone that can fold into pretty much whatever device you need.
A well-respected Apple (NASDAQ:AAPL) analyst predicted this week that the largest company in the world (by market capitalization) will come up with a foldable iPhone in about two years. Ming-Chi Kuo of TFI Securities thinks it will have a foldable OLED display that can open up into an eight-inch tablet. That would make it slightly larger than the iPad mini.
“After 5G,” Kuo wrote to clients, “the foldable smartphone is the next innovative selling point of high-end models.”
It sounds kind of crazy, but I first wrote about foldable phones nearly a year ago after getting my first taste of them at the huge Consumer Electronics Show (CES) in January 2020 (just before Covid-19 hit). I was skeptical at first, but they turned me into a believer.
Foldable smartphones — like the one pictured here — are designed to bring even more convenience to people juggling multiple mobile devices. It can literally fold into and out of virtually any device as effortlessly as folding a piece of paper.
Say you’re texting a friend and they send you a highlight from last night’s game. You can unfold your smartphone into a tablet to watch it on a larger screen. Ready to go for a jog? Fold it back into a smartwatch and bring it with you. When you’re done, unfold it into a laptop to finish off the workday.
That may be a bit further into the future, but the possibilities are endless. So it’s no surprise that the world’s largest smartphone makers are scrambling to bring these phones to market.
LG (NYSE:LPL) allocated $8.5 billion to foldable displays, saying it wants to make them the new standard.
Chinese tech behemoth Huawei spent more than $15 billion on research and development in 2018.
Samsung, the world’s largest smartphone maker, led the way in 2020 with 87% of the foldable market. And according to Display Supply Chain Consultants, more than 5.1 million foldable and rollable smartphones are expected to be shipped this year.
There had been rumors that Apple is working on a foldable prototype, and thanks to Kuo’s new report, the buzz just picked back up.
Of course, the new phones have their doubters.
There were plenty of iPhone naysayers back in 2007, too, when the product first launched.
Microsoft’s (NASDAQ:MSFT) CEO at the time, Steve Balmer, rejected Apple’s new smartphone initially. In an interview with Bloomberg, he laughed off the idea, saying it would never sell because of the high price tag of around $500.
Jim Balsillie, the co-CEO of BlackBerry (NYSE:BB) maker Research In Motion, described it as “one more entrant into an already busy space with lots of choice for consumers.”
And Nokia (NYSE:NOK) Chief Strategist Anssi Vanjoki said the iPhone would remain a niche product.
Well, we know how that story ends …
Apple went on to crush the competition — including Nokia and BlackBerry, which didn’t spot the opportunity. It’s since sold more than two billion iPhones and turned into the world’s largest public company with a market capitalization of $2.2 trillion.
A similar opportunity to gain market share and dominate the next-generation smartphone field is cropping up today.
And this time, major smartphone makers are diving in headfirst. Smart investors should be, too.
A very small percentage of the world’s population is currently using foldable phones, but we will ultimately see 3.2 billion smartphones being replaced by foldables. And I predict the industry will grow in a few years to reach a $13.8 billion market!
Many investors are taking a conventional route to gain from foldable phones’ success. They’re looking at the obvious plays — the phone manufacturers like Samsung, Apple, and LG.
But not us.
Instead, I believe that the perfect strategy for investing in the coming foldable phone craze lies elsewhere — in the “picks and shovels” companies that make the “guts” of these next-generation phones.
Back in 2007, after Apple released the iPhone, a number of its suppliers hit it big. Semiconductor producer Skyworks Solutions (NASDAQ:SWKS) is up 23X since 2007.
And Cirrus Logic (NASDAQ:CRUS) — a maker of audio, voice and haptics products — has climbed nearly 11-fold since 2007.
We can make money in a similar fashion with foldable phones.
The biggest change between future smartphones and the ones we have now is the bendable screen. Without that technology, foldable phones are impossible.
That’s why I see such big opportunity in the select companies responsible for making the foldable displays. And it’s why I’ve created a portfolio of four such stocks in my Investment Opportunities newsletter.
It’s still early, and that’s the time to get in for the biggest profits.
On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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