Apple (AAPL 0.47%) has been witnessing resilient demand for its iPhones even though the overall smartphone market is in the soup, as was evident from the company's results for its fiscal 2023 second quarter (ended April 1), which were released on May 4. But there's one niche of the smartphone market the tech giant has yet to tap.

The Cupertino-based company is now the only smartphone original equipment manufacturer (OEM) that's yet to launch a foldable smartphone. This space is currently dominated by Samsung, which is followed by Chinese OEM Huawei. Other Chinese smartphone companies such as Oppo and Vivo also have a presence in the foldable smartphone market.

And now, Alphabet has joined the foldable smartphone bandwagon with the Pixel Fold. So, is Apple's absence from this market a missed opportunity? Let's find out.

The foldable smartphone market could be huge

Market research firm IDC estimates that 14.2 million foldable smartphones were shipped in 2022. That's a small number considering a total of 1.2 billion smartphones were shipped last year, which puts the share of foldable devices at just 1.2%.

IDC forecasts that foldable smartphone shipments could grow at an annual rate of almost 28% over the next five years. By 2027, annual shipments could hit 48 million units, generating $42 billion in annual revenue. This puts the average selling price (ASP) of each foldable smartphone at $875. For comparison, IDC expects the overall smartphone market's ASP to land at $376 in 2027.

It is also worth noting that foldable smartphone shipments are increasing at a difficult time. IDC is expecting a 1.1% drop in smartphone shipments this year, but it expects shipments of foldable smartphones to jump an impressive 50%. When coupled with the higher prices that these devices command, it is easy to see that Apple is missing out on a potentially lucrative opportunity to grow its iPhone revenue.

Apple is late to the game

Samsung is the runaway leader in foldable smartphones with a massive share of 80% in 2022. The South Korean giant is making the most of the absence of its archrival in this niche, but a survey by Counterpoint Research indicates that customers are eagerly waiting for Apple to launch a foldable iPhone.

A consumer study conducted by the market research firm in the U.S. recently revealed that Samsung is the most preferred foldable smartphone brand in the country, with 46% of the respondents opting for the Korean company. Apple, which doesn't have a foldable smartphone yet, wasn't far off as 39% of the respondents chose it as their preferred foldable smartphone brand.

This suggests that if Apple were to launch a foldable smartphone today, it may be able to win a nice share of this fast-growing smartphone segment. The good part is that the company could be working on a foldable iPhone. The company has been filing patents for a foldable device, with a recent application suggesting that the foldable iPhone could fold itself automatically in the event of a fall to protect the screens.

Meanwhile, the rumor mill also suggests that Apple could indeed be working on a foldable smartphone, and it could launch the device by 2025. Apple doesn't comment on products under development, but it won't be surprising to see the company indeed release a foldable device in the foreseeable future given the huge revenue opportunity in this space.

The good part is that even if Apple is late to the foldable smartphone game, it shouldn't be a cause for concern. That's because even in 2027, foldable smartphones would account for only a 3.5% share of the overall smartphone market. So, Apple still has time to perfect its rumored foldable iPhone.

And once such a device does hit the market, it won't be surprising to see it become a big hit for a few simple reasons.

Why a foldable iPhone could become a hit

Foldable smartphones carry a much higher ASP as compared to traditional form factors. The Google Pixel Fold, for instance, is priced at $1,799. The Samsung Galaxy Z Fold 4 carries a similar price tag. Given that Apple enjoys terrific pricing power in the smartphone market with the ASP of each iPhone at almost $1,000, it won't be surprising to see consumers willing to pay a premium for a foldable smartphone from the company.

With the global foldable smartphone market expected to generate $174 billion in revenue by 2031, Apple could give its top line a significant boost if it enters this market. The company captured 50% of the global smartphone market's revenue in the first quarter of 2023 thanks to its high ASP and stable shipments. It is worth noting that Apple cornered such a big chunk of smartphone revenue last quarter despite accounting for just 21% of shipments.

A foldable iPhone could give Apple the opportunity to further increase its ASP and boost its smartphone revenue share. If the company corners half of the foldable smartphone market's revenue in 2031, it could add $87 billion to its top line based on the estimates above. Apple sold $205 billion worth of iPhones last year, indicating that a foldable device could substantially increase the revenue of Apple's biggest product line and help this tech stock become a big winner in the long run.