Apple stock rose 2.5% on Wednesday. Jefferies analyst Edison Lee upgraded the stock to Hold from Underperform in a research note on Tuesday, citing the potential for its next earnings report to beat expectations. Meanwhile, Apple starts early prototyping of foldable iPhone.

Apple has quietly entered the early stages of developing its long-rumored foldable iPhone, with supply chain sources confirming that the company began its initial P1 (Prototype 1) phase in June. If everything stays on track, the device could complete prototype testing by the end of 2025 and proceed to the Engineering Verification Test (EVT) stage, setting the stage for a possible launch in the second half of 2026.

Sources familiar with the matter say Apple had also been exploring a foldable iPad alongside the iPhone. However, the company has decided to pause progress on the larger foldable device for the time being. Industry experts attribute this decision to manufacturing difficulties, increased production expenses—particularly related to flexible display technology—and a relatively modest consumer demand for larger foldable devices.

Talk of a foldable iPhone has swirled for years, but concrete progress remained out of sight—until now. While Android competitors have raced ahead with foldable models, Apple has taken a far more cautious route. Industry sources say the company's foldable iPhone has been in the works for over five years, undergoing more than ten redesigns along the way.

Apple is no stranger to long development timelines and has a history of pulling the plug on products late in the game if they don't meet internal standards. That reputation for perfectionism means suppliers are approaching the project with caution, treating each step as provisional.

Prototype phase underway after years of refinement

The foldable iPhone is currently in its P1 phase, to be followed by P2 and P3 before reaching EVT. Each prototype stage typically spans around two months. During this process, Apple's supply chain partners will conduct limited trial runs before handing over assembly responsibilities to primary iPhone assemblers Foxconn and Pegatron, who will validate production yields and manufacturability.

Apple is sticking to its usual product rollout playbook, with the foldable iPhone moving through its P1 to P3 prototyping stages roughly a year ahead of entering Engineering Verification Test (EVT), followed by Design Verification Test (DVT) and eventually Mass Production (MP). For example, the iPhone 17, expected to debut in fall 2025, wrapped up EVT in the second quarter of this year.

As for the foldable iPhone, early shipment estimates put the initial volume at around 7 million units, though insiders caution that the number could be adjusted depending on how the market evolves.

Apple's long-awaited entrance into the foldable space comes at a time when the category is showing signs of fatigue. Samsung Electronics, the dominant player, is projected to ship 8 million foldables in 2024, well below its 2021 peak of 11 to 12 million units. Huawei remains the second-biggest player in the global foldables market as competition intensifies and consumer enthusiasm cools.

Apple's entry comes as global foldables market plateaus

According to DIGITIMES Research, global foldable phone shipments peaked at 21.2 million units in 2023, but are projected to decline 11.3% year-over-year to 18.8 million units in 2024. A modest recovery to 19.5 million units is expected in 2025, representing only a 3.7% annual growth.

Meanwhile, the broader smartphone market continues its structural decline, with global shipments falling from 1.317 billion units in 2021 to 1.193 billion units in 2024. Both Apple and Samsung have seen their volumes contract in tandem with the shrinking market.

Yet Apple has managed to maintain relative share stability. Its global market share rose slightly from 18.2% in 2021 to 18.3% in 2024, even as Samsung's fell from 20.6% to 18.8%. Chinese brands such as Xiaomi, Transsion, Honor, Huawei, and Lenovo have steadily gained ground over the same period.

Apple is expected to launch an ultra-thin iPhone in 2025 as part of its strategy to reverse declining shipment volumes. However, tepid sales of Samsung's recently launched ultra-thin Galaxy S25 Edge could foreshadow broader demand challenges. With Samsung also planning to reduce its 2025 foldable shipment targets, questions are emerging as to whether Apple will similarly scale back its ambitions for its first foldable iPhone.