The screen might be foldable, but nothing else inside would be. They might be able to effectively rearrange the innards, but it would most like result in an increase in overall size rather than a decrease. Plus the joy cons would have to be completely re-designed. IMO they'll leave that space open for a potential N3DS successor.
Switch is already portable, lol. Not in the "fits in your pocket" sense, but nothing really has been since people started demanding "XL" versions. Still small and light enough to carry around or store in the car. And of course Switch is the only worthwhile portable with local multiplayer on a single screen.