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Yes, that’s exactly the problem - there’s nothing wrong with the encryption used, but it’s IMHO incorrect to call it time-based when it’s “work-based” and it just so happens that the specific computer doing the encryption works at a given speed.
I don’t call my laptop’s FDE time-based encryption just because I picked an encryption that takes it 10 seconds to decrypt the key.
There are cameras and physical buttons that you might want to use on the phone, and the fold might make it nicer to hold in one orientation. Also, the limitation exists because splitting the apps across the shorter side can make very awkward layouts, at least on small phone screens - no such problem with a square. I see no reason not to have the option of both layouts no matter its physical orientation.
I’ve never used a foldable though, so take my opinion with a grain of salt.