I'm really not sure if I understood that "processor folding" correctly -> would that translate in the case of Intel/AMD/Linux to something like a "dynamic hyperthreading" done under-the-hood by the OS?
In addition to the reduction of VPs, you can consider setting the schedo tunable “vpm_throughput_mode” to a value of 2. By default, running in raw throughput mode (i.e. vpm_throughput_mode=0) AIX spreads all available work across as many VPs as available, dispatching work first to the primary SMT thread of each VP, then the secondary SMT threads, and so on, thus providing the best performance in most workloads. This configuration, however, can lead to a higher PC (processor capacity) utilized by the LPAR. Depending the workload, you can reduce the PC by setting the vpm_throughput_mode tunable to 2, thus having AIX to schedule work to the primary and secondary threads equally.