Regarding the subject of folders, things can be much more simple.
There is a more efficient solution to implement, to the problem of libraries with +150 games in which to find an old game that you haven't played in a lot of time, can be a problem.
Simply, add a button in the menu with all the icons, to short these icons. For example, if you push this button, you have an option to short all the icons by alphabetical order or by the last time used.
And also add a third option for a contextual search bar, in which you can type in a box the letters of a game, if you write MARIO, all the games containing this word will appear in screen.
Giving the simplistic UI of Switch, and the "weight" and importance of the visual icons implemented in this design, this should be the solution to go.
It seems like Nintendo was pessimistic regarding how many digital games will purchase the people.
In an ironic way, the UI of the NES Online Service with only 20 games, include an option to manually change the order of the icons.
But with hundreds of games in our Switch libraries, we can't do the same thing.
Also, tags are a much more contemporary approach than the obsolete concept of folders, if you want to create this type of configurable options by the user. This is the solution implemented by Steam. Add different tags to your games, and you have an option to only show the icons with a selected tag. But you will never have the ugly and impersonal icon of a folder in your screen, a boring concept taken from offices, in your UI.
I'm playing games, I'm not in a boring office classifying documents: folders should die in graphic design. They are obsolete. They're not cool. There are smarter and more efficient solutions.