Apple's Magnificent Growth in This Market Could Be a Game Changer in the Long Run

Apple (NASDAQ: AAPL) is feeling the heat of the slump in the smartphone market. Shipments of iPhones were down 4% in 2022 to 226.4 million units, which explains why the tech giant's revenue and earnings fell at the end of 2022, even though this period coincided with the seasonally strong holiday sales season.

The bad news for Apple is that smartphone sales reportedly fell 12% year over year in the first quarter of calendar 2023. As the iPhone is Apple's largest source of revenue and accounts for 56% of its top line, it is not surprising that its top and bottom lines are expected to contract in the second quarter of fiscal 2023.

Apple's revenue is expected to dip 4.5% year over year to $93 billion for the three months that ended on March 31, 2023. Wall Street anticipates Apple's earnings will drop to $1.43 per share from $1.52 per share in the year-ago period. However, there's one market where Apple is recording terrific growth despite the smartphone slowdown, and that segment could eventually unlock a multibillion-dollar opportunity for the tech giant.

Apple's revenue reportedly jumped 50% in this fast-growing market

Bloomberg reports that Apple's revenue in India hit $6 billion in the 12-month period from April 2022 to March 2023. Citing a source familiar with Apple's India-specific performance, the publication pointed out that the company enjoyed a 50% revenue bump in India during this period, compared to the previous fiscal year, which ended in March 2022, when the company had enjoyed a 45% revenue jump.

Apple has generated $387 billion in revenue in the trailing 12 months, which means that India is still a very small portion of its business and doesn't account for even 2% of the company's top line. But that doesn't mean investors should discount Apple's massive potential in the India, especially considering the pace that market has been growing at a time when the broader smartphone market is under stress.

Smartphone shipments in India were down 10% in 2022 to 144 million units. But Apple weathered that downturn thanks to its 60% share of India's premium smartphone segment, which includes phones priced at $500 and above. The company reportedly controlled 5.5% of the Indian smartphone market at the end of 2022, according to CyberMedia Research (CMR). It is worth noting that this is Apple's highest-ever share in a price-sensitive market such as India and increased from 4.4% at the end of 2021.

This also tells us that Apple has massive room for growth in India. Only 4% of the country's 700 million smartphone owners have an iPhone. This number also suggests that smartphone penetration in India stands at less than 50%, based on the United Nation's mid-2023 population estimate of 1.42 billion people.

More growth is in the cards in India for the tech giant

It won't be surprising to see Apple further increase its market share in India this year. The company has just opened its first stores in India, one in Delhi and the other one in Mumbai. At the same time, Apple is also increasing its manufacturing footprint in the country. The company reportedly produces between 5% and 7% of its iPhones in India at present, which is a nice jump from just 1% in 2021.

Looking ahead, the Indian government believes that Apple could eventually manufacture a fourth of its iPhones in the country. The focus on increasing local production and enhancing the retail footprint is likely to help Apple increase its India-specific revenue substantially in the long run. Wedbush Securities analyst Dan Ives believes that Apple could generate $20 billion in annual revenue from India by 2025, suggesting that its business there could more than triple within the next three years.

More importantly, the Indian smartphone market is expected to generate $281 billion in revenue in 2028, compared to $139 billion in 2021. So Apple's market share growth and the company's strategy of boosting sales by lowering the price barrier, in addition to the moves discussed above, could make India a much bigger market for the company.

All this indicates why investors would do well to keep an eye on Apple's moves in India, as this market could play a key role in helping this tech stock soar in the long run.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.