The arrival of fifth-generation (5G) smartphones has not only supercharged Apple's (AAPL 1.27%) biggest product line -- the iPhone -- but is also allowing it to expand its operations and flex its pricing power in a market where it has historically struggled.

India is one of the biggest examples of how 5G smartphones have changed Apple's fortunes in a historically tough market. The price-sensitive nature of Indian customers has made it difficult for Apple to become a sizable player in India so far, but that seems to be changing. Indian English-language business daily The Economic Times reports that Apple is on track to record $3 billion in revenue in India in the ongoing fiscal year that ends in September.

Let's see why that's a big deal for a tech giant that has generated nearly $350 billion in total revenue over the trailing 12 months.

Person sitting on a staircase and looking at his smartphone.

Image source: Getty Images.

Apple has stepped on the gas in India

Citing a report from CyberMedia Research, The Economic Times points out that Apple's revenue from India could jump a whopping 60% this fiscal year. For comparison, the iPhone maker had recorded a relatively modest revenue increase of 29% last fiscal year in India.

Such impressive growth seems to have been triggered by the launch of Apple's 5G-enabled iPhones last year. The iPhone 12 went on sale in India in October 2020, and the device seems to have given a terrific boost to Apple's fortunes in the country thanks to the strong demand for 5G smartphones there.

According to market research firm IDC, India is the fourth-largest market for 5G smartphones globally. Shipments of 5G devices in India could hit 40 million units this year as compared to just 3.5 million units last year. The interesting thing to note is that 5G networks are yet to be commercially launched in India, but consumers are willing to spend more money to future-proof their new smartphone purchases.

IDC points out that the average selling price of a 5G smartphone in India is $410. This is significantly higher than the $156 average selling price of smartphones in India in 2020. The increased spending on 5G smartphones in India is turning out to be a tailwind for Apple.

According to Counterpoint Research, Apple's smartphone shipments in India in the second quarter of 2021 shot up 144% year over year. The company held a 49% market share of the premium smartphone segment that includes devices priced above 45,000 Indian rupees (roughly $612 at the current exchange rate).

This is an indication that Indian consumers aren't hesitant to spend more money on 5G-enabled iPhones from Apple. This also explains the impressive revenue growth anticipated from Apple in India this fiscal year, which is the company's first one with a 5G smartphone in its portfolio. The good part is that Apple could clock such impressive growth in India for years to come. Let's see why that could be the case.

The big picture

India's 5G smartphone market is still in its early phases of growth, which isn't surprising as the commercial rollout of 5G networks is still a year away, at least. Ericsson estimates that 5G subscriptions in India could hit 330 million by 2026, accounting for 26% of the country's total mobile subscriptions. So the 5G smartphone market in India is set for multi-year growth.

This bodes well for Apple, as its 5G smartphone portfolio is about to get better this year and the next with the addition of new models that would cover a broader price range. For example, the release of the 2021 iPhone models next month would make the existing iPhone 12 devices cheaper. The two-year-old iPhone 11, for instance, is priced at 54,900 Indian rupees (less than $747) now -- a 15% discount to the device's original price of 64,900 rupees when it was launched in 2019.

The iPhone 12 is currently priced at 69,900 rupees in India, which means that it could get more accessible once this year's models are launched. Additionally, supply chain gossip suggests that Apple is working on an entry-level 5G iPhone that could go on sale next year. The company is expected to give the iPhone SE -- which starts at $399 in the U.S. -- the 5G treatment, which could help it lure more customers into its fold in a price-sensitive market such as India.

The current generation iPhone SE can be bought for 32,999 Indian rupees (less than $450) on e-commerce sites such as Flipkart in India. A similar price for the 5G-enabled iPhone SE can help Apple move more volumes in the Indian market and corner a bigger share of the country's growing 5G smartphone pie.

In all, it won't be surprising to see the $3 billion revenue that Apple is touted to generate in India this year compound rapidly in the coming years.