What Is a Smartphone? A Mobile Phone and Computer in One Device

What Is a Smartphone?

A smartphone is a handheld electronic device that provides a connection to a cellular network. Smartphones were introduced to the world in 1994 by IBM but have since expanded to include companies like Apple and Samsung. Although they were originally meant to allow individuals to communicate via phone and email, smartphones now allow people to access the internet, play games, and send text messages in addition to making phone calls and sending emails.

Understanding the Smartphone

The world's first smartphone was created by IBM in 1994. Nicknamed Simon, the smartphone included revolutionary features including a touchscreen, email, and built-in apps including a calculator and a sketch pad. Cellular phone functionality has continued to improve since then, especially in the years after 2000. By 2007, Apple (AAPL) released its groundbreaking iPhone. When iPhone 3G was released in 2008, there were more than 3.6 billion mobile connections around the world.

Before the inclusion of internet browsing on mobile phones, network operators relied on the fee structure that they relied on for decades—calling another line cost a certain flat rate and sending a text message cost another flat rate. The introduction of smartphones dramatically altered the telecommunications sector. While cell phones were considered the death knell of land-based phones, smartphones were considered the death knell of the prototypical cell phone.

Once consumers understood that they could interact with smartphone-based applications, such as messaging apps and games, the demand for cell phones that did not offer that functionality would plummet. The demand for cell phones that lacked the functionality of smartphones plummeted in developed economies.

It's estimated that more than five billion people have mobile devices, which represents approximately 94% of the population of advanced economies and 83% of emerging economies, according to Pew Research Center.

Changes in the Cost of Smartphones

The processing power and capabilities of smartphones have increased over time thanks to the proliferation of mobile technology and Moore's Law. The first handheld cellphone, the Motorola DynaTAC 8000X, cost a whopping $11,000 in today's currency.

Although improvements in manufacturing have made smartphones more affordable, prices have also increased due to the scarcity of rare earth minerals used in creating computer chips. For instance, the worldwide average cost of a smartphone reached a peak of $304 in 2021, falling to $285 in 2024. Prices may be lower, but they're still not cheap. That isn't affecting demand, though.

Apple, for example, commands a premium for its iPhone devices, with much of that being the result of Apple being a well-known and trusted brand. The market considered the introduction of the iPhone to be the savior of Apple as a company, as its computer sales and revenue lagged in the years leading to the device’s launch. Other companies use white labels in order to spread their technology.

Impact on Social Media

The popularity of smartphones has also created business opportunities outside of the development of operating systems and the construction of device hardware. The creation of smartphone software applications, or apps, has become a multibillion-dollar industry.

Apps are downloaded to a smartphone via a store, which is controlled by the company that has created the operating system that the smartphone uses. In many cases, apps are free to download, but in some cases, there is a fee. Application developers may include advertisements in the app content once opened or may sell products through the app.

One of the major beneficiaries of the rise in smartphone adoption has been social networks, such as Meta (META), formerly Facebook. Being able to log into a social network account from a smartphone has increased the number of hours that people spend on the network, which has dramatically increased network revenue. The behavior of smartphone users has, in some cases, been the driving factor in the changes to social networks that were once dominated by people using their personal computers for access.

The increasing prevalence of smartphones has negatively impacted some industries, particularly companies that manufactured digital cameras. Most smartphones have picture-taking capabilities that rival standard digital cameras, but, unlike digital cameras, also have the ability to interact with other smartphone apps readily, and the internet. Some smartphone apps compete with technologies that were once limited to personal computers such as calculators, web browsers, alarm clocks, documents, and notepads.

The Bottom Line

Originally a niche technological luxury, smartphones have evolved into one of the most consequential consumer technologies of the 21st century. By putting internet access and mobile connectivity within arm's reach, smartphones have revolutionized the way that people interact with one another.