Smartphone

What Is a Smartphone?

The term smartphone refers to 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.

Key Takeaways

  • A smartphone is a handheld electronic device that provides a connection to a cellular network and the internet.
  • The world's first smartphone was created by IBM in 1994, nicknamed Simon.
  • The introduction of smartphones dramatically altered the telecommunications sector.
  • Smartphones were considered the death knell of the prototypical cell phone.
  • The popularity of smartphones has also created business opportunities outside of the development of operating systems and the construction of device hardware.

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 5 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.

85%

The percentage of the American adult population that reported to have a smartphone, as of February 2021.

Changes in the Cost of Smartphones

The cost of cell phones has decreased 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.

That cost has gone down significantly. For instance, the average cost of a smartphone was around $471 in 2014 and dipped down to $402 in 2016. 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.

Smartphone price changes are linked to increased demand for specific smartphone brands and improved technology, as these devices have more storage and memory than computers.

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 (FB), 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.

Article Sources

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  1. World Economic Forum. "IBM Created the World's First Smartphone 25 Years Ago."

  2. Apple. "Apple Reinvents the Phone With iPhone."

  3. Apple. "Apple Introduces the New iPhone 3G."

  4. GSMA Intelligence. "Quarterly World Review: Q2 2008."

  5. Pew Research Center. "Smartphone Ownership Is Growing Rapidly Around the World, but Not Always Equally."

  6. Pew Research Center. "Mobile Fact Sheet."

  7. National Museum of American History. "Dynatac Cellular Telephone."

  8. CPI Inflation Calculator. "Value of $4,000 from 1983 to 2022."

  9. Statista. "Average Price of Smartphones in the United States From 2014 to 2025, by Segment."

  10. Apple. "Form 10-K," Page 56.

  11. Business of Apps. "App Data Report Q3 2021."

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