Actually, I can understand it. Apple does not produce "smartphones" (or "computers" for that matter -- they've happily adopted the notion that a Mac is not a PC, as they show in their "Mac vs PC" commercials). In the end, it comes down to who their customers are.

Apple's target customer is explicitly the well-heeled technophobe. "Hey, customer, you see those gadgets everyone seems to be using? Well, here, take a look at this: it does everything those other gadgets do, but it's simple and easy to use. We'll guide you every step of the way, and keep you from making the kind of embarrassing mistakes you'd make on those other devices that give you, well, the freedom to make mistakes. And our gadgets look downright beautiful! You'll be delighted to have this handsome product at your side, and everyone else will be envious."

Apple's goal is customer happiness first, technical superiority second (if at all). In that sense, the first iPhone was a huge improvement on everything that came before; it made the world of people who had no technical ability into "smartphone" users. (Which, essentially, is the same as what the iPod did -- turned the mp3 player world from a technically sophisticated market into a general market.) By selling products directly to non-technical users, Apple tapped into an underserved market and reaped the rewards.