I believe that smartphones are actually a slice of the embedded systems development market, the same as desktop computers. They are probably the most profitable slice, but that is exactly why the biggest players in the market pay top budget to compete about the shares. Because of that understanding of mine, I think you don't really get into the "smartphone market" as a start-up, but you get into the embedded systems market. And that is quite possible. You just need to find a slice of the market that is not so highly competed in and you can enter there, e.g., producing small Linux computers for public transportation companies with different, very specific tasks, or building remote controls for model airplanes/quadrocopters. There you get all the know-how of building your own computers, working on your own operating system, finding suppliers and when you are really, really good, you might even come up with a platform of some sort that you can get other developers on to make Apps for, just in the business-to-business area instead of the tough endcustomer market.