How is it indeed

My guess would be that, beyond basically a thin plastic brick that makes noises and you make noises into them, to talk to another person...

Most of the functions of a modern smartphone rely on a high degree of lingusitic symbolic abstraction that only makes sense if it is stable and consistent.

Dream logic and dream perception is notably... basically the exact opposite of that.

You'll get very visceral feelings and sensations and visuals that... while yes, are abstractly tied to other things... my guess is that basically the part(s) of your brain that actually does interpretation of a complex system of symbols (writing)... basically, it isn't functioning coherently, the parts that all align to make that make sense when you are waking conscious, they're all being rerouted in a bunch of other ways while you're dreaming, to help produce other parts of the dream... or just... maybe defrag your memories and trauma?

I think a dumbphone, an old thing plugged into a wall... that is 'simple' enough to remain a somewhat coherent 'dream concept'... but a smartphone, an entire computer and all the things it can possibly do....just too complex.

My guess would be if people are dreaming of smartphones, the dream concieved smart phone is likely to be ... one or two uses cases, apps.

Somewhat interestingly... you can kind of see this in how earlier AI still motion and video generators... have that wierd dream like ... morphing, flowing aspect to them, the details are never right if you look closely, they really struggle with generating like, coherent billboards or signage or the text on posters or in a book.

It gets lost in the noise, ... and these models are basically oversimplified, rough models of neural networks... with way, way more amounts of processing power and a vastly more expansive data set thrown at them, to compensate for them being a crude approximation of the human brain, which is basically the most complex thing that is known to exist.

Maybe you could say that a dream is roughly a low fidelity hallucination, compared to the high fidelity hallucination that our waking consciouness is.

I wonder how synesthetics dream, how the deaf and the blind dream...

I still remember one powerful, psychadlelic trip I once had ... I was aware of the difference between the 2D image projection component of my vision, and the 3D spatial approximation component... because they were now massively out of sync... either the 2D image was basically delayed, or the 3d spatial component was just basically broken, getting sizes of and distances to objects and their edges massively wrong, sort of warbling, frothing, kind of like in a video game where LODs are flickering between high and low detail models erroneously.

... But, anyway, this is all my barely informed spitball speculation, I could be completely wrong, my non expert, layman brain is just trying to do abstract pattern recognition.