The always interesting Thom Hogan has posted an interesting conundrum for the crop sensor camera manufacturers as an aside to an article that is largely about the new Mac Pro.
He says that crop sensor cameras are trapped in a narrow window...
First, they have to significantly outperform smartphones to interest anyone - and, he argues, they have to be as easy to share images from as phones are.
The latest generation of SnapBridge has gotten pretty good in that regard, because it uses Bluetooth to automatically reconnect to the camera - it then has to switch to WiFi to actually download the images, but it does that pretty much automatically (and it switches back when it's done). The most recent version of Fuji's software I have doesn't do that - you have to manually switch the WiFi in settings. Since I own Nikons and Fujis, I don't know what other manufacturers' software does. I find texting or emailing a Z7 image immediately after taking it, while it's still on the camera, to be little different from texting or e-mailing an iPhone image (except that no iPhone has a 14mm lens or 12+ stops of dynamic range). E-mailing images from Lightroom is not bad (Nikon or Fuji doesn't matter at all there, since it's an exported JPEG in either case), but I don't have a good way to text an image from Lightroom.
From a sensor standpoint, crop sensor cameras have a huge lead over smartphones, and diffraction keeps the phones from catching up, at least without using something like Light's 16-sensor camera... The wild card is phones' computational prowess and the poor quality of some kit lenses. Casual snapshots may not need to be better than phones can do (they're comparable to good 110 film, bad 35mm film (Gold 800 in a SuperDuperZoom 35mm compact), and compact digicams from a few years ago - all of which were largely considered OK for snapshots).
For images that won't be printed or viewed on 4K or better displays, the real weakness to phones is dynamic range (which computational HDR can alleviate in some circumstances). The worst kit lenses may be able to reduce the effective resolution of a DSLR or mirrorless camera into the range of a really good phone - for whatever it's worth, DxOMark claims that some pancake kit lenses and low-end travel zooms can resolve only 4-6 of their "perceptual megapixels" - They don't do that test for phone lenses (unfortunately) - I wonder how the best of them would compare to that.
Second, crop cameras have to undercut the bottom end of full-frame - I'm not so sure I agree with him here. Obviously, full-frame is a constraint, but can't a crop camera with some distinguishing features sell for more than a stripped down FF camera? I'd pay more for an X-T3 or X-H1, with its excellent glass, durability and superb user interface, than for an EOS-RP, a D610 or an original A7.
While it's not for my style of photography, I'd say the E-M1 mkII also has a good argument to sell for more than a low-end full-frame camera. Its autofocus, speed and durability make it a "baby D5 (or baby 1Dx II if you prefer)" that can get shots that would be impossible with a camera that has very low-end features apart from the sensor. The same for the GH5 and all its video codecs.
Canon, Nikon and Sony seem to be viewing crop sensors as a value-only market, where a crop camera is almost always cheaper than full-frame, and the crop lenses are cheap zooms with a few pancake primes (and the occasional higher-end lens) thrown in. The occasional aberration (D500, 7D mkII, a6500) is rarely updated and has lens issues. Their cheap crop cameras are at direct risk from phones, too. All three of these companies are saying "full-frame is the future of serious photography".
Fuji (general photography with excellent lenses), Olympus (sports and action) and Panasonic (video) are taking a different approach. Their crop bodies can offer things full-frame doesn't, and it's there that I disagree with Thom. Who knows how big those niche markets are, but they're not trying to compete directly with either phones or the very low end of the full-frame market. They have full-frame competitors, but they're not the bottom of the FF barrel.