Spending may well be down on gadgets globally, but one sector is bucking that trend, and it’s the smartphone. Next Friday, two costly, top-of-the-range handsets — Apple’s iPhone 3G S and the Nokia N97 — go on sale in Britain, and a third, the Palm Pre, was launched last week in the US. It is due on sale here in the autumn. But do any of these wi-fi-equipped, mobile computers live up to their hype?

We have been able to compare the latest iPhone with its two main rivals in the first like-for-like, hands-on test. At first sight, the 3G S (S for Speed) looks identical to the current iPhone. It’s the same size and also comes in black or white. However, significant internal changes have been made. The 2Mp camera of the original iPhone has been upgraded to 3Mp with autofocus — a tap on the screen will fix the focal point, so you can, say, choose between the tree in the foreground or the house behind. It shoots good video, too, at up to 30 frames per second, and has (limited) editing features, plus a visible timeline that helps you scroll through footage to find a particular image. And footage can be uploaded straight to YouTube.

Other hardware changes are an increased memory option (32GB — twice the current capacity) and the inclusion of a digital compass, which makes it much easier to use Google Maps. Now it shows you not only where you are, but also the direction you’re facing in.

There are other noteworthy developments, such as voice control for voice-dialling numbers as well as commanding the phone to, say, “play music by Duffy”; you can also ask it what track is playing. There are improvements to the iPhone software, too, including a retrospective update arriving this week that includes cut, copy and paste, allowing you to, say, copy a quote from an electronic book on the iPhone and paste it into an e-mail.

The 3G S comes with access to the enormously successful App Store — an online selection of 50,000 games, timewasters, productivity helpers and social networking programs, with hundreds more added every week. Announced at the same time as the iPhone was a new app from the sat-nav maker TomTom, which promises to turn the iPhone into a full in-car GPS device.

Smaller and more pocketable than the iPhone, the Palm Pre has a gloriously bright 3.1in screen and a tiny qwerty keypad that slides out of the bottom of the phone. Despite being cramped, it’s as easy to type on as the iPhone’s touchscreen. Palm has also stolen a march on its rivals with its powerful operating system, which can combine data from many different sources. For example, when a friend calls, it displays their Facebook picture along with the number from your address book, or in calendar mode it shows personal appointments from your online Google calendar, along with meetings from your work diary, so that you don’t double-book yourself.

Best of all, the touchscreen is slick and responsive, and easily as good as the iPhone’s. It also responds to the same action of pinching together and separating fingers to zoom in and out. If software writers start producing apps for the Palm Pre, by the time it arrives here in a few months, it may be a very serious challenger to the iPhone.

Nokia, the world’s biggest phone maker, also has a powerful new handset: the N97. It has a large, touch-sensitive screen that pivots up to reveal a qwerty keyboard, turning the phone into a tiny laptop and greatly aiding text and e-mail typing. The keys are well spaced, beating Apple’s virtual keyboard. With the keyboard stowed, the screen looks impressive and is highly customisable, displaying the latest weather information, Facebook updates, e-mail and pictures of your favourite four contacts. The phone has a classic, stylish appearance and while it may not have the effortless cool of Apple’s design, its familiarity (it works like other Nokia phones) will win it many supporters.

Like the new Apple, the N97 has 32GB of built-in memory — but in this case you can augment it with cheap SD cards, giving you the ability to carry thousands of albums, photographs and movies with you. The camera here is a 5Mp device, and has a flash.

The N97 is compatible with Nokia’s N-Gage gaming platform, so a number of exclusive titles will play on its sharp, bright screen. It also has a Skype “client” built in, which allows free and cheap calls over the internet, although prospective British buyers should check with their network to see if it allows Skype traffic over 3G if they happen to be outside a wi-fi zone.

Less impressive is Nokia’s App Store equivalent, Ovi, which has only about 1,000 programs and is much less accessible. Nonetheless, Nokia’s phone is a great all-rounder, even if the browser is stiffly unresponsive and the touchscreen sometimes needs an extra prod.

The new iPhone and N97 have hefty price tags, their pay-as-you-go options coming in at around £500. The Nokia, however, is to be carried by most British networks, so expect deep discounting for anyone who takes it on contract. The 3 network, for example, says it will allow Skype calls (giving users the opportunity to make free calls to Skype users anywhere in the world) and is likely to price the handset competitively.

Explore Personal Tech

• InGear