I'm not missing anything from the picture: I believe you are. An embedded system is a computer system designed for specific control functions within a larger system.
A phone is just as embedded as a washing machine. Mobile devices come in many flavours, not just smartphones. Even within the smartphone segment there is more to the system than just the apps processor. Trust me, the modem processor in any phone is resource limited. And them some.
For _any_ embedded product there should be a processor sized/priced correctly, from a PIC up to an ARM Cortex. If you're using an ARM7 to power a washing machine then fine, you're not resource limited. But you're also using an over-designed processor for the job.