Of course, it was not the first touch "device" with a finger oriented UI. There had been plenty of those in other fields.
I think what you meant was first smartphone with a UI designed for touch.
However, even that honor must go to what was also the first smartphone in the world, the 1994 IBM Simon.
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Of course, it was ahead of its time. After that, there were other all-touch smartphones, both concept and commercial. Big buttons, slide to unlock, orientation sensors, all black front, you name it, it was done.
Hmm. I think that what the iPhone did most differently (besides being from a well liked and known company), was that it included a fun factor that more function oriented phone designers had eschewed. I don't know how else to put it. For example, flick scrolling was well known, but other designers still used scrollbars, because they made more sense for long documents... and still do. It defied common sense to get rid of them as a primary list navigation method. Yet Apple did.
Thoughts?