The race for megapixels is pretty much over, no one wants a camera over 8MP, in fact a 5MP camera with a great sensor and a lens is enough.
The race for the screen size and density is pretty much ending aswell. Apple is there, Android will move up the resolution and that's it.
CPU and inside spec race is always on going but that too, much like laptops and desktops is becoming a "good enough" thing.
I am surprised how there is no battery race, it must be very hard to come up with a new battery technology, whoever comes ups with a new tech though to make a modern smartphone last 2-3 days or even a week is going to be an instant winner.
Imagine using your phone actively and not needing to charge it for a week!
A more efficient(and smaller) battery will also have a huge effect on the size of the phone cause the biggest part in modern phones other than the screen of course, is the battery.
Say what? Apple is already there with a 3.5" screen? I think screen wars are far from over.