Do phones NEED better hardware than they currently have?

I'm wondering whether we've hit a point of diminishing returns with mobile hardware? By this I mean processors and ram, not cameras and speakers etc.
The way that an S2 works almost as quickly as an S3 makes me think that further upgrades are getting increasingly more pointless, and I wonder whether it is now a question of optimising and tweaking software?

Or is it just a case of manufacturers pushing out phones with higher specs as a marketing thing?

Windows Phone and BB10 seem to work pretty well on dual-cores, and on 512 ram for WP.

Of course I'm not saying no more evolution of mobile hardware, but a mobile phone by definition will have a screen small enough that allows it to mobile and therefore not be able to facilitate a lot of working. The split screen thing on some phones also seems to me a little pointless considering phone screens are relatively small anyway.

I kind of feel that until we have massively new technologies incorporated in phones, (I dunno, holograms projection or something insane) the way phones are now, they're perfectly fine with the technology we currently have. Please, though, correct me if I'm wrong

(I do realise that with better cameras and screens etc, more powerful processors are necessary, but seriously octa core seems overkill!)