O que significa on paper it seems like the most exciting smartphone that has ever come out ?

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"On paper" is referencing how something seems without taking into consideration real-world variables or without moving beyond just an idea/theory. If you want to build something, you draw up a blueprint first. So, if you design something that would be incredibly hard or expensive to build, it would be a great idea "on paper," but not in real life because it is impractical to build.

In your scenario, they are saying that the smartphone sounds great--likely due to the best available components and most recent operating system. But, since they say "on paper," which is a qualifier, they are communicating that they either haven't had a chance to use the phone themselves or that they have had a chance to use it and it isn't as great in actual use as the "specs" (the information they had about the phone) made it seem.