I think Nintendo will be in the game a little bit longer just because children don't have smart phones, however I think that the core is losing interest rapidly in handheld game systems. Unfortunately, that means that the 3DS is going to be getting more and more kiddy software as time goes on, and fewer and fewer games that appeal to adults.
The PSP sold well with adults because it came out before the Iphone and offered a complete multimedia package in the palm of your hand, and even the iPhone could not do games that were anywhere near as impressive as the PSP's at the time. However, phones keep getting more and more powerful, to the point that carrying around a device like the Vita seems pointless to most people. They'd rather play simple touch games like Angry Birds or Pocket God than have to lug around a big piece of hardware that won't even fit in their pockets.
It's a shame, because the Vita has incredible potential as a device, but the market just plain isn't there. Anyone who can afford one would probably rather buy an iPhone or a Droid, and with Power-A's Moga SDK and bluetooth controllers on the the way, the Vita won't even have the bragging rights of tactile controls to its name. Once that happens, iPhones and Droids will pretty much be full-fledged handheld game systems, and even now they have more or less displaced the handheld market for adults.
Even though I'm sure Nintendo will keep making handhelds for a while, handheld consoles are going to go back to being seen as toys for kids. If you're an adult with a smart phone, soon there will be little that a handheld can offer that your phone doesn't do better, and I can easily imagine Nintendo pandering further to the younger demographic to make sure they don't lose interest in portable gaming (not that they have much compition to worry about in that market, which is probably their biggest strength).
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