I think there is room in the market for both Nintendo and the others.
Some people like dedicated portable platforms with lots of games, some casual, some more complex and - granting subjectivity in this judgement - lots of crap games too. Some prefer to carry one device that can do several things including games and here too it is possible to have a range of games. Many with smartphones only want the simple games which explains the sucess of angry birds. I do agree that the early pricing point Apple established is hurting the chance of getting lots more AAA titles, except from larger companies, to the App store but they are there.
This is similar to desktops vs. consoles somewhat. Many folks have desktops to do work/internet and might only play the odd solitaire or minesweeper, possibly preferring to game on a console. There are more complex games for desktops however IMO.
For myself, I have my most complex games (simulations) on my Win7 PC (if I ever get a Mac I would have win on bootcamp just for that) because no other platform-even consoles can match desktops for high end simulations like flight sims.
Gaming on my iphone was almost by accident. I found I enjoyed many of the better puzzle games and a few of the classic ports as well so am satisfied with no need for a dedicated portable console. Point and click style games like Ascendancy and Great Little Wargame work well on touchscreens (as well as they would on PSP and DS) and we have a few highend graphic games like Infinity Blade - one of my faves - that prove the hardware can run it. But it remains my secondary game device.
I have 2 flight sims on my iphone, f-sim Space Shuttle and Xplane glider. They both work well, look really nice, and work well on the platform because you don't need complex controls. The first is only landing the shuttle which is mainly just gliding the thing as the rest was automated-the second the only flyable motor plane is the Cessna and it is rather simplified. No fuel mixture or propellor control as you get on desktop sims, so I prefer to "fly" the gliders. I am curious to try one of the other xplane mobile titles but suspect it won't be as fun without my keyboard and Saitek joystick. All other flying games for portable or full-blown consoles are also dumbed down sadly.
So what am I saying, don't count out Nintendo, and don't count out the effect of competition from ios either.