You can argue that every device that plays videogames is in direct competition with every other device that plays videogames because developer resources are limited as is the potential number of gamers, their time and their money.
With that said, while the iPod Touch/iPhone and the Nintendo DS are fairly close as far as videogame systems I don't believe that they are in that direct of comptition. They seem to be devices with complimentary strenghts and weaknesses at the moment which means that people are likely to favour one of the systems or buy both depending on what they're interested in, but it is unlikely that someone would buy either device as a replacement for the other ...







