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The answer is simple really: The iPhone is more powerful by far. However, the iPhone is doing a lot more things at the same time, while the PSP just plays games. Graphically speaking, there is no game on iPhone that comes close to Crisis Core, Dissidia, God of War, etc., But in theory they should be able to make games that look that good. However, devs take their time with PSP games while new iPhone games come out every moment.