I don't think the iPhone will kill handhelds at all.
I think that much of the game industry would love for Apple to take over, since they simply hate Nintendo that much. And while the iPhone is doing well, it's not nearly as much of a threat to Nintendo as many people would have you believe. Companies are sick of not being able to have surefire and predictable successes on the Wii, and they're sick of bleeding money whenever they had an unsuccessful game on the HD consoles, so they want to create this illusion that the iPhone is a serious threat to anyone, especially Nintendo.
If I were Nintendo (or any of the console manufacturers for that matter), I'd consider PC gaming a far greater threat than the iPhone.