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I wouldn't say there is no demand at all for AAA gaming in a portable form; the Switch shows that such games can sell in the context of a handheld. Phones though are an entirely different market where people have been conditioned to expect everything to be either free or extremely cheap.

Honestly, folks have been claiming that mobile gaming will replace consoles since like 2009, and a decade and a half later it's still nowhere near. They're two separate things that can and do coexist, kinda like the PS5 and Switch.