They are "too Japanese" for them.

They recognised that dedicated handhelds are becoming more and more niche in comparison to the lucrative mobile market. Even with the horrible human user interface (for games), more and more advanced mobile games are being released and skipping dedicated handhelds altogether.

Do you remember Kojima: "Japanese developers lack global outlook, technological skills"

"I think the problem really is more about where people are looking and who they're targeting," said Kojima.

"A lot of creators are just focused on Japan and the Japanese market and aren't really aware of what people around the world want."

Just turn this around.  The reason Western developers aren't making the best handheld games is because of where they're looking and who they're targeting.

Japan developers are getting some things right in the handheld segment, but are doing horribly overall as an industry.

Western developers have a heavy focus on spectacle, they take the same approach they do on consoles to handheld but without the budget to support their ambitions. The result is messy games like Liberation and Resistance.