People need to stop misquouting things. They said they'd like to "absorb" the Wii U into future hardware, but that could mean anything, like dev libraries to make for easier porting. 

You can't use a PowerPC chip in a handheld I don't think either, it's just not power efficient enough. 

Ugh, so it isn't more efficient?

ARM and PowerPC are two different instruction sets. They're both RISC based which helps with efficiency, but they're still different architectures.

And the WiiU CPU is a three core PowerPC based CPU. It has a seperate ARM based processor for background tasks and OS handling.

If they had any sense, their next handheld would pretty much be a Wii U. Instant back catalogue to re-release with stunning handheld visuals (let's face it, Sony won't be going down that route again) and a large set of pre made engine for all their key games along with very simple "re-release" options for Wii U games should the userbase swell allowing them to maximise the profits from their Wii U investments.

The Wii U chip simply runs way too hot to get into a handheld. 

Even if they could bring the consumption down to 1/3, that would be about 11 watts, way too power hungry for any type of handheld device. 

What they probably will do is take the Wii U's architecture and design a new dev kit that makes it easier to port games from Wii U to the new chip. 

It's RISC based so I suppose you could say it's inherently more efficient than X86 (which is CISC). But far more R&D went into X86 than PowerPC to the point where Intel and AMD managed to design CPU's that mitigated much of the efficiency advantage whilst offering a decent price/performance ratio. At its height, PowerPC architectures offered great performance for relatively cheap cost, but eventually (after much investment) that advantage was reduced. Even Apple ended up with X86 after years of pushing PowerPC.

ARM on the other hand (also RISC based) has taken off as the power efficient alternative which is why it's found in the vast majority of phones and tablets, not to mention the background tasks on the next gen consoles.

Well that's why I said "pretty much a Wii U". In the way Vita is "pretty much" a PS3. There are obviously going to be some consessions. But really Nintendo want a simple to develop "Wii U-ish" system, that is also incredibly friendly with a home console.

The issue is still in that case, using say an ARM + Qualcomm GPU is far more efficient and cheaper than trying to shoehorn/downsize the Wii U chip literally.

It's just not possible. I think the eDRAM on the Wii U would be another killer too. 

If they want Wii U type performance that runs at a lower resolution, like say 960x540 ... yeah sure that should be doable by middle of 2016 for $200-$250.

Why couldn't that just run Wii U games then, but downscaled to fit with the hardware? Why can't Nintendo have the Wii U's infrustructure be the start of this "unified OS" and "games on multiple playforms?" Why couldn't the Wii U and it's library and OS be the base for which all future platforms are based?

Every single game has to be AAA quality?

Im pretty sure 3DS has sold over 40m in a little over 3 years due to Nintendo games, Japanese 3rd parties and family friendly western titles. When was the last time AAA western games were the driving force of any Nintendo platform? Oh ya never in there 30 or so years as a hardware manufacturer.