Yes. I honestly cannot comprehend why people have such a hard time figuring out that handhelds can live with smartphones around.

This is partially handheld manufacturers fault to. I mean they simply do not have an effective way to market themselves. The days where you made a AAA title, slapped th Nintendo logo on it and it sold well, are over. Nintendo has to step up their development and advertisement effort to be able to sustain the handheld industry. They will probably get at least 4-5 million angry Vita owners money to, in the longrun.

AT one point on Rovio had a larger television presence with one brand, then the entire Nintendo, in mainland Europe. How in the hell are they staying idle?

The issue is that I can't comprehend how the handheld audience could grow let alone even stably persist.

Mobile is absorbing the new gamers that would a decade ago replaced those that left. Handheld itself is becoming more Niche as it is essentially just Nintendo left. And the outer pressure of Mobile's software and hardware development cycle will put intense pressure on Nintendo, who will likely return focus to Japan, further shrinking it.

I mean its basically gotten to the point, where Nintendo is the only reason for a Handheld device at this point. I personally don't think they can support the entire market by themselves.

The 3DS's hardware feels more dated than it's sucessor would in 10 years probably. Plus the sucessor will not only have usual nintendo handheld games, it will have typical nintendo home console games thanks to fusion platform and PSP games thanks to Vita's failure.

Who said it would grow? And it's not hard for it to stably persist. There's an audience for everything. Laptops didn't replace computers and tablets didn't replace laptops. 

You also have to realize the audience for handhelds and the audience for smartphones are different audiences. It does cut into the market share but it won't kill it. Those who want higher quality games will buy a 3DS or Vita over a $0.99 app. 

As it stands there's more than enough room for a handheld. As time goes on though and smartphones get better developers and memory space increases, the need for handhelds may shrink. But that's a little while down the road from here. Sony might give it one more shot later on with a Vita successor, but I'm afraid they don't really have much affect on handhelds. Nintendo's next handheld will tell us how long the handheld market will last. If they give us another unneeded addition to the DS family, we probably won't see dedicated handhelds in the next decade. If it's something new like the Gameboy and original DS were, then it could last longer. Right now it is too early to tell how handhelds will persist past the 3DS, until we get an idea of what the next Nintendo handheld will be these sort of threads are a bit premature.

As long as there exists quality software on handhelds I don't see why not ...

We will never see handheld sales like last generation with the DS/PSP again... ever. But there is still a market there, albeit a smaller one.

This situation is changing rapidly, only 3-4 years ago it seemed like a matter of time before Microsoft announced a Xbox handheld and now that seems a ridiculous premise. Sony will most likely never put the $ into R&D of a handheld again after the Vita and even Nintendo who has dominated the handheld industry is hush hush.

For this reason the NX, if it is what we think it might be could be the answer. Imagine a smaller version of the WiiU tablet that went online from any WiFi spot that docked into a powerful home console and was an extension of the games you played on your TV. Well that may just be different enough to work....

Nintendo has been able to sell 50+ million 3DS systems, this isn't something to ignore. It's a big drop from the DS, but it's still a significant achievement considering the popularity of Smartphones and Tablets. The 3DS successor can do better than 3DS, they have some hurdles to overcome first though. Of course there's still a market for dedicated handhelds....and no, not for a Handheld that "docks" into some imaginary device to make it the Console as well.

I don't think so.

There won't be another PSP and a standard 3DS successor would probably follow the path of the Vita/Wii-U (as in 15-20m sales tops). That's probably why Nintendo is trying to do something new and unify their gaming ecosystem.

Unless Mobile gaming is a fad, unlikely considering Mobile isn't, its a big and recent problem that I don't think your chart is apt to describe. PCs are more threatened by mobile then consoles (with regard to Mobile Computing). Handhelds on the otherhand have two major significant threats from Mobile.

Suggesting Mobile Gaming to steal active userbase from Handhelds is a strawman, that I didn't mention. I'm considering  new gamers who unlike in previous generations have a ton more options to choose from, only one of which is for a propreitary single function device (Nintendo Handheld). All else equal, Nintendo gets a fraction of what it gained when it was the only one on the block or even with Sony. When you consider, that "Quality" is the only thing Nintendo will have (for a limited time) over these competitors, it looks pretty dismal, will new gamers even be aware of this quality? In this hostile red ocean, is it realistic to have a new succesful handheld competitor?

If new gamers aren't coming in, what about those who persist? Unless we have 100% adoption rate, and those who played handhelds in the past stop doing so for whatever reason, further decline is inevitable.

And then their is the development pressure of Mobile, with increasing production power of advancing devices, "Quality" really starts coming into question as well. Granted the mobile app market limits budgets to a degree, how good does a 1-5 $ game have to be to outshine a 20-40$ game. And once this becomes more standard than exception, what then will Nintendo or really any Mobile Dedicated Console manufacturer have in their favor?

I should clarify, I'm not saying the market will cease to exists, but rather become a niche market, and in someways it already is