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.

The chart was for consoles to illustrated the cyclical tide-like nature of the console market, something few analysts took into account when talking about declining console sales in the 2010-2013 period.

I differentiate the effect of Mobile for the cyclical market forces that govern the console market, because its external and increasing at an """Exponential""" rate.

 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).

Why is it assumed that handhelds must necessarily compete directly with mobile, despite the experiences offered not being the same? Far fewer people assume that mobile is competing directly with consoles or PC. Sure, there's more options for consumers these days, but if you really think about it, isn't every form of entertainment competing for your time and money? Why should we assume that mobile uniquely competes with handhelds? Because they're both portable? I guess that mentality is what's leading some analysts to assume that the Apple TV will compete directly with the PS4 and XBO, which is patently ridiculous (though making ridiculous assertions seems like standard operating procedure for professional games industry analysts).

Its not like Mobile completely outdates handheld, but they do overlap. Specificially with new gamers, who are not aware of and or do not appreciate the differences of experiences between the two, then is it a stretch to say they would be percieved as the same? The exact same argument applies to consoles as well, so its not unique to mobile and handhelds. 

I'd even hazard this generation of consoles is affected in a similar albiet reduced way, but I haven't considered this yet.

All else equal, Nintendo gets a fraction of what it gained when it was the only one on the block or even with Sony.

What fraction? A tenth? A quarter? Half? Four-fifths? Have any surveys been done comparing the age brackets of DS users vs. 3DS users and how those shifted over the course of the generation? I need evidence. Numbers. But since anecdotes are considered fair game these days, most under-18s I know (admittedly few, and most of them related) have an interest in owning a 3DS, and my nephews and my roommate's older daughter all have 3DSs.

Let me clarify, this is conjecture, resonable enough conjecture imo to pose the question, which is what I'm doing. When I say fraction, I mean strictly no more than. And I say strictly no more than with certainty based on the fact that mobile market "exists" now. I realize this isn't strong enough to make claims or even raise doubt over the concurrent performance of the 3DS, so I'm referring to the future of handhelds in general. I'll admit the normallization argument is compellling, if only because NDS and GBA where inflated, but these new conditions (Mobile) is abnormal compared to previous Nintendo handheld generations.

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?

"Quality" doesn't merely consist in visuals...

I don't use "Quality" as simply visuals, rather just an umbrella term for all of the "advantages" of higher production value handheld console games versus lower priced mobile games. Mainly drawing from the quality vs quantity argument which is also a games meme so to speak.

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.

Even if we assume a neligible and declining number of those born after 1995 are buying handhelds, it should take decades for enough older established gamers to die off or stop playing to push the handheld market into oblivion. Something happened that resulted in the DS having grossly inflated sales, the GBA was itself grossly inflated in the U.S., and the PSP was the first and now only non-Nintendo handheld to be a commercial success. We're seeing an adjustment back to something more normal, not the start of a terminal decline. If Nintendo's next handheld sells worse than the 3DS even if they put their best effort forward, then an argument could be made that handhelds are really in trouble. It's only been four and a half years since the 3DS debuted, far too short  of a time span to establish any sort of long-term trend.

The trend I'm looking at to even pose this question is mobile rather than 3DS' performance itself. I agree with you but at the same time I'm jumping the gun a bit b/c I don't think its in Nintendo's hands at this point. Mobile is just too strong. We're already getting to the point where main differentiators between console and mobile games are physical buttons.

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

A likely end-life tally of about 70-75 million for the 3DS is hardly "niche."

I'm not worried about the 3DS, rather beyond the 3DS.

*Full disclosure: I don't even believe consoles will have another generation in physical form, but thats not the thread topic.

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