Actually, that is the Vita. System only sold 20 million or so. People forget how much Nintendo has dominated handhelds. Despite releasing its worse system it kicks its rival out of the market. 

First, the whole "Nintendo's handheld market is being consumed by mobile" is a farce. The 3DS is the best selling console this generation. Pokemon Go has proved that mobile can be used to increase handheld game sales (which was Iwata's plan from the start). There is this faulty assumption from the analyst that mobile and handheld are mutually exclusive. Pokemon Go proves they are not.

The reason the 3DS struggled was because of the system launched with subpar games, a 3D gimmick that most people didn't want, was too expensive and didn't have a great battery life. The 3DS only sold about 3 million its first year, and sales only improved when Nintendo slashed the price and some games finally came out. The 3DS, like the Wii U, had this issue where Nintendo still wanted the expanded market's money but not have to worry about them. This is how you got Nintendogs+Cats and Wii Fit U. Sure, great on the DS< but the DS also had plenty of other titles for these consumers as well. Heck, the 3DS's launch lineup was forgettable. Does anyone care about Steel Diver and Pilotwings Resort?

The Switch doesn't have these problems. As I type this, the Switch has likely outsold the 3DS's first year (which launched in the firs quarter as well). Nintendo has two big hits with Zelda and Mario Kart. Splatoon will sell big in Japan. SMO will sell big. There are other games we don't know about. There will eventually be Pokemon. By all accounts, I don't see why the Switch couldn't break 100 mil

If you read him again he was comparing Ninty domination on handhelds even at its worst with Sony domination on home consoles even at its worst.
If you take into account home consoles too for Ninty as portables too for Sony, the worst selling Ninty home console sold less than Sony worst selling portable, but his point was another, that in their respective best markets they both excel even at their worst.

A combined 235M handhelds 7th gen (DS+PSP) down to a current 80M 8th gen (3DS+Vita) while mobile gaming revenue continues reaching new heights = a farce? Ok, pal...However you want to justify it, Nintendo's market has shrunk dramatically in recent years. Increasing competition and market share from both mobile and computers only makes it harder for console manufacturers to sell the same numbers they did in the past. The Switch obviously does face many of the same challenges you just listed for the 3DS; price, battery life, a rumble gimmick nobody asked for, etc. The one clear strength it does have is one of the most anticipated games ever as a launch title, which obviously made for a great launch. Whether the console can maintain that momentum once their core has finished buying and reverse the downward slope remains to be seen. It is indeed less realistic for the more expensive, less accessible Switch to reach numbers only achieved by Nintendo's cheapest and most casually appealing consoles. Could it? Maybe, but let's not put the cart before the horse...

A combined 235M handhelds 7th gen (DS+PSP) down to a current 80M 8th gen (3DS+Vita) while mobile gaming revenue continues reaching new heights = a farce? Ok, pal...However you want to justify it, Nintendo's market has shrunk dramatically in recent years. Increasing competition and market share from both mobile and computers only makes it harder for console manufacturers to sell the same numbers they did in the past. The Switch obviously does face many of the same challenges you just listed for the 3DS; price, battery life, a rumble gimmick nobody asked for, etc. The one clear strength it does have is one of the most anticipated games ever as a launch title, which obviously made for a great launch. Whether the console can maintain that momentum once their core has finished buying and reverse the downward slope remains to be seen. It is indeed less realistic for the more expensive, less accessible Switch to reach numbers only achieved by Nintendo's cheapest and most casually appealing consoles. Could it? Maybe, but let's not put the cart before the horse...

If the reason for the decline in handhelds is due to mobile gaming, then why did Pokemon Go result in higher sales for 3DS hardware and Pokemon software? If your argument is true and the reason for the decline in handheld is the growth of the mobile market, then this would mean they would be mutually exclusive. By your argument, Pokemon Go should have resulted in a decline in Pokemon games because you could now get Pokemon games on the phone. So mobile can not be the reason for the decline because customers can just as easily move towards handheld gaming.

Your argument fails because correlation does not equal causation. The global economy was weaker in 2011 than it was in 2004. This can be seen in the video game market as a whole with total hardware sales and software sales declining significantly. You also have the 3DS just being a worse console than the DS. The system only sold 3 million its first year and then sold 12-13 million when the price was cut and better games came out. You can't ignore this as well. There are other reasons that explain the decline.

 Software sells hardware. The Switch is a success because Zelda is a success. Mario Kart 8 is pushing the Switch. Splatoon 2 will push the system in Japan. By all accounts, the system should keep selling thanks to early momentum. Momentum brings developers who will make more games which will help propel the system. The Nintendo Switch will have plenty of Japanese development as the 3DS and DS did. So with this early push, I don't see why sales would just collapse.  Also keep in mind the DS started kind of weak. The system only sold 5.27 million in its first 4 months and that was during Christmas. The Switch has sold about half of that in its first month in March. I don't see how this system could not get close to Nintendo's other handhelds. 

I never said the markets were completely exclusive. PoGo becoming another (brief) cultural phenomenon did help give the 3DS a sales spike when a mainline entry was right around the corner to capitalize on all that buzz. But it's telling that Go was the bigger success of the two (sizably). The core will always be there when you entice them, but Nintendo consoles have always needed large casual appeal as well to break the nine figure mark; cheap and novel enough to be good impulse buys with a really enticing accessible game to bait the hook. The Switch is not cheap for a handheld, its hybrid aspect is not as novel as previous big successes, and the casual market now already have capable devices within reach at all times for their simple gaming fix. Casual crazes now come out of devices they already use daily (mobile/PC). 1-2 Switch is not exactly setting the world on fire. Without the bulk of that extra market, a Nintendo console is not likely to see that level of success. It certainly hasn't before. You can't ignore this.