Third parties have been diverting development away from handhelds for years because of the sheer number of smartphone users around. That's particularly true in the West, whose third parties are nonexistent on the 3DS and Vita outside of multiplat sports and licensed games. But it's also been siphoning off Japanese development as well, where phone gaming is prolific. Between that and the implosion of the Vita, Nintendo's first party work is the only thing propping up the handheld space right now.
It's an enourmous step backwards for that segment of the gaming space IMO. Mobile is cannibalizing development resources that could be put into more substantive experiences. To begin with, few developers besides Nintendo have been seeing reliable success in the dedicated market as of late, so the prospect of having their own Angry Birds or Puzzle and Dragons is proving to be a major lure. These issues were not anywhere near as big before the iPhone came out.
I can't think of what can be done to stem that tide. Not when the Vita is dead and the 3DS has likely seen it's best days already.
