IHS Screen Digest is forecasting global year-end unit sales of 12.2m units and the initial shipment is in line with our expectations. Given significant brand equity built over 140m unit sales of current handheld platform Nintendo DS, we expect very high levels of consumer demand for the successor. Glasses-free 3D and the promise of Nintendo’s first party library (as well as some significant publishing commitments from third parties) will drive sales through the launch period.

Longer term, the outlook is less certain given the environment is very different from the one which allowed the DS to thrive. Non-dedicated mobile devices, notably Apple’s iOS device range, are winning increasing shares of gaming consumption. Apple’s iTunes App Store has conditioned consumers to a mobile gaming pricing model which dramatically undercuts ASPs for packaged games on existing dedicated gaming handheld platforms: ASPs range from 60c to $5 for the most part with many lifetimes worth of entirely-free gaming available from free Apps, ad-supported Apps and microtransaction-supported Apps.

While dedicated handheld games publishers would argue (fairly) that the quality and investment of games for DS and PSP (and shortly 3DS and PSP2) is of a different scale to games on smartphones and tablets, the issue is how much of the market cares enough to invest in a dedicated handheld games console if they already own, or plan to buy, one of the increasing numbers of smartphones or tablet devices tied into iTunes or the Android Marketplace. Dedicated gamers will see Nintendo through the first 20m units but it is a significantly broader market which drove DS north of 100m units.

While ASPs are likely to withstand such pressures for the premier league of handheld IPs eg, Super Mario, Pokemon, IHS Screen Digest believes that ASPs for packaged handheld titles outside of the chosen few will come under severe downward pressure. The quality, sales, content libraries and addressable markets of smartphone and tablets are all growing and will continue to place increasing levels of pressure on the dedicated gaming device market.

IHS Screen Digest believes that dedicated handhelds must offer sufficient significant differentiating factors to compete in a fragmenting and proliferating device landscape with maturing content delivery ecosystems. Nintendo has opted for auto-stereoscopic 3D on the feature front and will also bring its library of top-tier gaming IPs to bear on the marketplace. Thus far there have been few indicators regarding Nintendo’s digital strategy and whether it will intensify from lukewarm current-generation initiatives. Sony is expected to announce details of PSP2 in the next month: we expect no retreat from Sony’s traditional leading edge technology strategy for the hardware while PSN is likely to play a significant role in terms of content.

Source:-http://www.screendigest.com/news/nintendo-shipping-4m-3ds-hardware-units-by-end-q1-2010/view.html