• by Steve Smith , Staff Writer @popeyesm, December 24, 2012

Consumer electronics continue to be hot tickets for the holiday season, but the traditional winners in personal CE too now must bow to the mobile juggernaut.

Dedicated handheld game consoles and digital cameras are taking repeated beatings by the high quality of smartphone experiences in both areas. And this gouging into other precut categories is no longer incremental.

According to ABI Research, shipments of digital cameras will fall an amazing 20% in the U.S. this year, and 11% worldwide. Their analysts note that image and sound quality seem to be less of an issue for consumers of late. Well, add to that the incredible leaps that smartphones have made in both areas in these last generations of hardware. It simply is becoming too hard a case to make that consumers need to carry multiple devices just to take 90% of the snaps we make. Add to that convenience the fact that photos are made to be shown and shared. Again, the basic connectivity and baked-in social functions of both iOS and Android trump digital cameras.

The same holds true for gaming. According to ABI, dedicated handheld gaming devices will be down almost 13% this year in the U.S. compared to 2011 and down 4% worldwide. Sony’s PlayStation Vita and Nintendo’s 3DS came at the market seeming to understand that they couldn’t compete at the low end and even the middle of the market. Their costly next-gen consoles are wonderful machines, but their portability and power advantages are just harder to appreciate now.

ABI is expecting some resilience in both gaming and cam markets as the hardware makers cut prices and find their niche among the quality-driven enthusiasts. This may be easier for the digital cam industry, where pro-am enthusiasts themselves provide the content. In gaming, it all still depends on developer support, not just hardware prowess. Neither Vita or 3DS have stellar, deep libraries.

When it comes to gaming especially, I think the 7-inch tablets could prove an even bigger challenge -- for the game consoles especially. This is a superb form factor for gaming. There is enough screen real estate for lush graphics to come through and for virtualized interfaces that don’t impede view of the game action. I have been playing "Bastion" and "Final Fantasy IV" on the iPad Mini and "Bard’s Tale" on the Nexus 7 with great results. The form factor is much more compelling for game immersion and physical handling than either smartphone or full-size tablet.

When the wraps come off all those half-sized tablets this holiday, the handheld console game market could well experience its next great gouging.