As I've posted in other threads:
Simple, shallow, cheap iOS games serve a purpose. They're good for wasting a few minutes in line at the grocery store or right before going to sleep. They're quick diversions and are priced appropriately... but they don't take the place of full-blown DS/PSP/3DS games. Shallow $1 games are very popular and a lot of fun, but there's still a huge market (and huge revenue stream) for deeper $40 games. Both types of games fill different needs in different situations and aren't really competing for the same market share.
iOS games are like YouTube videos: quick, cheaply produced, and very inexpensive to watch. DS/PSP/3DS games are like feature films: longer, higher budget, and cost more to watch. Both categories co-exist perfectly fine because they're serving two different purposes in two different situations.