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It took forever for Nintendo to release a handheld capable of 32bit and when they did the graphics were barely better than SNES. I wouldn't exactly call that an improvement.
The main problem with handhelds is their tiny screens. The resolution is really low and doesn't lend itself well to 3D. If they would put hi-def screens in the handhelds, it would be another story, but that would increase the price too much. At the very least Nintendo should've used larger screens (and not spaced them out so much, it makes some games look weird).
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"Sanity, huh? Sorry, but I don't remember having such a useless thing to begin with" - Zaraki Kenpachi
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