Traditional handheld games consoles are in decline with 1m fewer devices produced this year compared to 2009.
The drop has been attributed to the rise in popularity of mobile phones equipped to play games and other forms of entertainment.
Research shows handheld consoles will decline 2.5 per cent to 38.9m this year down from 39.9m in 2009, according to market research firm Isuppli.
In comparison factory shipments of mobile phones are forecasted to reach 1.27bn in 2010 – up 11.4 per cent from last year's 1.14bn orders.
Consumer electronics analyst for Isuppli Pamela Tufegdzic said: The formidable lead enjoyed by mobile phones capable of gaming will continue in the years to come with no hint of decline.
Their near-universal presence gives them the potential to become a viable competitive threat to dedicated gaming platforms – primarily handheld devices.”
Tufegdzic added: Although gamers who prefer a superior gaming experience will always opt for either a console or handheld, sales of both platforms tend to rise and fall based on the vagaries of product development, consumer buying patterns and economic trends.”
The firm also says units of home consoles will total 52.3m this year, a small rise of 0.2 per cent year-on-year. It expects Move and Kinect to cushion its anticipated decline of console shipments next year, and for Microsoft, Sony and Nintendo to launch next-gen consoles in late 2010.