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Everyone is assuming Epic doesn't want to bother or knows it would be competing against Nintendo games. It is a bit odd though of the boss saying the specs and engine can't be done but at the same time they are working on the iPhone which needs a customized "watered-down" version of the engine.
To be fair, the iPhone does have a stronger processor than the 3DS but it shares the power and CPU with other applications whereas the 3DS isn't sharing processor power with other non-gaming applications.
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