In an interview with Nikkei, Nintendo president Satoru Iwata explicitly stated that the DSi was not going after the iPhone. Why Iwata felt the need to clarify this is unclear based on the excerpt the Edge published, but I’d go out on a limb and say the Nikkei reporter asked the question.
“We wanted users to have the device on them at all times,” he stated. “By downloading subway maps and other things, for instance, the DSi can be useful for applications other than playing games. We wanted to create an offering that would fit naturally into people’s everyday lives.”
Just because something has a camera, a browser and music playback does not mean it’s been made to compete with the iPhone. It’s not the end all, be all of tech and I wish people would realize that.