Also people do like visuals and you can do more with a console than a phone. This is true no matter what the technology. If I can do a certain amount with a 1 watt GPU in a phone, I can do a lot more with a 10 or 50 or 100 watt GPU in a console.
I can say this with some authority as a game developer who's working on console titles and with mobile phones:
You are assuming that there's another, more advanced console generation on the horizon. There isn't. Microsoft hasn't announced it, Sony hasn't announced, and Nintendo is still catching up to the last generation. Oh sure, eventually we'll get one, but I'd be surprised if we even got an announcement about a more powerful console within a year.
Meanwhile, sub-1-watt GPUs are gaining ground FAST. The latest phone chipsets are within a stone's throw of "fast enough that nobody can afford to make content that fully uses the graphics hardware".
That's the real reason we're not seeing another console hardware generation: the art budget to fully take advantage of current-generation hardware is in the neighbourhood of $30M. You can't spend much more than that on average and still expect to make money on a game.
So, yeah, you're not wrong, but you're missing the big picture. Nintendo got it when they released the Wii; Epic gets it. It would be nice to get phones up to par with the consoles so we don't have to spend quite as much time optimizing our code, and so the lowest common denominator is better, but game developers aren't all that anxious for more graphics horsepower than the Xbox 360 offers.
I don't think the console form factor is going away, but regardless, there's a lot of value in unified tech across all platforms, PC, console, and mobile; mobile is going to be big enough soon that every serious game engine is going to have to be mobile-capable, even if games are still largely being targeted at consoles.
This was a bizarre concept at one point, there was no way you could use the same engine on e.g. the Nintendo DS and the Xbox 360. Now handhelds and consoles are close enough that it would be stupid not to use the same engine...