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In 1989, Nintendo announced plans to release the successor to the Famicom, the Super Famicom.

Its main rival was the 16-bit Mega Drive, known in North America as Genesis, which had been advertised aggressively against the nascent 8-bit NES.

A console war between Sega and Nintendo ensued during the early 1990s.

Nintendo began to produce its own hardware in 1977, with the Color TV-Game home video game consoles.

Four versions of these consoles were produced, each including variations of a single game (for example, Color TV Game 6 featured six versions of Light Tennis).

Nintendo continued to produce popular toys, including the Ultra Machine, Love Tester and the Kousenjuu series of light gun games.

Despite some successful products, Nintendo struggled to meet the fast development and manufacturing turnaround required in the toy market, and fell behind the well-established companies such as Bandai and Tomy.

In 1979, Gunpei Yokoi conceived the idea of a handheld video game, while observing a fellow bullet train commuter who passed the time by interacting idly with a portable LCD calculator, which gave birth to Game & Watch.

In 1980, Nintendo launched Game & Watch—a handheld video game series developed by Yokoi.

Nintendo released the Game Boy in Japan on 21 April 1989, and in North America on 31 July 1989.

Nintendo of America president Minoru Arakawa managed a deal to bundle the popular third party game Tetris along with the Game Boy, and the pair launched as an instant success.

Yamauchi's realization that the playing card business had limited potential was a turning point. However, Nintendo was forced to sell it because problems with the labour unions were making it too expensive to run the service.