Smart phones' cameras are improving all the time, but size limitations means it will never be as good as MILCs. MILCs have a size advantage over DSLRs.
IMHO, the P&S market will be crushed between smart phones & MILCs. Those who want to carry the least will buy a smart phone, and settle on camera IQ, and those who aren't willing to settle on camera IQ will buy a MILC, and carry some extra weight.
Question is how will the market split between MILCs and DSLRs.
This is what, IMVHO, Canon should do:
1. Invest in sensors, lenses, and image processing software for smart phones.
2. Invest in the EOS-M line, e.g. more lenses & improve AF.
3. Reduce the number of DSLR lines. My guess is the EOS-M line is going to kill the entry level lines (xxxxD & xxxD).
4. Higher DSLR lines will have higher prices and/or longer lifecycles to compensate for lost sales due to 3.