In the third quarter of 2011, Apple Inc. (NASDAQ: AAPL) shipped about 20 million iPhones, a quarter-over-quarter increase of about 11%. Smartphone shipments from competitors Nokia Corp. (NYSE: NOK) and Research in Motion Ltd. (NASDAQ: RIMM) fell again. But the biggest increase, from about 13 million units to about 20 million units came from Samsung Electronics (OTC: SSNLF). Smartphones are key for Samsung, and the company is on a knife’s edge waiting for rulings on patent disputes with Apple in Australia and the US.

Samsung has just lowered its forecast for total third-quarter earnings which the company says reflects lower demand for its computer chips and flat panel displays. And a German court has already ruled that Samsung may not sell its Galaxy tablet devices in that country, giving Apple a win. Things might get even tougher for Samsung.

Apple also won a favorable ruling in the Netherlands, banning the sale of Samsung’s latest smartphones in that country. The Korean company has filed countersuits against Apple in the US and the UK.

Both those rulings could have a big impact on Samsung’s sales and profitability and the company may be forced to come up with a strategy that is more likely than countersuits to win in the smartphone market. That’s why the Australian decision, which is expected to come next week, is so important. And not just to Samsung, but to other smartphone makers, including HTC Corp. and Motorola Mobility Inc. (NYSE: MMI) which use the Android operating system from Google Inc. (NASDAQ: GOOG).

If Samsung should prevail in Australia, the company could be better positioned to negotiate a cross-licensing deal with Apple and other patent holders. If Samsung should lose, then such negotiations are very likely to cost the company significantly more. The knock-on effect on other smartphone makers could also be substantial. Apple, perhaps sensing blood in the water, rejected Samsung’s latest offer of a settlement on the Galaxy tablet issue in Australia.

The patent wars over smartphones and tablets are not yet to the endgame, but the outcome of the Samsung-Apple battle could be a predictor of what the endgame might shape up as.

Paul Ausick

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