Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Disappointment with Samsung Electronics Co.'s announcement Thursday that it won't restructure into a holding company gave way to excitement over the first-quarter earnings, with the shares rising as much as 4 percent.

That tells you a lot about traders' short-term focus as they drive the South Korean chaebol's stock to another record. Sweeteners like returning excess cash and canceling shares are giving the stock a sugar rush. Activist investor Paul Elliot Singer wanted healthier long-term structural changes.

Feels Good
Samsung shares reach another high
Source: Bloomberg

But if short-term perspective is what the market wants, that's what I'm here to offer by shining a light on Samsung's chip business. Although smartphones, exploding or otherwise, are what get the attention, it's semiconductors that soak up most of the company's investment and capex.

Semiconductor sales climbed 40 percent, year on year, the most since 2010. But that was driven entirely by the recent strength in the memory-chip business, of which Samsung is the global king. Non-memory sales -- chiefly the production of smartphone processors for itself and clients like Qualcomm Inc. -- climbed a paltry 10 percent, on the back of six months of declines in the division.

This disparity brings non-memory down to just 24.8 percent of chip revenue,  the lowest contribution in six quarters. That's fine if you believe that memory will remain strong for a long time, an unusual expectation given the sector's highly cyclical nature and the massive capacity coming online in China.

Non-memory chips account for the lowest share of semiconductor revenue since September 2015
Source: Bloomberg
Note: Shows four-quarter moving average to smooth out seasonality.

I'm not sounding the alarm just yet. But as Samsung spends big and hunkers down for in an intense battle with Taiwan Semiconductor Manufacturing Co. over next-generation 10-nanometer production technology, investors might want to get down off their sugar high and start to look closely for cavities.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Chip capex was 5 trillion won ($4.4 billion) in the quarter, out of a total 9.8 trillion won, Samsung said on Thursday's conference call

  2. On a rolling four-quarter basis, to smooth out seasonality.

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Tim Culpan in Taipei at

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Paul Sillitoe at