"The global economy is unsettled, but the semi market is holding its own", writes Malcolm Penn, CEO of Europe's leading chip industry analysts, Future Horizons, in its June market report, pointing out a series of anomalies prevailing in the semiconductor industry:

• 2008 Cap ex has been decimated despite negligible excess capacity
• Q1 utilisation rates are running on empty yet net new capacity is low
• Revenues per wafer start are appalling focus is now on profits, not capacity
• Prices have stopped falling no more "doing more for less" thank you
• Cheap debt is now expensive bang goes that (PE-driven) business model
• Breaking up is easy to do but what about the bits left over?
• One plus one equals two except when two chip divisions join forces
• Let the foundries take the strain but is there a price to pay?

"Be it falling cap ex, tight capacity, focus on profits, continuing strong market demand, second half seasonal effects the forecast tea leaves all seem to be pointing in the same positive direction", says Penn.

"Has the worm finally turned for the industry? We think so. We also think that the penny has yet to drop and that the impact on the market will be seismic and dramatic."

Consolidation, much favoured by the financial community and frequently proposed as the answer to the industry's problems, simply doesn't work in the chip industry, states Penn. Spin-outs of non-performing operations don't work either, he reckons.

Meanwhile the determination of the foundries to squeeze customers for more dollars per wafer, sits uncomfortably with the ambitions of the foundry industry's customers to increase their gross margins.

"It's not business as usual", says Penn. It's all destined to be very unusual. Meanwhile April's figures showed a 7.7 per cent revenue decline.

Typically, Penn is unfazed by this, saying that demand remains robust and that: "Digging beneath the layers reveals a set of market fundamentals that are in remarkably strong form."

See also: Mannerisms, the blog of David Manners. Updated twice daily, it's the distinctive, entertaining, authoritative and never dull commentary on the semiconductor industry, from someone who knows. Sign up for the Mannerisms eNewsletter.