Analog Devices (NYSE: ADI) is firing on nearly all cylinders. Even the one business division that's misfiring today seems to be a limited problem that will go away quickly.

The analog chip maker saw second-quarter sales jump 41% year over year to $668 million. Gross margins improved by 390 basis point over the previous quarter and a whopping 990 basis point from the year-ago quarter. That new level of profitability more than tripled GAAP earnings to $0.55 per share. Analog converted 42% of the incoming sales into operating cash flows and spent more money on dividend payments than capital expenses. Times are good.

Like I said, nearly every part of Analog's business contributed to these improvements. The one division that failed to deliver the goods was the communications department. Chinese telecom operators put the brakes on their wireless base station installations this quarter, but current ordering patterns point to renewed Chinese networking growth in the third quarter.

That's good news not only for Analog, but also for the wireless equipment manufacturers who build systems around Analog's chips. I'm looking at you, LM Ericsson (Nasdaq: ERIC). Now it's up to China Unicom (NYSE: CHU) and China Mobile (NYSE: CHL) to step on the infrastructure accelerator and make Analog's predictions come true.

Analog's uniformly excellent results also reinforced the indications from Silicon Laboratories (Nasdaq: SLAB) that the industrial semiconductor market is on the rebound. That division, which makes up nearly half of Analog's sales, saw revenue take a 54% leap over last year. Analog CEO Jerald Fishman saw this as "a very positive sign for recovery in this broad and diversified industry group," and even bragged a little bit about receiving an award from industrial automation giant Rockwell Automation (NYSE: ROK).

All told, this is a great time to own some manufacturing capacity of your own, like Analog does. Broadcom (Nasdaq: BRCM) and other fully outsourced analog chip designers can complain about manufacturing constraints all they want while Analog Devices steps in and steals the business the fabless folks left behind.

Discuss the pros and cons of in-house chip manufacturing and Chinese contracts in the comments box below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Silicon Laboratories is a Motley Fool Stock Advisor selection. The Fool owns shares of China Mobile. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.