The KKR-led consolidation process for the European semiconductor industry will lead to disaster, according to Europe's leading semiconductor industry analysts, Future Horizons.

Fresh from pushing for the NXP-ST consolidation in the wireless chip business, KKR, which is the lead member of the consortium which owns NXP, is said to be looking to take a controlling position in Infineon, and then merging Infineon with NXP.

This plan is said to have been cooked up between Infineon's supervisory board and KKR, in the teeth of opposition from Infineon's CEO Dr Wolfgang Ziebart, who has been forced to resign.

"I can't see any benefit in one large company merging with another large company", Malcolm Penn, CEO of analysts Future Horizons, told Electronics Weekly.

"There are operational inefficiencies, and trying to merge two companies to be one homogeneous operation, with all the geographical complications, is very difficult. There's only one merger which ever worked - SGS and Thomson. It's better for the industry if a company dies and is taken over."

At the recent IEF2008, Dr Susumu Kohyama, CEO of Covalent Materials, reckoned: "Consolidation is a way to final disintegration", while Ray Bingham, former CEO of Cadence, now managing partner at financial advisers Atlantic Capital, thought: "The consolidation of two companies is like the collision of two garbage trucks. You get a lot of stuff on the road, but you don't necessarily get any organized pattern that can take you anywhere."

The Penn/Kohyama/Bingham view is received wisdom in the semiconductor industry.

So why is KKR so keen on implementing consolidation? "I don't know. I don't understand how the financial mind works", replied Penn.

KKR's understanding of the semiconductor industry has already appeared shaky. At the time KKR made the NXP acquisition, the CEO of Xilinx Wim Roelandts pointed out: "If the market turns down, some of these investments are going to look very foolish." The market did turn down, and the investments do look foolish.

KKR has already conceded that it misjudged both the market and the value of NXP by marking down its valuation of its NXP holding on its balance sheet.

But KKR is, apparently, keen to throw good money after bad.

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.