"There's little doubt that SoCs will be increasingly prominent in many industries," said Max Baron, principal analyst for In-Stat's Logic Service unit.

In a new report, In-Stat predicts that SoC volumes will grow an average of 31% a year, reaching 1.3 billion units in 2004. In 1999, SoC shipments jumped 116% to 345 million units from 160 million in 1998, said the research firm. About 39% of the SoC devices served communications systems applications last year, according to In-Stat.

Generally, system-on-chip designs have been defined as ICs with embedded processors, memory, and other functions that make them much more complex than basic building-block semiconductors. The definition of system-on-chip shifts, but SoC are generally more application or customer specific than standard ICs because of the higher levels of integration.

Communications products are the largest market segment for SoC designs, according to In-Stat, but over the next several years consumer products will grow the fastest in the market, averaging an increase of 43% per year through 2004, said the research firm. However, communications systems will remain the largest applications driver, consuming 576 million units in 2004, compared to 310 million units in the consumer segment, said In-Stat.

Time-to-market pressures and the need for more functions in system products are fueling the SoC growth, said analyst Baron. "They must have efficient access to designs that have been previously tested," he said, referring to the need for intellectual property (IP) design blocks used to build system-on-chips. "SoC projects typically encompass several technical disciplines, so the more designs that can be reused, the more efficient the process."

In-Stat also said it has concluded that the average selling prices for SoC will drop slightly from $10.80 in 1999 to $10.50 in 2000.