Then, I asked for the IP vendors themselves to respond to a set of questions. Here's one letter to the editor:

To the editor:

One of the biggest design challenges is the increased need for software in today's devices. For most designs at 90nm, 65nm and below, software functionality represents more than 50 percent of the design cost both for SoC semiconductor suppliers and OEM system designers. The software cost of SoCs will continue to increase with the constant demand for greater functionality.

No one company can design everything needed on time in these highly integrated SoCs, so at lower nodes, IP is not a lost cause, as it's a necessity. Processor IP helps by providing standard products like software ABIs, and by offering additional software support from the ecosystem.

To be successful, IP companies must meet three uncompromising conditions. First: provide a set of standard functions; this enables a market. Secondly, a large market opportunity is needed where products provide ''must-have'' versus ''nice-to-have'' features. Finally, you need a significant barrier to entry to establish the value that allows for longer-term ROI.

With processor IP, having the critical software base is key to setting market standards. MIPS Technologies has the crucial software instruction set that we defined and it is protected with patents. The extensive ecosystem developed around our products builds that barrier even higher.

Recently, MIPS acquired the world's leading analog IP company, Chipidea. The analog connectivity and formats are defined by standards. In analog IP, the high barrier to entry is based on the fact that analog implementations are extremely difficult, and truly skilled analog engineering talent is rare. Chipidea's more than 400 IP blocks also set a high competitive barrier.

At the end of the day, IP quality is paramount. Quality is an imperative that if ignored is more detrimental to success than any competitor. Quality products lead customers to purchase additional IP licenses and expand their range of products purchased. We see this first hand though customer feedback and results; MIPS Technologies has never had a customer tape out where our processor core was non-functional.

One challenge to building a successful IP model that includes royalty revenues is the ability to hold out from a cash flow perspective for the 2-3 years from design start to the volume semiconductor production that generates royalties. Most IP companies don't have the resources to sustain long term in this environment. The key to success is a clear, sustainable value proposition created by providing customers with a continuous stream of design-critical, quality IP.

Finally, companies must stay true to their model, offering IP and not silicon products. Customers don't want to compete with their suppliers with similar products.

Unquestionably, the IP business model works if you address a large market defined by standards where barriers to entry allow ROI. With MIPS' acquisition of Chipidea, the company becomes the second largest semiconductor design IP company and the number one analog IP company worldwide. MIPS has a 25 percent operating margin business model, and Chipidea is poised to match or exceed that level longer term. The ability to sustain this operating margin with high growth provides clear value and return for our customers, employees, shareholders and ecosystem partners.

Jack Browne
Vice president of marketing
MIPS Technologies