Like any intellectual property make vs. buy decision, the decision to make or develop serdes IP rests on factors including IP licensing costs, IP development costs, strategic value of owning IP and integration costs of IP cores. Many of those factors rest on the topic of this column: valuing serdes IP.

A simple way to value serdes IP is to use merchant silicon pricing as a proxy. Serdes IP exists in its purest form in off-the-shelf backplane interconnect ICs. Though there are multitudes of backplane interconnect devices on the market, let's use the Mindspeed M27211, which is an 8x3.125-Gbits/s with 8B/10B encoding that sells for $119. This implies a price of $4.76 per 1-Gbit/s. Taking 50 percent out for gross margin and another 25 percent out for manufacturing, the actual value of serdes IP probably hovers around $1.25 per 1 Gbit/s.

So then, what is the total value of serdes intellectual property in the communications semiconductor world? To help answer that, I turn to Gartner Dataquest's port-based system and semiconductor model.

Aggregating every kind of port-from T1/E1 to Gigabit Ethernet to OC-192-there was approximately 16.2 petabits of line interface bandwidth shipped in 2001. Sounds shocking, but consider that there was 22.4 petabits shipped in 2000. This 16.2 petabits of line interface traffic was probably supported by another 24.3 petabits of backplane bandwidth.

Here, I assume 50 percent extra backplane capacity to support redundancy and overspeed. A total of 40.5 petabits at $1.25 per 1 Gbit/s yields a total serdes intellectual property market value of $50 million. This represents a reasonable upper bound to the third-party serdes IP licensing market on an annual basis.

Jeremey Donovan ( Jeremey.Donovan@Gartner.com) is chief analyst at Gartner Dataquest.