After a long wait, the voice-over-Internet Protocol market is off and running. In the U.S., Verizon is poised to move tens of millions of subscribers to VoIP; SBC offers hosted VoIP services; and Yahoo Broadband has signed up more than 3 million VoIP subscribers.

This growth in VoIP deployment is driving sales of voice processors. These programmable chips, which convert voice data from TDM format to IP packets or ATM cells, range from single-channel ICs designed for VoIP phones to high-density voice processors that handle hundreds of channels per chip.

Except for the cheapest devices, voice processors combine DSP engines, which convert voice to packet data, and packet engines, which implement the packet protocol.

Broadcom got into this market too early, acquiring startup Silicon Spice in 2000. The company successfully released a 184-channel voice processor late that year, but sales languished during the downturn and Broadcom laid off the entire development team. Recently, Broadcom has seen a surge of interest in its voice processor, but it may be too late to revive the product line.

Centillium, in contrast, has been more patient, deploying three generations in four years. The latest version, Entropia III, handles over 1,000 PCM voice channels, more than any other available chip. Entropia III also offers the lowest power per channel.

As the leading vendor of DSPs, Texas Instruments is also a leader in voice processors and offers the most complete set of software, covering many voice and packet protocols. TI's TNETV3010 offers fewer channels than other voice processors, but its small package and integrated memory allow the chip to be packed tightly in an array of processors.

We estimate the high-density voice processor market at $50 million this year. Pricing stood at about $1 per PCM channel or $3 per low-bit-rate channel. In 2005, this pricing will be cut in half, fueling rapid growth: We expect unit shipments to double annually and revenue to increase by 60 percent per year for at least the next two years.

With deployment in the enterprise, 3G wireless infrastructure and media gateways, voice processors are suddenly a hot commodity. Watch for companies, like Centillium, with more specialized parts to gain ground on traditional DSP vendors like TI.

Linley Gwennap is founder and principal analyst of The Linley Group and co-author of "A Guide to Storage Networking Silicon" (www.linleygroup.com/npu).