Processor IP licensing is the business of selling chip companies the right to use a ready-made processor design, called a core, inside their own chips. IP stands for intellectual property. The chip company buys the right to use the design, not any physical part. A processor core is the block of a chip that reads a program's instructions and carries them out, one after another.
Why license a core? Designing a good core from scratch takes hundreds of engineers several years, and then years of testing. Most chip companies earn their money from something else on the chip, such as a radio, a sensor connection or a display controller. So they license a proven core and spend their own effort on the rest.
Every core understands a fixed list of basic commands, such as add, compare and jump. This list is its instruction set architecture (ISA). A program built for one ISA will not run on a core with another ISA unless it is translated. Arm's ISA is used in nearly all phones. So a chip built around a licensed Arm core can run the large body of software already written for Arm chips.
Take, for example, a start-up in Bengaluru that designs a chip for smart electricity meters. The chip must measure the current, calculate the units used, encrypt the reading and send it to the electricity distribution company, or discom. The finished chip will be a microcontroller (MCU), a small computer on one chip. The start-up licenses a small, low-power core and pays a one-time licence fee. In return, it receives the core as design files that load into its electronic design automation (EDA) tools, with test files and documents. Its engineers connect the core to their own measuring circuits. Two years later, the chip goes into production. From then on, the start-up pays a royalty, a small amount on every chip it ships. Say the chip sells for ₹60 and the royalty is 2% of the price. Then the start-up pays ₹1.20 on each chip. If 50 lakh meters use the chip in a year, the royalty for that year is ₹60 lakh.
The fee and the royalty are how an IP company earns. The concept page on semiconductor IP licensing explains how they are set. A few very large customers pay for a different right, called an architecture licence. It lets them design their own cores that follow the ISA. Phone chip makers do this for the cores inside a system-on-chip (SoC), and cloud companies do it for the CPUs in their data centres.
The open rival is RISC-V, an ISA that no one owns and anyone may use without a fee. Companies still sell RISC-V cores, because a tested core saves years of work, but the ISA itself costs nothing. India's own processor projects are built on RISC-V, such as SHAKTI from IIT Madras and VEGA from C-DAC.
How is this different from GPU and NPU IP? A processor core runs general programs, one instruction after another. A graphics or AI engine does one kind of arithmetic on thousands of numbers at the same time. Many chips license both kinds of block.