You don’t need to tell IP pioneer ARM Holdings that success in the core licensing business requires best-in-class engineering, patience and the prescience to aim your technology at a sweet spot five years down the road. The result of building up a solid roster of licensees with favorable royalty terms ought to be a high- margin, low-cost business with plenty of momentum.

In the graphics IP space, that has been the payoff for multimedia IP powerhouse Imagination Technologies Group, which has seen chip volumes for its PowerVR cores take off in mobile devices and auto applications. And it is the challenge now facing ARM and its Mali core.

As Moore’s Law drives chip transistor counts higher, discrete graphics processors are losing sockets to embedded implementations and heterogeneous, compute/graphics processing arrays. Meanwhile, graphics applications are mushrooming in consumer, computing, industrial and automotive electronics.

It’s therefore no surprise that processor companies have targeted graphics. AMD acquired ATI Technologies in 2006 for $5.4 billion; Qualcomm then bought ATI’s mobile graphics division from AMD for $65 million. And ARM (Cambridge, U.K.) created a media processing unit in June 2006 by purchasing Falanx Microsystems.

Despite all the jockeying, graphics IP still looks like a one-horse race. Estimates vary, but Imagination’s graphics core shipments are thought to approach 250 million chips a year.