In yet another sign that the big are getting bigger in the semiconductor IP world, Virage Logic announced its intention to buy ARC International.

The acquisition, which will be an all-cash deal valued at roughly $41 million, puts Virage in an interesting position. While ARC makes processor IP, most of that is targeted at areas such as storage, audio and video, which is where the company’s recent wins have been. Rather than engaging in head-to-head competition with the biggest battle in the IP world today—ARM vs. Intel—the acquisition of ARC allows Virage to partner with both companies.

ARM and Intel have been on a collision course in the low-power space ever since Intel introduced its Atom chip. ARM is pushing up from the mobile handset market into netbooks, while Intel is pushing down from the desktop into the same market. The first ARM-powered netbooks have just begun hitting the market, while Intel is working hard to cut the power consumption on Atom chips to push further down into markets dominated by ARM.

“This allows us to co-exist with both companies,” said Alex Shubat, Virage’s president and CEO. “It also allows us to attack the market where there is huge growth and huge number of units are shipped.”

Also working in Virage’s favor are deep relationships with foundries such as TSMC and the Common Platform. To survive in the IP market requires a strong ecosystem, particularly where there is competition. ARM has built an enormous ecosystem for its processor IP, which has been its real strength in the mobile phone market. MIPS has been revamping its own to compete in the Android phone market. And Intel is drawing on its own relationships with applications developers.

While many of these relationships are not exclusive, market wins tend to coincide with the strength of ecosystems. IBM’s success over the past five years, for example, is largely the result of a growing ecosystem at all levels, ranging from early stage research to IP and joint development. ARC has customer wins with a slew of companies, including Intel, HP, Broadcom, Sandisk, Infineon and Sony.

Shubat said the deal will go through by the end of the year, and possibly sooner. He noted that there is “zero product overlap,” which should speed the integration of the two companies.

“This is definitely about ecosystems and consolidation,” he noted. “A few strong players will survive.”