SAN JOSE -- Systems companies are fundamentally changing the way they procure chips, Cadence's senior vice president and chief financial officer asserts.

System companies are moving away from a model under which they brought standard, off-the-shelf semiconductor and memory chips and integrated them to create a device, instead preferring to put the onus on the original component manufacturer to create the application, Geoff Ribar says. "Now the system companies are really driving back those designs back into the chip companies and saying, 'Here is what I want in the chip.'"

The cost of developing chips have also gone up materially, said Ribar, a former executive at nVidia, AMD and SiRF.

"The old model used to be people designed software and people designed hardware ... in parallel and then [tried] to force them together at the back end of the process," Ribar said. "What happens, besides the hardware and software engineers hating each other, is that it didn't work the way it was supposed to over a period of time. And so, what their people are doing more and more is they're trying to emulate that model of the software and hardware in advance."