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Optical communications systems at 10, 40 and WOG now use digital signal processing to enhance the signal tolerance against channel impairments such as chromatic dispersion and PMD. The power of digital signal processing is driven by developments in CMOS integration, which push the limits of gate count, feature sizes and development budgets. But what steps are involved in developing a full custom ASIC? What are the pitfalls and challenges? This tutorial outlines the development of an ASIC for a CP-QPSK transponder.