What is 3rd order intercept point or IP3

Third-order intermodulation and distortion(IMD) are often specified in terms of the third-order intercept point. The presence of 2 or more tones in a non-linear device generates intermodulation products. These products are the sum and difference of multiples of the fundamental tones.

Pout = a1f1 + a2f2 + ← Fundamentals (1) 
a3(f1 ± f2) + ← 2nd Order Products 
a4(f1 ± 2f2) + a5(2f1 ± f2) + ← 3rd Order Products 
a6(2f1 ± 2f2) + ← 4th Order Products
... + a∞(∞f1 ± ∞f2) ← etc. 

Many of the spurious tones are out-band and cause no problem. The third-order difference tones are nearest the fundamentals. They very likely fall in-band and add non-linearity and distortion to the output.

Fundamental tones and other spurious tones

A metric of 3rd order products is important for evaluating device performance particularly in amplifiers that are not perfectly linear.

The third-order intercept point is a hypothetical point where the power of third-order components will reach the same level as the fundamental component's power. If one draws the power input versus power output, they will observe the different frequency components having different slopes.

So, the third-order intercept point is an ideal point as once the device reaches to 1 dB compression point the two curves will become parallel to each other and they will never cut. Which shows that the power for the fundamental and third-order components will not be the same.

Intercept points

e.g desired input signal (F0) in the Receiver chain is at 3500MHz, and two undesired signals, F1 = 3510 and F2 = 3520, So upon mixing of two undesired signals, they produce third-order intermodulation products, and one at (2*F1 – F2) falls at 3500MHz, which is also the frequency of the desired signal and thus SNR of the desired signal gets reduced.

3rd order intermodulation products

The power level of 3rd order Intermodulation products depends on the linearity of the device or amplifier which is represented in terms of Intercept Point (IP3).

The higher the output at the intercept, the better the linearity and the lower the IMD. The IP3 value essentially indicates how large a signal the amplifier can process before IMD occurs.