In this paper, the authors concern the design and optimization of a digital hearing aid application. It aims to show that a suitably adapted ASIP can be constructed to create a highly optimized solution for the wide variety of complex algorithms that play a role in this domain. These algorithms are configurable to fit the various hearing impairments of different users. They pose significant challenges to digital hearing aids, having strict area and power consumption constraints. A typical digital hearing aid application is proposed and implemented, comprising all critical parts of today's products. Then a small area and ultra low-power 16-bit processor is designed for the application domain.