What is a computer chip, and why are governments competing over chips?
A chip the size of a fingernail can hold billions of switches, and in 2021 a shortage of them touched more than 169 industries.
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A computer chip is a tiny slice of silicon with a whole electronic circuit built into it. Its official name is an integrated circuit, and it packs components such as , the switches behind every one and zero, onto a thin, flat piece of material. A modern chip can hold many billions of transistors in an area the size of a human fingernail, and chips sit inside virtually all electronic devices, from computers to smartphones to televisions.
Governments now compete over chips because so much depends on them and so few places can make the most advanced ones. When supplies ran short, a Goldman Sachs analysis counted more than 169 industries affected as of April 2021, far beyond electronics. A single Taiwanese company, TSMC, took about 70 percent of global contract chip-making revenue in the second quarter of 2025, according to the market research firm TrendForce. China, for its part, accounts for around half of global chip sales by revenue, making it the largest single market.
So chips have become a matter of national policy. In 2022 the United States passed the CHIPS and Science Act, which includes $39 billion in for chip factories on American soil, with the dual aim of strengthening supply chains and countering China. In October 2022 it also restricted exports of advanced chips to China, rules that reflect a US ambition to counter the accelerating advancement of China's high-tech capabilities.
Chips were not always this central. Jack Kilby, a new hire at Texas Instruments, demonstrated the first working integrated circuit on 12 September 1958. About six months later Robert Noyce of Fairchild developed the first practical chip. Together they started a race that has not stopped.
Try it
Shrink the switch, fit more of them
y = 1 · x^2
Challenge · Set the exponent to 2, as on a flat chip, and read how many times as many switches fit when each is 3 times narrower.
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Recap
Chips are printed all at once, so shrinking their parts packs in more switches, and few places can afford the factories that do it.
💡 A trick to remember it · A chip is a city printed in one go: shrink the houses and the same plot holds four times the street.
Surprising fact · A modern chip can hold many billions of transistors in an area the size of a human fingernail.
Sources (5)
No source, no claim. Every fact in this lesson (15 claims) cites at least one of these.