A transistor is essentially a replacement for a vacuum tube. When tiny transistors replaced bulky vacuum tubes, the first applications resulted in electronic devices that accomplished the same as tube-based devices, but were much smaller. This encouraged engineers to build more functions into the same devices since there was now more room. By the end of the 1950s, electronics manufacturers were faced with circuits of increasing complexity. Computers, for example, contained tens of thousands of transistors. Assembly often required hundreds of thousands of interconnections, all of which had to be soldered by hand.

Electronic devices, such as computers and radios, use several different types of components. Some are very fast switches. Others act as electronic gates, allowing certain messages to get through while rejecting others, or restricting flow of current to a single direction. In a computer such gates become logic circuits that, for example, combine two statements into one using the electronic equivalents to the logical connectives and, or, or if-then. Another component amplifies a signal. After the invention of the transistor, various configurations of transistors were created to perform these functions, components still referred to by such traditional names as resistor, capacitor, diode, and so forth. In each case the method was to add specific impurities to different regions of a semiconductor chip, a process called doping.

The idea of placing several components on a single chip came separately to two people who worked independently.

Jack Kilby, an electronics engineer, in 1958 joined a team at Texas Instruments that studied ways to reduce the size of computer circuits. Kilby created a semiconductor chip that carried an oscillator made of several components, such as switches, resistors, capacitors, and diodes, all made from doped semiconductors. Although these components were on a single chip, Kilby had not developed a suitable way to connect them, and had to create interconnections in the traditional way. He demonstrated his oscillator-on-a-chip to executives from Texas Instruments on September 12, 1958, and filed for a patent a few months later.

Robert Noyce, a physicist, was the head of research at the recently founded Fairchild Semiconductor. That company had developed the "planar" technology for the manufacture of transistors. In that method, large numbers of transistors were created on a single wafer, which subsequently was cut up to yield the single transistors. Noyce realized that this technology would be suitable for creating an entire circuit on such a wafer. But he also found a way to make connections between the components on the wafer by laying down conducting tracks. The result is termed an integrated circuit, but most people simply call it a chip.

Noyce filed a patent for his integrated circuit one year after Kilby did, and was granted it in April 1961. Kilby's patent application was rejected because he had not solved the problem of interconnecting the components on the chip.

A legal battle between Kilby and Noyce ensued, which ultimately was won by Noyce by decision of the Court of Customs and Patents Appeals in November 1969. Fairchild Semiconductor and Texas Instruments, however, had already agreed to share the licensing of integrated circuits in 1966. Noyce and Kilby, regarded by the technical community as coinventors, a view both have accepted, jointly received the National Medal of Science for their invention.