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Integrated circuits (IC) are called by many chips, and as a particular case, microprocessors are also nicknamed chips. The same happens in Hebrew, where ICs are called "shvav" (or "shvavim" in plural), which is the Hebrew word for a chip.

What is the source for the nickname?

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    I don't have enough detail for an answer, but I believe they got the name because the IC is etched onto a small piece, AKA a chip, of silicon. – Roaring Fish Oct 2 '12 at 12:29
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ODO says chip is short for microchip.

Definition of microchip
noun
  a tiny wafer of semiconducting material used to make an integrated circuit.

Thus chip has its normal meaning of "a small piece" (of silicon, in this case) and microchip is a tiny piece.

Even if the shortening of microchip is discounted, at the heart of each IC package is a tiny chip of silicon.

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    the chip is not the peace of silicon inside the package, it's in fact the IC itself, the chip is the full package with the IC, as can be seen in a description of a picture in the Wikipedia article for IC Wide angle shot of the memory microchip shown in detail below. The microchips have a transparent window, showing the integrated circuit inside. The window allows the memory contents of the chip to be erased, by exposure to strong ultraviolet light in an eraser device. – SIMEL Oct 2 '12 at 14:12
  • @IlyaMelamed Wikipedia is a convenient source of data, but without citations it's just opinion. What that caption calls a "microchip" is actually a package. – Andrew Leach Oct 2 '12 at 14:39
  • The citation is from me, I'm an Electrical engineer. A microchip is made from two different parts. The IC which is the electrical component "printed" on a semi conductor (most of the times, Si, but sometimes can be Ge, GaAs, C and other materials), and the package which is responsible for protection of the IC and for heat dissipation. A "chip" or a "microchip" is the whole component, IC and Package together. – SIMEL Oct 2 '12 at 14:48
  • I can see we're going to have to agree to disagree then. I have provided a citation, with which I happen to agree as it accords with my experience in the construction of electronic components. A slanging match gets everyone nowhere. – Andrew Leach Oct 2 '12 at 14:58
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    A chip is a small piece; a microchip is a really really small piece. – Andrew Leach Oct 2 '12 at 15:32

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