That first device was the size of a modern mobile phone. Right now, 2 million transistors could fit in the full stop at the end of this sentence. Intel has just released its new Penryn processors, which have up to 820 million transistors, and soon the standard inch-wide microprocessor will have 1 billion transistors. Combined with advances in programming, we will see single-chip systems such as hand-held translators, in-car collision avoidance systems, and a raft of devices that react to voice and touch.

It is extraordinary to reflect on how far the silicon revolution has come in such a short time. Soon after Bardeen and Brattain made their breakthrough, William Shockley, also at Bell Labs, invented the first semiconductor transistor. All three were awarded the 1956 Nobel prize for their efforts. Justin Rattner, chief technology officer of Intel, calls the transistor "the fundamental building block of the information age. It's hard even to think of a single invention that is responsible for as much change - you'd maybe have to go back to the Bronze Age, where a single invention changed the course of everything and had a lasting impact." But doubts are growing over how much further we can go with these technological building blocks of transistors and integrated circuits.

To improve speed and keep power and heat under control, transistors have been getting smaller and smaller. Gordon Moore, co-founder of Intel, came up with an eponymous law, that the number of transistors on a chip doubles every two years. But he believes his law is running out of steam. At the Intel developers' forum in September, Moore said that in "another decade, or decade and a half, we will hit something that is fairly fundamental". That fundamental problem was explained by IBM Fellow Dr Bernie Meyerson as "atoms don't scale". The nanometre - one-millionth of a millimetre - is the unit used to measuring the tiniest elements of a silicon chip. Intel, IBM and others have recently started production of 45 nm chips.

But the silicon atom itself is more than a tenth of a nanometre across. Moore suggested there was a basic physical limit of five atomic layers. Today, the oxide layer in transistors is a mere five to six atoms thick, leading to challenges with current leakage. This is a quantum effect, where electrons "tunnel" through an insulating region instead of following their assigned path. Mr Rattner isn't so sure there's a brick wall ahead. "Gordon always adds a footnote along the lines of 'of course, we've never been able to see beyond about 10 years'. Typically we are seriously at work two generations ahead. We are in production with 45 nanometre and well along with 32 and 22 nm." Glenn Wightwick, an IBM distinguished engineer and director of the Australia Development Laboratory, agrees there are issues to overcome but doubts innovation will slow.

"Until the late 1990s, the vast majority of the gains made have been the result of scaling - making things smaller. When the lithography moved to 180 nm, 90% of the relative improvement over the previous generation of semiconductor devices was derived from traditional scaling - that is, the application of Moore's Law. "Today, as we move from 65 nm to 45 nm and beyond to 32 nm, only 20% of relative improvement is derived from scaling alone. Innovation, in the form of novel materials, structures, processes and architectures delivers the rest. This is why IBM invests so heavily in R&D."

IBM's researchers are experimenting with different materials and techniques to improve performance, such as copper in chips, silicon-on-insulator, strained silicon, multicore chips and air gap self-assembly. The current crown jewel is IBM's Power6 processor, which has 790 million transistors and runs at 4.7 GHz. Dr Wightwick acknowledges that physical limits are being approached. Mr Rattner concurs. "We are reaching the limits of physics in some ways," he says. To achieve a 45 nm resolution, Intel had to use a new material - Hafnium - in the gates of the transistors.

"We ran right into a physical limit," he says. "But what's happened again and again when you come upon the physical limits is we've been able to advance around them, and I think that will continue for at least the next several generations." Already, the scale of the detail on the chip is smaller than the wavelength of the light (193 nm) used to print it.

This bizarre result is thanks to the use of "clever maths" while patterning transistors, Mr Rattner says. But this technique is going to reach a limit. Intel is looking at ways to use light with much smaller wavelengths, extreme ultraviolet and X-rays, but it is a tricky undertaking. "X-rays don't focus in traditional ways - it's all done with mirrors. "But I think a couple of generations out we will have to make the transition."

There could be an even bigger transition to come, once the scale gets below 10 nm. Mr Rattner predicts that in a decade, the fundamental basis of electronics will change. Instead of using the electrostatic charge of an electron, devices will depend on another quality of electrons, their "spin". Mr Rattner says: "Spin-based devices will be based on different materials such as titanium cobalt alloys that have the required appropriate magnetic domain. When you get into the speculative area, then you are talking about molecular devices." Molecular devices are one of several new radical ideas around.

Dr Wightwick says many research laboratories are looking for new and novel devices that could replace transistors inside computers. "Things like carbon nanotubes and molecular cascades. There is a lot of interesting work being done in quantum computing." But when the basic building blocks change, the entire architecture of information processing, and the silicon industry itself, will undergo a revolution. Already, says Dr Wightwick, the cost of a new "silicon foundry" is huge, driven by the cost of moving from one generation of lithography to the next.

This has led to dramatic consolidation across the industry in order to share these costs. Moving to a whole new class of devices using different materials (probably still on top of a silicon substrate) will be even more difficult and costly. That's the bad news. The good news is that it's a bonanza in the making for users of technology.

Mr Rattner says that when the first 22 nm silicon chips appear - just two chip generations out - it will prompt a generation of single-system chips that make it easier to interact with technology. "We are right at the start of the information age. We think we are so sophisticated with our hand-held devices and internet access. But we have asked an enormous amount from users to tolerate - why is it that my mother-in-law calls me up and says 'I've got this error 22 message'? "How do we soften those interfaces and make them more human? That's a very important next step. We are in that era of technology where we start to move away from machine imposed limitations.

"We were doing an internal talk on computer perception and we've got a slide from Star Trek of Captain Kirk holding a universal translator and we ask, 'how far are we from that?'. I think it's probably not more than a decade into the future when devices like that will be practical." Dr Wightwick also predicts a bright future.

"Creating new ideas, solving problems, inventing things and applying technology in new and novel ways, seems to be a basic human characteristic. One of the things I love about computing . .. is that innovation has been so fundamental to this field. I don't see any slowing down of the rate of innovation. In fact, I continue to see more innovation every day." Innovations that give us more processing power will spawn many other innovations, Mr Rattner says. Google "took a very powerful piece of software and ran trillions of bytes of examples of English and Arabic and trained it to recognise language statistically. It knew nothing about Arabic or English, though.

"We have spent decades on artificial intelligence thinking we could do everything with rules. "The new thinking is statistical - which is how the brain works - and making use of access to a massive amount of training information from the internet.

"This move to machine learning is going to open up a broad class of applications such as machine translation and continuous speech recognition. "That technology will move very quickly and then you begin to combine that with robotic technology and you move into the age of personal robots." Early next decade Mr Rattner envisages car companies developing autonomous vehicle technologies geared at collision avoidance that can take over control of the car, if the driver dozes off, and bring it safely to a stop

"This is not so far fetched and not so far into the future." The next 60 years look set to be just as exciting a ride as the first.

NEXT SPEAK Patterning/lithography: the process by which transistors are built onto a silicon wafer. Transistor: a current-controlled switch.

Gate: used to control current flow in the transistor. Spin: the angular momentum of a particle.

Electrostatic charge: the positive or negative electric charge of a particle. Carbon nanotube: an extremely thin hollow cylinder comprised of carbon atoms, about 10,000 times smaller than a human hair. Quantum computers: computers that use quantum physical properties to represent data and perform computations.

The birth of integration Ivan P. Kaminow, adjunct professor at University of California, Berkeley, joined AT&T's Bell Labs in 1954, during the decade when the transistor was slowly taking over from valve-based electronics.

He is now a respected pioneer of photonic integrated circuits - circuits that work on light instead of electricity. During a talk last month at the University of Melbourne, organised by the national research institute NICTA, he reflected on his early years at Bell. "I have learnt the lesson that if you try to predict the future you have to expect the unexpected. My first job was in the transistor circuit department (at Bell Labs), only seven years after the transistor was invented. What they had me do was take a vacuum tube circuit used to test telephone lines and convert it to a transistor circuit. It had an aluminium chassis where the vacuum tubes were plugged in. The transistor came in a little can, a few millimetres on the sides, with three wires coming out. It was pretty simple to convert the circuit. I went home and told my wife the transistor probably wouldn't amount to very much. The reason was that these transistors cost $50 and these vacuum tubes cost only a dollar. I was only 24, so you can forgive me for making that dumb mistake but I can't forgive Bell Labs for missing the idea of integrated circuits. I can see two reasons. Yields (the amount of working transistors in a batch of silicon) were poor, so if you have a 10% yield and put two (transistors) on the same device the yield would be 10% of 10%. That was a short-sighted way of looking at things; also, the guy who was in charge of this was pretty arrogant. About 1958 (electrical engineer Jack S.) Kilby, a new hire at Texas Instruments during summer vacation when everybody was out of the labs, decided to put several transistors on the same chip. And that was the origin of the integrated circuit. He connected them with resistors and capacitors with external wires, so it wasn't really fully integrated. A few months later (Robert) Noyce at Fairchild Semiconductor, which later became Intel, he made an integrated circuit where the wiring was integrated on the chip. Since then there have been quite a few surprises. According to Gordon Moore, in the 1990s, more transistors were made each year than raindrops in California. I'm sure that 10 years later you can multiply that by several orders of magnitude. Ten to the 18th (power, that is, a billion billion) transistors are made each year, more than existed at the beginning of the year. That's 10 to 100 times the number of ants on Earth. So all these advances are based on a design for transistors."

This is a short, edited extract of Professor Kaminow's talk. TIMELINE

1947 Transistor invented in Bell Labs. 1948 Shockley develops first semiconductor transistor. 1952 Hearing aids are first commercial products to use the transistor.

1954 Texas Instruments introduces transistor radio. 1956 AWA manufactures first Australian portable transistor radio.

1965 Intel co-founder Gordon Moore coins Moore's law. 1981 IBM launches the PC. 2007 Intel demonstrates chip with 1.9 billion transistors.

2007 IBM reveals it has developed a single-molecule switch.