For more than 50 years, designers of computer chips mainly used one tactic to boost performance: They shrank electronic components to pack more power onto each piece of silicon.

Then more than a decade ago, engineers at the chip maker Advanced Micro Devices began toying with a radical idea. Instead of designing one big microprocessor with vast numbers of tiny transistors, they conceived of creating one from smaller chips that would be packaged tightly together to work like one electronic brain.

The concept, sometimes called chiplets, caught on in a big way, with AMD, Apple, Amazon, Tesla, IBM and Intel introducing such products. Chiplets rapidly gained traction because smaller chips are cheaper to make, while bundles of them can top the performance of any single slice of silicon.

The strategy, based on advanced packaging technology, has since become an essential tool to enabling progress in semiconductors. And it represents one of the biggest shifts in years for an industry that drives innovations in fields like artificial intelligence, self-driving cars and military hardware.

“Packaging is where the action is going to be,” said Subramanian Iyer, a professor of electrical and computer engineering at the University of California, Los Angeles, who helped pioneer the chiplet concept. “It’s happening because there is actually no other way.”

The catch is that such packaging, like making chips themselves, is overwhelmingly dominated by companies in Asia. Although the United States accounts for around 12 percent of global semiconductor production, American companies provide just 3 percent of chip packaging, according to IPC, a trade association.

That issue has now landed chiplets in the middle of U.S. industrial policymaking. The CHIPS Act, a $52 billion subsidy package that passed last summer, was seen as President Biden’s move to reinvigorate domestic chip making by providing money to build more sophisticated factories called “fabs.” But part of it was also aimed at stoking advanced packaging factories in the United States to capture more of that essential process.

“As chips get smaller, the way you arrange the chips, which is packaging, is more and more important and we need it done in America,” Commerce Secretary Gina Raimondo, said in a speech at Georgetown University in February.

The Commerce Department is now accepting applications for manufacturing grants from the CHIPS Act, including for chip packaging factories. It is also allocating funding to a research program specifically on advanced packaging.

Some chip packaging companies are moving quickly for the funding. One is Integra Technologies in Wichita, Kan., which announced plans for a $1.8 billion expansion there but said that was contingent on receiving federal subsidies. Amkor Technology, an Arizona packaging service that has most of its operations in Asia, also said it was talking to customers and government officials about a U.S. production presence.

Packaging chips together isn’t a new concept and chiplets are just the latest iteration of that idea, using technological advances that help cram the chips closer together — either side by side or stacked on top of one another — along with faster electrical connections between them.

“What is unique about chiplets is the way they are connected electrically,” said Richard Otte, the chief executive of Promex Industries, a chip packaging service in Santa Clara, Calif.

Chips can’t do anything without a way to connect them with other components, which means they need to be placed in some kind of package that can carry electrical signals. That process starts after factories complete the initial phase of manufacturing, which may create hundreds of chips on a silicon wafer. Once that wafer is sliced apart, individual chips are typically bonded to a key base layer called a substrate, which can conduct electrical signals.

That combination is then coated in protective plastic, forming a package that can be plugged into a circuit board that is essential for connecting to other components in a system.

These processes originally required lots of manual labor, leading Silicon Valley companies to shift packaging to lower-wage countries in Asia more than 50 years ago. Most chips are typically flown to packaging services in countries like Taiwan, Malaysia, South Korea and China.

Since then, packaging advances have gained importance because of the diminishing returns from Moore’s Law, the shorthand expression for chip miniaturization that for decades drove progress in Silicon Valley. It is named for Gordon Moore, a co-founder of Intel, whose 1965 paper described how rapidly companies had doubled the number of transistors on a typical chip, which improved performance at a lower cost.

But these days, smaller transistors are not necessarily cheaper, partly because building factories for leading-edge chips can cost $10 billion to $20 billion. Big, complex chips also are costly to design and tend to have more manufacturing defects, even as companies in fields like generative A.I. want more transistors than can currently be packed onto the biggest chips manufacturing machines allow.

“The natural response to that is putting more things in a package,” said Anirudh Devgan, chief executive of Cadence Design Systems, whose software is used to design conventional chips as well as chiplet-style products.

Synopsys, a rival, said it was tracking more than 140 customer projects based on packaging multiple chips together. As much as 80 percent of microprocessors will use chiplet-style designs by 2027, according to the market research firm Yole Group.

Today, companies typically design all the chiplets in a package along with their own connection technology. But industry groups are working on technical standards so companies can more easily assemble products from chiplets that come from different makers.

The new technology is mostly used now for extreme performance. Intel recently introduced a processor called Ponte Vecchio with 47 chiplets that will be used in a powerful supercomputer at Argonne National Laboratory, which is near Chicago.

In January, AMD disclosed plans for an unusual product, the MI300, that combines chiplets for standard calculations with others designed for computer graphics, along with a large pool of memory chips. That processor, intended to power another advanced supercomputer at Lawrence Livermore National Laboratory, has 146 billion transistors, compared with tens of billions for most advanced conventional chips.

Sam Naffziger, an AMD senior vice president, said it wasn’t a slam-dunk for the company to bet its chip business for server computers on chiplets. Packaging complexities were a major hurdle, he said, which were eventually overcome with help from an undisclosed partner.

But chiplets have paid off for AMD. The company has sold more than 12 million chips based on the idea since 2017, according to Mercury Research, and has become a major player in microprocessors that power the web.

Packaging services still need others to supply the substrates that chiplets require to connect to circuit boards and one another. One company driving the chiplet boom is Taiwan Semiconductor Manufacturing Company, which already makes chips for AMD and hundreds of others and offers an advanced silicon-based substrate called an interposer.

Intel has been developing similar technology, as well as enhancing less-expensive conventional plastic substrates in an approach favored by some such as the Silicon Valley start-up Eliyan. Intel has also been developing new packaging prototypes under a Pentagon program and hopes to win CHIPs Act support for a new pilot packaging plant.

But the United States has no major makers of those substrates, which are primarily produced in Asia and evolved from technologies used in manufacturing circuit boards. Many U.S. companies have also left that business, another worry that industry groups hope will spur federal funding to help board suppliers start making substrates.

In March, Mr. Biden issued a determination that advanced packaging and domestic circuit board production were essential for national security, and announced $50 million in Defense Production Act funding for American and Canadian companies in those fields.

Even with such subsidies, assembling all the elements required to reduce U.S. dependence on Asian companies “is a huge challenge,” said Andreas Olofsson, who ran a Defense Department research effort in the field before founding a packaging start-up called Zero ASIC. “You don’t have suppliers. You don’t have a work force. You don’t have equipment. You have to sort of start from scratch.”

Ana Swanson contributed reporting.

Peloton, the maker of home exercise equipment, said on Thursday that it was recalling more than two million exercise bikes, an announcement that sent its stock lower.

The company’s shares tumbled nearly 9 percent by the market close and have plunged more than 20 percent this month.

The company had received 35 reports of seat posts breaking and detaching from the original model of its bike during use, according to a recall notice from the Consumer Product Safety Commission.

Peloton is voluntarily recalling Model PL-01 bikes that were sold from January 2018 to May 2023 in the United States, and is offering customers replacements for the bike’s seat posts that can be installed at home, the company said in a statement on its website Thursday morning.

“For Peloton, it was important to proactively engage the C.P.S.C. to address this issue,” the company wrote. “We worked cooperatively with them to identify today’s approved remedy.”

The decision to recall the bikes is a turnabout for Peloton, which in the past has resisted recalling its equipment. In 2021, the company recalled its Tread+ and Tread treadmills after initially resisting the safety commission’s warning that the death of a child and dozens of injuries had been linked to the equipment. John Foley, the chief executive at the time, said that the company had made a mistake by fighting the request to recall the treadmills.

In 2020, Peloton recalled pedals on about 27,000 bikes after receiving more than 100 reports of them breaking and 16 reports of injuries.

Peloton has faced a raft of other challenges in recent years. After emerging as a pandemic winner in 2020, when people bought its home exercise equipment in droves, it has dealt with rocky revenues, negative television portrayals and cooling consumer demand.

Its current chief executive, Barry McCarthy, has been trying to turn the ship around since taking over last year for Mr. Foley, a founder of the company. Mr. McCarthy has cut jobs, emphasized a subscription strategy and started an equipment resale program.

In its most recent letter to shareholders, sent earlier this month, Mr. McCarthy said the company had settled an International Trade Commission dispute with Dish Network for $75 million, and that its subscriptions had grown by 5 percent in the most recent quarter.

In that letter, he struck a cautiously optimistic note, saying that the most recent quarter was the best since he took over as chief executive. “There will be challenges and opportunities ahead,” he wrote, “but if we continue to perform over the next 12 months like we performed over the past 12, we will have accomplished something truly special.”

Just over a week after thousands of television and movie writers took to picket lines, Netflix is feeling the heat.

Late Wednesday night, Netflix abruptly said it was canceling a major Manhattan showcase that it was staging for advertisers next week. Instead of an in-person event held at the fabled Paris Theater, which the streaming company leases, Netflix said the presentation would now be virtual.

Hours earlier, Ted Sarandos, Netflix’s co-chief executive, said he would not attend the PEN America Literary Gala at the Museum of Natural History on May 18, a marquee event for the literary world. He was scheduled to be honored alongside the “Saturday Night Live” eminence Lorne Michaels. In a statement, Mr. Sarandos explained that he withdrew because the potential demonstrations could overshadow the event.

“Given the threat to disrupt this wonderful evening, I thought it was best to pull out so as not to distract from the important work that PEN America does for writers and journalists, as well as the celebration of my friend and personal hero Lorne Michaels,” he said. “I hope the evening is a great success.”

Netflix’s one-two punch in cancellations underscored just how much the streaming giant has emerged as an avatar for the writers’ complaints. The writers, who are represented by affiliated branches of the Writers Guild of America, have said that the streaming era has eroded their working conditions and stagnated their wages despite the explosion of television production in recent years, for much of which Netflix has been responsible.

The W.G.A. had been negotiating with the Alliance of Motion Picture and Television Producers, which bargains on behalf of all the major Hollywood studios, including Netflix, before talks broke down last week. The writers went on strike on May 2. Negotiations have not resumed, and Hollywood is bracing for a prolonged work stoppage.

Last week, at a summit in Los Angeles a day after the strike was called, one attendee asked union leaders which studio has been the worst to writers. Ellen Stutzman, the chief negotiator of the W.G.A., and David Goodman, a chair of the writers’ negotiating committee, answered in unison: “Netflix.” The crowd of 1,800 writers laughed and then applauded, according to a person present at that evening who spoke on condition of anonymity because of the sensitivity of the strike.

The last time the writers went on strike, in 2007, Netflix was little more than a DVD-by-mail company with a nascent streaming service. But over the past decade, Netflix has produced hundreds of original programs, helping to usher in the streaming era and upending the entertainment industry in the process.

Initially, Netflix was cheered by the creative community for creating so many shows, and providing so many opportunities.

Demonstrations over the past week have underscored just how much writers have soured on the company. In Los Angeles, Netflix’s Sunset Boulevard headquarters have become a focal point for striking writers. The band Imagine Dragons staged an impromptu concert before hundreds of demonstrators on Tuesday. One writer pleaded on social media this week that more picketers were needed outside the Universal lot, lamenting that “everyone wants to have a party at Netflix” instead.

On Wednesday, demonstrators were out in force outside the headquarters. “Ted Sarandos is my dad and I hate him,” read one sign. Another said: “I shared my Netflix password. It’s ‘PAY ME’!”

While the writers marched, the veteran television writer Peter Hume affixed fliers to picket signs that read “Cancel Until Contract” and “Please Cancel Netflix Until a Fair Deal Is Reached.”

Mr. Hume, who has worked on shows like “Charmed” and “Flash Gordon: A Modern Space Opera,” said the streaming giant was responsible for dismantling a system that had trained writers to grow their careers into sustainable, fulfilling jobs.

“I have 26 years of continuous service, and I haven’t worked in the last four because I’m too expensive,” Mr. Hume said. “And that’s mostly because Netflix broke the model. I think they put all the money into production in the streaming wars, and they took it away from writers.”

Netflix’s decision to cancel its in-person showcase for marketers next week caught much of the entertainment and advertising industry off guard.

The company had been scheduled to join the lineup of so-called upfronts, a decades-old tradition where media companies stage extravagant events for advertisers in mid-May to drum up interest — and advertising revenue — for their forthcoming schedule of programming.

Netflix, which introduced a lower-priced subscription offering with commercials late last year, was scheduled to hold its very first upfront on Wednesday in Midtown Manhattan. Marketers were eager to hear Netflix’s pitch after a decade of operating solely as a premium commercial-free streaming service.

“The level of excitement from clients is huge because this is the great white whale,” Kelly Metz, the managing director of advanced TV at Omnicom Media Group, a media buying company, said in an interview earlier this week. “They’ve been free of ads for so long, they’ve been the reach you could never buy, right? So it’s very exciting for them to have Netflix join in.”

So it came as a surprise when advertisers planning to attend the presentation received a note from Netflix late Wednesday night, saying that the event would be virtual.

“We look forward to sharing our progress on ads and upcoming slate with you,” the note said. “We’ll share a link and more details next week.”

The prospect of hundreds of demonstrators outside the event apparently proved too much to bear.

Other companies staging upfronts in Manhattan — including NBCUniversal (Radio City Music Hall), Disney (The Javits Center), Fox (The Manhattan Center), YouTube (David Geffen Hall at Lincoln Center) and Warner Bros. Discovery (Madison Square Garden) — said on Thursday that their events would proceed as normal, even though writers were planning multiple demonstrations next week.

Mr. Sarandos’s decision to pull out of the PEN America Literary Gala will not disrupt that event either. Mr. Michaels, the “Saturday Night Live” executive producer, will still be honored, and Colin Jost, who co-hosts Weekend Update on “Saturday Night Live,” is still scheduled to M.C.

“We admire Ted Sarandos’s singular work translating literature to artful presentation onscreen, and his stalwart defense of free expression and satire,” PEN America said in a statement. “As a writers organization, we have been following recent events closely and understand his decision.”

The writers’ picket lines have successfully disrupted the productions of some shows, including the Showtime series “Billions” and the Apple TV+ drama “Severance.” On Sunday, the MTV Movie & TV Awards turned into a pretaped affair after the W.G.A. announced it was going to picket that event. The W.G.A. also said on Thursday it would picket the commencement address that David Zaslav, the chief executive of Warner Bros. Discovery, is scheduled to give on the campus of Boston University on May 21.

One of the writers’ complaints is how their residual pay, a type of royalty, has been disrupted by streaming. Years ago, writers for network television shows could get residual payments every time a show was licensed, whether for syndication, broadcast overseas or a DVD sale.

But streaming services like Netflix, which traditionally does not license its programs, have cut off those distribution arms. Instead, the services provide a fixed residual, which writers say has effectively lowered their pay. The A.M.P.T.P., which bargains on behalf of the studios, said last week that it had already offered increased residual payments as part of the negotiations.

“According to the W.G.A.’s data, residuals reached an all-time high in 2022 — with almost 45 percent coming from streaming, of which the lion’s share comes from Netflix,” a Netflix spokeswoman said.

“Irrespective of the success of a show, Netflix pays residuals as our titles stay on our service,” the spokeswoman said, adding that the practice was unlike what network and cable television did.

Outside Netflix’s Los Angeles headquarters on Wednesday, writers on picket lines expressed dismay that the company was beginning to make money off advertising.

“If they make money doing ads, my guess would be that ads will become a bigger revenue stream for them,” said Christina Strain, a writer on Netflix’s sci-fi spectacle “Shadow and Bone.” “And then we’re just working for network television without getting network pay.”

Sapna Maheshwari contributed reporting.