Limitations, innovations, and challenges of circuits and devices in silicon integrated circuits when they are scaled down to a half micrometer and smaller are reviewed. At the start, by examining physical limits of signal processing capabilities of a semiconductor device and power limits of circuits, the major directions of innovations are given. Then, device innovations in advanced MOSFET devices featuring sizes of a half micrometer, quarter micrometer, and even smaller than one tenth of a micrometer are reviewed. Circuit innovations in MOS VLSI's are also reviewed. Major issues are signal-to-noise ratio and speed of operation at low supply voltages. It is pointed out that miniaturized MOSFET's with channel lengths even shorter than one tenth of a micrometer could probably be realized with superior performance, but the circuit technique of using them at low-voltage power supplies still remains a challenge. Finally, it is pointed out that the real challenges in the future will be design and test limits of huge systems, and the real goals of engineers in the future will be functional integration rather than scale integration.