Biochips are cybernetic inserts within Borg drones, which were inserted during the 23rd century inside of their bodies via the surgical assimilation procedure. The chips enhance both physical and organic regeneration of the drone which is a vital part of the subject surviving the surgery. Removal of the chips would result death of the drone. (TNG - I Borg).
Following the assimilation and incorporation of nanoprobe-based assimilation, surgical assimilation became no longer necessary. Thus the chips were built by the nanoprobes directly within the body.