The chips are alive with the sound of music. Personal and portable electronic music instruments have become one of the most rapidly growing segments of the consumer electronic market, and, like the personal computer, are expected to become cheaper, smarter and better.

"We're just beginning to scratch the surface of the electronic musical instrument," says Wendell Johnston, marketing vice president for musical products at Mattel Electronics, the California company that sells a portable electronic drums set called Synsonics Drums. "In the past, an instrument's sound was related to its size and shape. Now, it doesn't have to be related at all."

Electronic musical instruments come in many forms. The most common is the piano-like keyboard that, depending upon which chips it has, can be made to sound like a piano, or a harpsichord, or a pipe organ, all with respectable fidelity. Mattel's Synsonics Drums resembles a tightly packed quartet of hot plates--each "plate" representing a different drum sound. Tapping a plate is like beating a drum.

In electronic sonics, a chip sends electronic signals to a speaker to recreate the sound we hear when a piano hammer strikes piano strings. The chip has been programmed with the mathematical equations that are required to describe and reproduce sound waves. Unlike traditional musical instruments where sound is created by human actions--the drawing of a bow across a string, for instance--electronic sonics produces music by computer processing of information on silicon chips.

Manipulating information is what computers are good at and that's what has made the musical instrument market a natural for consumer electronics companies to explore.

Mattel's Synsonics Drums sell for about $100 at toy and consumer electronics stores. Later this year, Mattel expects to introduce a simpler model at half the price, according to Johnston. Sources within the company indicate that it is working on an electronic guitar. The key here, say the electronic music manufacturers, is that with a bit of engineering and computer software, any musical instrument can be impersonated and perhaps a different kind of musical instrument could be created.

Ranging in price from $150 to more than $1,000, electronic instruments are typically far less expensive than their conventional counterparts, although their quality is not quite the same, most listeners agree. But because the electronics have become cheaper and cheaper, say the manufacturers, musical instruments will be transformed from a specialty market to a consumer market.

"Bringing out the portable affordable keyboard creates a whole new market for us," says P. L. Watkins, the division manager for specialty products at Yamaha International Corp., which also makes "real" pianos.

"One hundred percent of the population at some time wants to create music--whether clapping their hands or singing after a few beers." That is a large market to shoot for, Watkins says, but "the technology is expanding the marketability of the product."

For example, Yamaha markets a line of electronic piano-type keyboards that have varying musical abilities and "intelligence." Someone with no musical training could pick out a melody on some of the electronic keyboards and store the tune in computer memory. The tune can be replayed as the player adds accompaniment.

Yamaha's MP-1 keyboard actually transcribes its player's musical improvisations into sheet music as it's being played.

"The instantaneous achievement aspect of these products is important," Watkins notes. Yamaha is conducting music learning research in Japan to determine how to design instruments that are easy to learn and play but still powerful music makers.

While declining to reveal specifics, Watkins said electronic keyboard sales grew by one-third in 1982 and are expected to increase another 50 percent this year. Industry sources estimate that a quarter of a million consumer electronic instruments were sold last year and more than half a million will be sold by the end of 1983.

The largest of the electronic instrument manufacturers is Casio, the Japanese company best known for its pocket calculators. Casio last year sold $75 million worth of musical instruments, according to Robert Larsen, the company's sales manager for these products. Casio's sales this year, he maintains, will be twice those of 1982.

"The sales of electronic instruments has been very rewarding and is exceeding our expectations," says an official of Sears, Roebuck & Co., the nation's largest retailer. "We've only been selling them through the catalog, but we will be going into retail this fall."

There is, says Casio's Larsen, a critical change occurring in the market. As they become more computerlike, electronic instruments are being built to hook into personal computers. "Casio will be building musical instruments with input/output ports for computers," says Larsen. He expects Casio to begin marketing these musical peripherals by the end of this year.

"There is no doubt that these musical products will interface with all kinds of computers," says Yamaha's Watkins. In effect, the computer would become an expanded memory and processing console for composing and editing music.

This would mean, says Lee Isgur, a research analyst at Paine Webber, that the electronic music market could piggyback on the success of the personal computer as their owners seek to expand the uses of their machines. Several companies already are making musical peripheral devices for the Apple and Atari computers. Mattel Electronics will soon offer a music keyboard interface to its games machine that lets people play a musical version of the popular Space Invaders video game.

It seems, say Isgur, Watkins and other industry sources, that portable musical instruments will continue to grow into computers and computers will continue to diversify into such artistic options as musical instruments.

According to Yamaha's Watson, such Japanese companies as Panasonic, JVC and Brother are now eyeing the American market with a mind toward exporting the musical products they are currently selling in Japan.

However, says Isgur, it is still far too early to say whether electronic music making will enjoy the same kind of commercial success as an entertainment medium as the video game or the stereo system.