Processors calculate using switches (transistors). 'Moore's Law' demonstrates how the number of transistors in a processor has increased over time.
The processing power of computers has grown exponentially in the last few decades – making computers increasingly more powerful. A modern smart phone has more computing power than entire computer systems that might fill a room a few decades ago.
Part of the challenge is the demand for computers to become progressively smaller. Shrinking processor size as well has computational power has been a feature of computer system development in recent decades.