The chipset, located mainly on the motherboard is a electrical component in an integrated circuit(IC) that manages the data flow between the processor, memory, and peripherals. To put it simply the chipset is what controls the communication between the processor and the external devices. There are two parts of the chip-set which are the northbridge and the the southbridge. The northbridge handles the high speed devices such as the system memory and the primary expansion buses(RAM, Graphic Card, etc.). What the southbridge is responsible for is whatever else the northbridge did not do. It primarily handles the lower speed peripherals and board function such as USB, parallel and serial communications. (Ethernet, USB, audio devices, etc.)
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