The sequencing of the human genome made many scientific experiments possible, but the biochips made by Affymetrix (Nasdaq: AFFX) and Illumina (Nasdaq: ILMN) are the real muscle behind many of those experiments.

Biochips consist of little pieces of DNA stuck onto a chip in a fixed position. They come in two flavors, genotyping and gene expression, which allows researchers to characterize a sample of cells or tissue in many different ways.

The genotyping chips can characterize the presence, absence, or even duplication of millions of different DNA markers from a single DNA sample. A chip containing human markers might be used by a cancer specialist to discover which genes are deleted (or duplicated) in a tumor, while a chip containing cow markers might help researchers discover how different cattle breeds are different at the DNA level. There's an ongoing battle between the two biochip makers over which company can stick more unique markers on a single chip; Affymetrix is currently winning the "my chips are bigger than your chips" contest, although Illumina's sales are still growing strong thanks to innovations like allowing researchers to put multiple samples onto a single chip.  

Gene expression chips, on the other hand, measure the relative expression of RNA, the precursor to the proteins that perform biologic functions. Scientists can use gene expression chips to figure out how a mutation affects the expression of other genes. While measuring gene expression was possible before the invention of biochips, the chips allow scientists to measure the expression of more than 25,000 genes simultaneously, something that would take years to do without a biochip.

While biochips are the bread and butter of each company, both have diversified into related fields in recent years.

In early 2007, Illumina bought Solexa in an all-stock deal to acquire its sequencing technology. These second-generation sequencers can sequence DNA much faster than traditional sequencers. In fact, the company sequenced the entire genome of an African man in a matter of weeks. The sequencers have quickly become a revenue booster for Illumina, as the machines get rapidly adopted by scientists.

On the other hand, Affymetrix has expanded into clinical diagnostics, setting up partnerships with major pharmaceutical companies. If drug companies can figure out which patients will respond to their drugs, they can increase their likelihood of approval by only testing (and getting approved for) a subset of patients. A large revenue boost from this type of work is probably a few years away, as the pharmaceutical companies work their way through clinical trials, but in the age of personalized medicine, the growth potential is enormous.

Just when I thought the two companies would go their separate ways, they've been moving back together in the last couple of months.

First, in December, Affymetrix announced it was purchasinglaboratory-reagent maker USB. I wasn't all that hot on the move at the time, but I'm warming up to the idea that the company will be selling a larger array of laboratory products. By expanding into more general laboratory needs, Affymetrix can get its sales reps into laboratories that aren't using biochips, and make a pitch for the scientists to perform experiments that can be done with biochips. As companies like fellow Rule Breakers pick SonoSite (Nasdaq: SONO) have shown, sometimes a company has to grow its own market; getting into a wider array of laboratories is certainly a good first step for Affymetrix.

Then, in January, Illumina announced that it would reorganize, including adding a new division for diagnostics. Illumina already had relationships with deCODE genetics (Nasdaq: DCGN) and Google (Nasdaq: GOOG)-backed 23andMe, but I'd guess the reorganization is a precursor to a further move into medical diagnostics.

Take two
Call this a cop-out, but I don't see why you can't buy both biochip makers. Sometimes duopolies, like the one forming in the health-care diagnostics arena between Quest Diagnostics (NYSE: DGX) and Laboratory Corp. of America (NYSE: LH), can benefit both companies, forming a moat around the entire market and making it harder for other companies to enter.

Sure, one of the companies will outperform the other, but if the scientists continue to have an appetite for research products, and the companies continue to innovate, investors could still beat the market by picking both.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Lab Corp. of America is a pick of the Stock Advisor newsletter. Quest Diagnostics is a pick of the Inside Value newsletter. The Fool has a disclosure policy.