I agree with aros, first place would be to start with a bigger engine. I there is a big difference even between the 318 engine and the 320 straigh6 Vanos engine. In any case to get more power, you need. 1) more air, 2) more fuel, 3)an engine management system or ECU, 4) an engine which is not gonna blow up when you burn more stuff in it.
The chip is only the ECU i presume. You need to start with the air intake, (Free flow pod filter with cold air box), then you need to upgrade the exhaust (from as far back into the engine as you can get), THEN the chip, THEN you can upgrade the injectors, forge the pistons, increase airflow more with a turbo and intercooler... well you get the picture. This list goes on... THEN you gotta think about how you gonna keep this power on the road... well that's another story. But before you consider going down this path, you gotta think "what am I trying to achieve?" If it's the thrill and excitement of playing with your new toy.. which motivates most of us... yeah go for it.... spend the money, and the time. But if you don't have 1 weekend per fortnight free to spend on your hobby, and still want to have a car to drive to work, you should just put the money you gonna spend on all these mods on a car with a bigger, more powerful BMW designed and built engine.