How do two-leaded color changing LEDs work?

Question

I have a few 3mm color-changing LEDs which I harvested from a toy. They fade in between all different colors, and then after a little while, they blink crazily between all the colors. After a few moments, the cycle repeats.

What is interesting about them (and what I wasn't expecting) is that they only have two leads, like a normal hobbyist LED.

I understand that, like an RGB LED, they have multiple elements (probably not the right word) inside. But how do they achieve the color changing and cycling?

Here is a picture of the LED in question:

Notice the little bit of black material inside the LED. Could this possibly be a tiny chip?

Answer 1

I expect they contain a tiny chip (you can see the little black thing inside) which sequences the patterns. It's either a microcontroller or a special purpose IC.

Most likely something like one of these:

They're available in bare die form and connected to the LEDs inside by ultrasonically welded little wires.

Answer 2

Yes, there is a chip (probably a simple microcontrolleer) inside the LED.