One wafer will turn into multiple chips.

Defects are best measured on a per-wafer basis, not per-chip. So if if your chips are huge and you can only put 4 chips on a wafer, 1 defect can cut your yield by 25%. If they're smaller and you fit 100 chips on a wafer, then 1 defect on the wafer is only cutting yield by 1%. Of course, there's more to this when you start reading about "binning", fusing off cores, etc.

There's plenty of information out there about how CPU manufacturing works, why defects happen, and how they're handled. Suffice to say, the comment makes perfect sense.

Sure it does. If it’s many small dies on a wafer, then imperfections don’t ruin the entire batch; you just bin those components. If the entire wafer is a single die, you have much less tolerance for errors.

You say this with such confidence and then ask if smaller chips require smaller wafers.

Bigger chip = more surface area = higher chance for somewhere in the chip to have a manufacturing defect

Yields on silicon are great, but not perfect