Many authors credit Space Invaders as the first blockbuster game to have been written with an onboard microprocessor (Taito used Intel's 8080 for game logic), but there is also references to Taito's Western Gun as the first arcade game to use a microprocessor in Chris Kohler's book Power-Up: How Japanese Video Games Gave the World an Extra Life.
What is considered to be the first arcade game to use a microprocessor?
Midway's port of Western Gun, known as Gun Fight in the West is the first arcade game that used a microprocessor (the same Intel 8080 used with Space Invaders). The original Western Gun release in Japan used Taito's Transistor-Transistor Logic chip (possibly one in the 7400 chipset family, as used on many of Taito's boards). Dave Nutting made the decision to use the 8080 when Taito licensed the game to Midway for its North American release in November of 1975.1
Adding this as an additional answer, since it technically differs from my Gun Fight answer.
mnem mentioned the Fairchild F8 microprocessor in the comments of my question. If we are indeed counting the Fairchild F8 as an 8-bit microprocessor then Gun Fight is technically not the first arcade game ever created using a microprocessor. It is, however, the first commercially released game that used a microprocessor.
Jerry Lawson, designer of the Fairchild Channel F video game console, allegedly created a top-down driving coin-op game using the Fairchild F8 in 1974/75.1
The Golden Age Arcade Historian comments:
Sidebar - Was Demolition Derby the first coin-op game with a microprocessor?
Some sources have suggested that Demolition Derby was the first game to use a microprocessor and even that the game was released not long after Pong, but is this true? Lawson claims he started working on the game in 1972 or 1973 and sold it to Major Manufacturers of San Mateo, CA. Some sources (including the Wikipedia article on Lawson) claim that the game "debuted" shortly after the release of Pong. The F-8, however, was not released until 1975 and Major Manufacturers was not incorporated until October of 1974. The October, 1975 issue of Play Meter announced that at the 1975 MOA show (the same show where Gun Fight was introduced), Major Manufacturers would be "…. introducing two new upright games that use a microprocessor...instead of a logic board, as well as exhibiting their line of video games and a new designer cocktail table". The article does not name any of these games, nor do any other issues of Replay or Play Meter. It is not clear from the description if the microprocessor games were video games or not. The October, 1975 issue of Vending Times, however, does list two games that the company was to display at the MOA: Lunar Module and Fascination - but does not mention whether they use a microprocessor. The 1972/1973 date thus seems clearly too early, at least for a microprocessor version of Demolition Derby (though Lawson could have started with a non-microprocessor version). In addition, only one copy of Demolition Derby is thought to have been built and it never went past the field testing stage. On the other hand, while it seems unlikely that it was field tested prior to 1975, given that Major Manufacturers did plan to show microprocessor games at the 1975 MOA, it (or one of Major's other games) may have been tested prior to the release of Gun Fight.
