OK why the need for a physical chip, why not replicate in software?

Look at how much energy and computer cycles they have to put into just for folding a single protein and then realise that scaling it up at our current level is basically impossible: https://foldingathome.org/

Because we can't effectively model the behavior of human tissue in software.

We can't even effectively model basic chemistry. We can't a priori tell you what color a chemical will be, much less many of its other properties.

by a long shot, too.

It's not a chip like a CPU. It's chemistry and biology.