How to reduce the AVR MCU footprints on PCB?
If you are using an AVR, you might be able to significantly reduce your footprint by using a Wafer Level Chip Scale package (WLCSP). 



These can end up using even less board space than a Chip-on-board since you don't need room for the bonding wires. Instead, you fanout the connections from directly under the package, similar to a BGA. 



The parts are much easier to work with than COB and you can order them from normal distributors like Digikey...

http://www.digikey.com/product-search/en?keywords=attiny%20wlcsp

You can read more about Atmel's WLCSP in this app note...

http://www.atmel.com/Images/doc42007.pdf