Computer Dictionary/Chadless keypunch
punched cards, rather than punching out a circle or rectangle. The U's made a hole when folded back.
One of the Jargon File's correspondents believed that the term "chad" derived from the Chadless keypunch. Obviously, if the Chadless keypunch didn't make them, then the stuff that other keypunches made had to be "chad". The assertion that the keypunch was named after its inventor is not supported by any record in US or UK patents or surname references.