γ radiation is high frequency photons, or radio waves above 10 exahertz (1019 Hz.) So there is a lot of EM waves around a γ source.
or if the radiation actually damages the chips etc by changing their atomic structure.
Yes. Ionizing radiation is directly affecting atoms, and it causes electronics to fail. Per Wikipedia:
Environments with high levels of ionizing radiation create special design challenges. A single charged particle can knock thousands of electrons loose, causing electronic noise and signal spikes. In the case of digital circuits, this can cause results which are inaccurate or unintelligible.
In that case (back to my musing)....Why don't they just put an "antenna" around a radioactive source and pull current out of it, instead of messing around with an archaic boiler and steam-punk engine?
ie convert radiation directly to current.