Why a separate chip just to decode instructions? The 432's instructions are absurdly complicated. An instruction is from 6 to 321 bits long and can start anywhere in a byte. Decoding instructions needed a complex state machine complete with subroutines.
This complicated block diagram from a 432 patent shows what's inside the decoder chip. To summarize: instructions enter at the left (ACD) and micro-instructions exit at the right (ยตI bus). Microprogram ROM is in the center. The Composer Matrix extracts chunks of instructions.