Next step is to give them a lot if light.
It's not so much their height as what's growing -- at first pair of seed leaves (cotyledons), they are still delicate and only has a single long taproot. Unless their re touching each other, they won't be competing much.
Once they start growing their true leaves, the roots will begin to branch and tangle with each other. Usually, it's better to wait until this point to manipulate them. So any that are growing too close together to root wrestle should be culled to stronger/strongest looking by clipping with nail or embroidery scissors.
If they are about 1/2" apart, they can be separated. I find it easiest to dump the lot (slide the soil and seedlings out by tipping and quick jerk/pull motion while supporting the top of the soil with fingers of other hand) and spread them apart rather than digging them up. But I don't use those cells that are connected -- they drive me crazy (Mostly using soilblocks now).