The government last September bought the rights from Japan's FEC Inc. to the revolutionary chip so small it can be embedded in everything from money to human bodies to prevent banknote and document forgery, or for keeping track of goods and people.

The project was mooted by former premier Mahathir Mohamad just before he retired in October 31 after 22 years in office, as part of his efforts to push Malaysia into hi-tech industries and make the country an industrialised nation by 2020.

FEC (M) Sdn. Bhd. chief executive Kunioki Ichioka told a news conference the company was currently testing the chip and would submit proposals to the government on applications. The chip, developed by a Japanese firm, has been dubbed 'MM' or Malaysian Microchip.

Canada and Australia have expressed interest in exploring the use the chip in their national identity cards and Mexico for its election card, while China, Taiwan and the United States are also keen on the product, he said.

The chips cost about 10 US cents each but "we are aiming to reduce the price," he said.

Rais Yatim, a minister in the prime minister's department in charge of the project, declined to reveal the government's investment in the technology and said production was slated for October.

Applications will be guided by industry needs and target markets will initially be in the cargo and transportation sectors, or for retail operators to replace price bar codes used to tag products, he said.

Officials said the chip would initially be manufactured in Japan before production is shifted to a factory in Malaysia's northern Kedah state belonging to state-owned wafer fabrication firm Silterra (M) Sdn. Bhd.

Details are still being worked out but FEC executive director Gophal Ramdas said production could run into "billions of chips," with local passport chip maker Iris Technology already expressing interest in ordering 100 million MM chips.

China had also expressed interest in investing in the development of applications and this was a great boost because "it is a big market for us," he added.

Mahathir, who also attended the news conference, said the prototype developed by FEC had shown it was workable.

Asked why he did not pick similar technology developed by more established Japanese firms like Sony or Hitachi, Mahathir said he believed the FEC chip was more advanced and one of the very few with a built-in antenna.

"We think this is cutting-edge technology. Although FEC is not as big as Sony its technology is very advanced," he added.

Mahathir last year said the chip, combined with current technology, could also boost security at airports and transport terminals to prevent the possibilities of terrorist acts.

SPACE.WIRE