The European Central Bank is considering adopting the world's smallest integrated circuit, developed by Hitachi Ltd., to prevent forgery of euro bills, according to Hitachi sources.

The ECB has begun talks with the major electric appliance and electronics manufacturer over possible use of the IC chip, the sources said.

"Talks are going (well)," a senior Hitachi executive said.

If a deal is signed, the ECB would become the first central bank to use IC chips to prevent forgeries.

Developed in 1998, the current version of the granule-size IC chip measures 0.4 mm by 0.4 mm and is thin enough to be embedded in bank notes, securities certificates and other documents of value, according to Hitachi. The chip has a 128-bit read-only memory and is capable of storing a 38-digit number.

Hitachi has already commercialized the chips, which cost from 20 yen to 30 yen each. The company says the chip will be embedded in entrance tickets for the Aichi Expo, to be held on the outskirts of Nagoya in 2005.

Used by about 300 million people, the euro is the currency with the world's second-largest distribution, following the dollar.

If the ECB adopts the Hitachi chip, the firm hopes other central banks will follow suit, spurring growth in microchip technology and providing the faltering Japanese semiconductor industry with a major boost.

Reading the embedded Hitachi chip would require a computer scanner and other computer equipment.