A new system for tagging industrial tools and components using holographic technology which will reduce the size of holographic optical tags, such as bar coding or frequency tags, is under development in a UKP2.3m European research programme. The project is 50% funded by the Esprit European Strategic Programme for Research in Information Technology and the rest is split between ICI Imagedata, the data storage and presentation materials business, Krupp Forschungs Institut in Essen and Mandelli SpA, the Italian machine tool manufacturer. Academic partners are the University of Oporto, Portugal and Kings College London. The tags will be typically a square centimetre for a machine tool tagging system and retrieval of information will still be possible with up to 70% of the hologram destroyed. The base material is ICI Imagedata’s Digital Paper, a low cost and durable recording material that can store immense quantities of laser-readable data. The hologram is created by embossing information onto Digital Paper by writing the information using a laser. This can be read from a distance by shining a laser onto the image and decoding the reflected signal. The tests are due to be held on a prototype, by Mandelli, in late 1991, and eventually the system could be also used in a variety of security and industrial applications where automatic identification is required.