A nanotechnology company working with microchips less than one millimetre square but containing a wealth of electronic information has won a £678,000 grant.

The Department of Trade and Industry grant to Applied Microengineering, Didcot, is among the first 25 from a £90m fund announced last year by science minister Lord Sainsbury, which brought the Government into conflict with Prince Charles.

The Prince expressed fears the new technology, involving the manipulation of materials as small as one millionth of a millimetre, could lead to new material being created that would feed off the earth and eventually reduce it to a "grey goo".

The grant will pay to develop a machine to test bonding materials in minute structures -- much smaller than the human eye can see and sometimes 5,000 times smaller than the diameter of a human hair.

The manipulation of minute particles could be the next huge step forward for science. An EU report said the global market for nanotechnology, now worth £1bn, could grow to ten times the size within six years.

Applied Microengineering chief executive Bob Santilli said: "There is some confusion about the term nanotechnology. What Prince Charles was talking about was really a branch of chemistry. We are dealing with a branch of micro-electronics."

A report from Britain's top science institution, the Royal Society, last month discovered that only 29 per cent of people had ever heard of nanotechnology and only 19 per cent could offer a definition.

Mr Santilli added: "Few people really know what nanotechnology is but it is already in use all around us: in washing machines, cosmetics, cars for instance. We also work for the Ministry of Defence."

Because of the secret and sometimes classified nature of some of the company's work, Mr Santilli declined to say how many people it employed or how much money it turned over annually.

But he said that the company was also a partner with ICI, Unilever, and Birmingham University in a project to examine the physical structures of fluids. The research had been awarded a Government grant of £1.4m.