FARGO (AP) - California-based Alien Technology Corp. is considering closing its Fargo plant due to a drop in demand for its "smart" tags in the slumping economy.

Alien marketing director Victor Vega said the closure is one option being considered and no decisions have been made yet.

The Fargo plant, in the North Dakota State University Research and Technology Park, opened in 2006. It was praised then as a promising high-tech business venture that could bring more than 1,000 jobs to the area. Last fall, it employed about 35.

"Smart tags" are radio frequency identification products. Alien, based in Morgan Hill, Calif., makes them for retailers and other industries.

Vega said Alien is considering job cuts or temporary closing. It also is studying assembly techniques for smaller-scale production, Vega said.

"We're just looking at it at this point," Vega said. "It's really all just driven by volume."

If Alien leaves, the state would have to decide what to do with stock it bought as part of a package of development incentives. It is unclear how much the equity in the privately held company, bought for $1 million, is worth now, state Commerce Commissioner Shane Goettle said.

The state would work out an "exit strategy" for its holding if Alien leaves, Goettle said. That could mean hanging on to the investment for a few years until the company improves, he said.

"We have to engage the company pretty aggressively yet about what happens with our equity stake. None of that's occurred yet. We're still on the edge of this news," Goettle said.

State-owned Bank of North Dakota loans worth $1.2 million and $1.7 million would be collected in conjunction with a private bank that was the lead lender on the project, Goettle said. He could not name the lead lender or the collateral Alien put up to guarantee the loans.

City officials say that if Alien closes, a loan for $134,000 from the Greater Fargo-Moorhead Economic Development Corp. would be in default. The part already released to help pay down interest on other loans, about $90,000, would be due in full in four months with interest at 11 percent.

Alien got a 10-year property tax exemption from the city for its north Fargo building, which meant it did not have to pay about $82,500 per year in taxes, nearly $250,000 over three years, said City Assessor Ben Hushka.

The Fargo facility houses an assembly process that puts radio frequency identification chips onto an antenna, which makes an inlay for RFID tags.

"That technology that we have invented is actually very well suited for very high-volume production, but in this period of inconsistency and the lower market volumes, what we have chosen to do at this point is to research alternative techniques of attaching the chip to the antenna," Vega said.