By Chua Hian Hou , Technology Correspondent

GERMANY'S Fraunhofer-Gesellschaft, the R&D giant known for its work on the MP3 digital music format, will set up a new $10 million institute to conduct research in digital media at the Nanyang Technological University.

The Fraunhofer Singapore institute will employ 20 researchers when it opens mid-2010, NTU and Fraunhofer announced on Wednesday.

More will be hired later to do cutting-edge research in computer graphics and virtual reality as part of its foray into Asia, said Fraunhofer Institute for Computer Graphics Research's director, Professor Dieter Fellner.

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