While the current version of Waving Torch comes with pre-loaded messages such as "Hello" in English or "China" in Chinese, it's not out of the question that hackers could breach the system to change messages.

Another version of the Waving Torch exists, but is not yet on the market. The new version has a USB computer connection that allows users to customize their messages.

Memsic last month reported that expected second quarter revenue will be reduced by $2.0 million due to the cancellation of the Olympic torch project. In a statement, the company said: "Problems experienced by Memsic's customer, due in part to the recent earthquake in China, prevented the timely commercial introduction of the Olympic torch, and during the second quarter the customer invoked a clause in its contract with Memsic that permitted the customer to suspend the project in the event of a natural disaster such as an earthquake. As a result, Memsic will reverse the previously recognized revenue and the related account receivable in the second quarter."

It's still not clear what happened to $2 million worth of boards Memsic had already shipped to China in the first quarter. Citing legal restrictions, Memsic CEO Yang Zhao declined to comment for this story.

Memsic nevertheless had high hopes for its Olympic Torch in Beijing. Last December, in a document filed by the company with the Securities & Exchange Commission, Memsic described the torch project as a key element for "the company's diversification strategy."

"The 'Waving 2008' electronic message torches provided by us will be sold at venues for the 2008 Olympic Games in Beijing, China, as well as in over 5,000 Olympic stores throughout China. We will partner with a third-party manufacturer to produce the torches. This project is a new departure for us, as it is the first time we have been contracted to produce a complete solution for a consumer product."

The optimistic forecast appears at odds with Chinese government officials anxious about negative stories related to the Beijing Olympics. Whether or not the Waving Torch eventually turns up during the opening ceremony might be one small measure of how big a risk the government is willing to take with openness over the next two weeks.