What is a transponder and what is it for? A transponder is a device inserted under the skin that carries the microchip, containing the unique number of the host and an antenna that receives radio wave signals. The transponder is encapsulated in bio-glass for protection and is injected into a standard spot under the skin, on the back or on the left side of the neck. It takes about three weeks for thin layers of connective tissue to form around the transponder implant and hold it in the correct position.