In the recent Hollywood blockbuster 'Die Hard 4.0,' cutting-edge network monitoring devices made it impossible for protagonist Bruce Willis to hide anywhere in the city.

With a webcam set up in a greenhouse in Hokkaido, Japan allows researchers thousands of feet away to follow the growth of grapes in order to improve their quality.

From Hollywood to real life, Taiwan's Vivotek has webcams for every need.

Established only eight years ago, Vivotek was the first company in Taiwan to enter the webcam market, and has now become the second largest webcam maker in the world, a global brand with annual earnings of NT$1.08 billion.

According to a report by international research firm Frost & Sullivan, the expedited growth of broadband following the terror attacks of September 11, 2001 has propelled the Internet-based application of security monitoring and control. The compound annual growth rate (CAGR) of the overall Internet monitoring industry has reached 41 percent, and its fastest growing sector is webcams, with a CAGR of 50 percent.

The key to the rise of Vivotek was its advanced grasp of product trends. In addition, the entrepreneurial team is well versed in audiovisual and communications technology, and over 50 percent of the 170-plus Vivotek workforce is devoted to R&D, making it a true 'brain-powered' enterprise.

'They circumvented the fiercely competitive field of security monitoring and control ?V CCTV and DVR ?V and entered the sparsely populated webcam market,' observes Topology Research Institute researcher Maxwell Chang.

'It's been a wild ride,' says Vivotek chairman Owen Chen, the 2007 winner of the Rising Star Award and the National Outstanding SMEs Award, gone prematurely gray at under 50.

The Search for a Blue Ocean

Originally a researcher with the Chunghwa Telecom Telecommunications Laboratories, Owen Chen continued his work in telecommunications technology R&D at Lenoo, a manufacturer of optoelectronic components. As a 37 year-old PhD candidate at the National Taiwan University (NTU) Department of Electrical Engineering, he recruited a group of over ten people, made up of graduate students from his own multimedia research lab and former colleagues, and relying on little more than passion, launched a new business.

Without the support of a major corporation or a client base, these believers in the knowledge economy decided to pursue technology licensing.

In the beginning, Vivotek wrote computer codes for clients in the imaging technology industry, collecting a design fee, plus royalties per each unit of the final product sold. After a dozen such projects over a couple of years, 'we sat down and decided on a change of direction,'Chen recalls.

Moving from audiovisual and telecom core technology design into productization, Vivotek had two safe choices: to join the developing closed-circuit television (CCTV) market in Taiwan, or to go into the video conferencing market, which Chen knew well.

Vivotek chose a third and less-traveled road ?V webcam manufacturing, with an industry value less than half that of the US$500 million video conferencing market.

'CCTV was the playing field of several large companies, and as a new player, our profit margin would be low. I also wanted to avoid competing against my old video-conferencing equipment industry colleagues,' says Chen.

Operating with limited funds, Vivotek decided to bank on systems providers by creating an original brand for a relatively unknown technology for which they believed they had an industry lead. 'We spent over a year exhibiting our products, getting to know systems providers, and asking clients to test our products,' says Vivotek operations director William Ku.

Saying 'No' to Goliath

This was a risky move. It took time for people to come to accept network monitoring as a viable new technology, and Vivotek received no orders for nearly two years, burning through NT$75 million ?V 50 percent of the company's capital ?V and rendering a net worth of NT$5.

This group of 30-something former NTU researchers could have become high-salaried researchers for MediaTek (Taiwan's leading developer of audio products). The head of Polycom, a global leader in video conferencing, flew to Taiwan in an attempt to purchase Vivotek simply for its personnel, and MediaTek chairman Tsai Ming-chieh also quietly sniffed them out. But Vivotek's entrepreneurial team said no to these industry giants and stuck to their flagging company.

'I could never sleep soundly back then. I woke up at 3 or 4 a.m. everyday and was in the office talking to the boss at 8 or 9. I wasn't worried about not having enough time to finish my work, but that there would be no work,' says Ku, who joined the company at its rock bottom in 2001.

The Right Place at the Right Time

Despite a lack of orders in the beginning, Vivotek's R&D and personnel training efforts finally paid off. Following the September 11th terror attacks, technology-oriented Vivotek had the advantage in the suddenly lucrative network monitoring market.

In 2003, Internet communications company D-Link sought out an ODM contract with Vivotek for webcams with such high-end features as rotation and adjustable focus, followed by major European telecom companies such as Spain's Telef?nica, whose partnership allowed the fee-based installation of Vivotek webcams for all of its Internet server clients.

From 2002 to 2006, Vivotek revenues rose from NT$20 million to NT$1.08 billion, and after-tax profits from a NT$20 million deficit to NT$200 million.

'The greatest difference between Vivotek and its competitors is its ability to develop the right chip for any product, while others mainly purchase ready-made chips,' says one professional in the security monitoring and control industry. This not only cuts down on costs but also gives Vivotek control over the quality of image compression and decompression. 'With network monitoring, it's not good enough to just get an image. It needs to be very precise, especially when it comes to monitoring government agencies, banks, and airports,' says Jena Chen, public relations manager of GeoVision Inc., a firm that entered the webcam market in 2007.

Traditional security monitoring and Internet communications industry firms, even industrial computing firms, have recently joined in the fight for the network monitoring business. 'Product innovation and stability will determine the future of this market. The company that can most quickly provides client-specific products will be the winner,' says Chang.

Up against competitors that have always had more resources at their disposal, brain-powered Vivotek desperately needs to strengthen its existing technological advantage.

In 2007, Chen boosted the number of R&D personnel by 80 percent, to over 70, and created an IC design spin-off, Vatics Inc. As of March 2007, Vivotek's R&D costs were 11 percent of revenues, for which their earnings per share have suffered. 'We are preparing for the future,' declares Owen Chen, determined to do battle.

Translated from the Chinese by Ellen Wieman

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Vivotek Inc.

Established: The year 2000, at the height of the dot-com boom

2006 revenues: NT$1.08 billion

2006 net profits: NT$200 million

Main products: Webcams

The secret to their success: Gaining brand recognition prior to the rise of network monitoring, thereby becoming the world's second largest webcam manufacturer.

Chinese Version: 晶睿通訊 靠九一一谷底翻身