||A major contributor to this article appears to have a close connection with its subject. (July 2014)|
|Traded as||HKSE: 0303|
Electronic manufacturing services
Small to medium sized business phones
Integrated access device
|Revenue||US$1,898.9 million (FY2014)|
|US$203.3 million (FY2014)|
Number of employees
VTech (Traditional Chinese: 偉易達) is a Hong Kong-based global supplier of electronic learning products from infancy to preschool and the world's largest manufacturer of cordless phones. It is also one of the top 50 electronic manufacturing services providers globally.
In November 2015 VTech's learning products app store, "Learning Lodge", was compromised, leading to the exposure of names, addresses, encrypted passwords and personal information of its customers, including photos and chat logs.
Name and listing
The company was originally named "Video Technology Limited" in reference to the company's first product, a home video game console. In 1991, it was renamed "VTech Holdings Limited" to reflect a wider portfolio of products.
The company first listed in Hong Kong in June 1986 under the name "Video Technology International (Holdings) Limited". It was privatised and delisted from The Stock Exchange of Hong Kong Limited in 1990.
VTech obtained a primary listing on the London Stock Exchange in 1991. In 1992, the company relisted on The Stock Exchange of Hong Kong Limited, establishing a dual primary listing with London. In 1993, the company established its American depositary receipt programme.
VTech delisted voluntarily from the London Stock Exchange on 7 October 2008. It also terminated its American Depositary Receipt programme with effect from 21 January 2011.
VTech was founded in Hong Kong in October 1976 by two local entrepreneurs, Allan Wong and Stephen Leung. When the first single-chip microprocessor "Intel 4004" became available in the early 1970s, the company saw the potential it offered for portable consumer electronics products. Wong & Leung set up a small factory in To Kwa Wan, with a US$40,000 investment and a staff of 40 people. In the first year, turnover was less than US$1 million.
VTech initially focused on developing video games. In 1977, the company created its first home TV game console, a version of Pong. Since only consumers in North America and Europe could afford such items, the company targeted primarily these markets.
The United Kingdom was chosen as the first market for Pong, as Hong Kong and the UK used the same standard for television systems. In 1978, the founders introduced LED games they had developed to buyers from RadioShack in the US, which were sold under the RadioShack brand.
VTech then began to build its own brand. VTech unveiled its first electronic learning product (ELP) called "Lesson One" at the New York Toy Fair in February 1980. It taught children basic spelling and maths. An exclusive version under the name "Computron" was offered to Sears, with the product being prominently advertised by Sears in its catalogue which was a popular shopping guide.
Next VTech made the video game console CreatiVision.
VTech then branched out into personal computers, including a series of IBM compatible PCs beginning in 1983 and Apple II compatible computers beginning in 1985, including a model called Laser 128. VTech exited the personal computer market in 1997 due to keen competition.
In 1985, the United States Federal Communications Commission (FCC) allocated the frequency band 900MHz to ISM (industrial, scientific and medical) devices. Taking advantage of this, VTech started developing a cordless telephone using the 900 MHz band and in 1991 introduced the world's first fully digital 900 MHz cordless telephone.
In 2000, to expand its cordless phone business, VTech acquired the consumer telephone business of Lucent Technologies. The acquisition also gave VTech the exclusive right for 10 years to use the AT&T brand in conjunction with the manufacture and sale of wireline telephones and accessories in the United States and Canada. Although the acquisition increased sales of VTech's telecommunication products by 50%, it led to operating losses and write-offs. The company issued a profit warning in March 2001 and launched a broad restructuring plan. By the financial year 2002, the company had turned around the business and returned to profitability.
Today, VTech's core businesses remain cordless telephones and electronic learning products. Its contract manufacturing services, which manufactures a range of electronic products on behalf of medium-sized companies, has also become a major source of revenue. The company has diversified geographically, selling to North America, Europe, Asia, Latin America, the Middle East and Africa.
2015 data breach
In November of 2015, Lorenzo Bicchierai, writing for Vice magazine's Motherboard, reported that VTech's servers had been compromised and the corporation was victim to a data breach which exposed personal data belonging to millions of individuals, including children, who signed up for or utilized services provided by the company related to several products it manufactures. Bicchierai was contacted by the unnamed attacker in late November, during the week before Thanksgiving, at which point the unnamed individual disclosed information about the security vulnerabilities with the journalist and detailed the breach.
Bicchierai then reached out to information security researcher Troy Hunt to examine data provided by the attacker to Bicchierai, and to confirm if the leak was indeed authentic and not an internet hoax. Hunt examined the information and confirmed it appeared to be authentic. Hunt then dissected the data in detail and published the findings on his website. According to Hunt, VTech's servers failed to utilize basic SSL encryption to secure the personal data in transit from the devices to VTech's servers; that VTech stored customer information in unencrypted plaintext, failed to securely hash or salt passwords.
The attack leveraged an SQL injection to gain privileged root access to VTech servers. Once privileged access was acquired, the attacker exfiltrated the data, including some 190 gigabytes of photographs of children and adults, detailed chat logs between parents and children which spanned over the course of years and voice recordings, all unencrypted and stored in plain text. The attacker shared some 3,832 image files with the journalist for verification purposes, and some redacted photographs were published by the journalist. Commenting on the leak, the unnamed attacker expressed their disgust with being able to so easily obtain access to such a large trove of data, saying: "Frankly, it makes me sick that I was able to get all this stuff. VTech should have the book thrown at them” and explained their rationale for going to the press was because they felt VTech would have ignored their reports and concerns.
VTech corporate security was unaware their systems had been compromised and the breach was first brought to their attention after being contacted by Bicchierai prior to publication of the article. Upon notification, the company took a dozen or so websites and services offline.
In an FAQ published by the company, they explain some 4,854,209 accounts belonging to parents and 6,368,509 profiles belonging to children had been compromised. The company further claims the passwords had been encrypted, which is contrary to reports by the independent security researcher contacted by Vice. The company indicated they were working with unspecified "local authorities." VTech subsequently brought in the information security services company FireEye to manage incident response and audit the security of their platform going forward.
The company has suspended trading on the Hong Kong stock exchange as a result of falling share prices after the breach.
United States Senators Edward Markey and Joe Barton, co-founders of the Bi-Partisan Congressional Privacy Caucus, issued an open letter to the company inquiring as to why and what kind of information belonging to children is stored by VTech and how they use this data, security practices employed to protect that data, if children's information is shared or sold to third-parties and how the company complies with the Children's Online Privacy Protection Act.
Electronic learning products (ELPs)
Today VTech is a leading global supplier of ELPs from infancy to preschool, making both individual standalone products and platform products that combine a variety of consoles with different software.
Its V.Smile TV Learning System, which was launched in 2004, established what the company calls platform products as an important category within its ELPs. Latest additions to the platform product range are InnoTab Max, Kidizoom Smart Watch and InnoTV.
Telecommunication (TEL) products
VTech introduced the world's first 900 MHz and 5.8 GHz cordless phones in 1991 and 2002 respectively. According to MZA Ltd, the company is the world's largest manufacturer of cordless telephones.
In North America, VTech is the largest player in the industry, according to MarketWise Consumer Insights LLC, selling both AT&T and VTech branded phones and accessories. Outside North America, VTech mainly supplies products to fixed-line telephone operators, brand names and distributors on an original design manufacturing (ODM) basis.
Contract manufacturing services (CMS)
VTech started manufacturing products for other brand names on an original equipment manufacturing (OEM) basis in the 1980s and CMS became one of the company's core businesses in the early 2000s.
VTech has been identified as one of the world's top 50 electronics manufacturing services providers, providing electronics manufacturing services for medium-sized companies. VTech's CMS has focused on four main product categories: professional audio equipment, switching mode power supplies, wireless products and solid-state lighting.
A June 2012 report from the Institute for Global Labour and Human Rights said the working conditions in the VTech factories in China failed to meet the legal standards and could be described as sweatshops. VTech strongly rejected the allegations and issued a statement on 22 June 2012 reiterating that it is a responsible and caring employer which abides by the legal requirements relating to employment in all jurisdictions where it operates.
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