At the 2005 Consumer Electronics Show (CES) in Las Vegas last January, endless rows of digital televisions and digital video recorders (DVRs) criss-crossed the convention hall. It was obvious that hundreds of startups saw digital video as a road to success.

Adimos stood out among the throng of small upstarts that had pinned their hopes on digital TV. The company sells its “video-processing chip” to consumer electronics companies, which integrate the technology into devices like digital TVs and DVRs to make them work better over wireless networks.

Adimos has had an impressive start, having already lined up partnerships with Toshiba and Onkyo in Japan. At CES, the company announced new relationships with Chinese companies Visart and Konka. In April, it hit the $1-million revenue mark, with the bulk of growth happening over the past four months.

But the capital-intensive chip manufacturing market is daunting. If Adimos can manage to convince device makers that its technology is the key to keeping their products connected to wireless networks, then the company could beat tough odds to win big sales.    

Adimos has certainly found a sweet spot by straddling the growth of digital TV and the rise of wireless home networks. According to research firm Informa Media Group, U.S. households watched 52 million digital TVs last year, and that figure is set to double by 2010. In Asia, consumers bought 7.5 million digital TVs in 2004 and are expected to buy 12.6 million in 2005. Wireless home networks are also going strong. According to research firm ABI, more than 10 million U.S. households already have them installed.

The company aims to convince video device makers that its video chip platform will guarantee a boost in efficiency. “Nobody wants to watch a movie that is dependent on a slow wireless connection with a poor image quality,” says Adimos CEO Sandeep Kumar.

Adimos’ technology sits behind any standard wireless connection from Wi-Fi to ultra wideband, and improves the efficiency of the bandwidth, says Mr. Kumar, who spent nearly 20 years as an executive at Texas Instruments and did time as a partner at Crimson Ventures before heading up Adimos. He says the chipset adds quality, reliability, and security by looking for errors in the signal and correcting flaws by working with the source devices.

Since Adimos has located a niche in a burgeoning market, only a few businesses, like ViXS in Toronto and Magis Networks in San Diego, offer direct competition. Mr. Kumar plans to raise a Series B round to help expand his company’s sales and marketing efforts.

But Adimos will have to convince more companies to integrate its technology into their consumer devices. To get them to pay up, it will have to prove its technology adds enough efficiency to the wireless network to be worth the added expense. Although the company does not disclose its pricing, Adimos says that its product costs about the same as the standard devices used to decode a fixed video stream-roughly $11 to $15 per unit when purchased in high volume.

Adimos will also have to sell to the companies that transmit the signals. For now, the company has focused on the digital TV market, convincing some display makers like Toshiba to include its product on their devices. Over the next year, Mr. Kumar plans to tackle the customers that make set-top boxes and DVRs.

But a solid start doesn’t necessarily guarantee future success. The semiconductor industry has notoriously high capital expenses, forcing startup chip makers to invest heavily in the technology while waiting for a payoff that may never come.

This year, the chip and consumer electronics industries are also facing lower sales after last year’s blockbuster results. They may resist ponying up the extra expense for an arguably minor service.

If Adimos can persuade companies that its technology adds enough efficiency and cost reductions to equal the expense, they may scoop up its chips in large quantities. Riding the wave of the digital video and wireless network markets, Adimos could help unlock the promise of digital video in the next generation of homes.