Remembering the Eight Pioneers

By Ooi Shinz Jo

August 2022 FEATURE
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ACTING AS a key entrepot for the Far East, Penang in the 19th and early 20th century flourished. The free port system that the British tended to impose in its port colonies in the region was the basis for the socio-economic structure that came to define the island. The trading grew to include the setting up of industries, such as tin smelting and the repackaging of commodities like rice and sugar.

The revoking of Penang’s free port status in the late 1960s pulled the rug from under its economy. At one point, the unemployment rate reached 15.7%, twice the national level.[1] Coupled with the gradual shifting of economic growth to the Klang Valley, the wealth that came with Penang’s maritime stature plummeted. This led to the prognosis by the then-president of the International Chamber of Commerce that Penang would ultimately end up as a “fishing village”.[2]

Flash forward to modern-day Penang… its moniker – the Silicon Valley of the East – suggests a fate very different from that prediction. The name is a reference to the state’s vibrant and robust ecosystem for electrical and electronics (E&E) manufacturing.

So, how did Penang reverse its dismal fate and propel itself to such economic heights?

Read also: After 50 Years: No Slowing Down in Penang’s Industrialisation

Faced with mass unemployment, the Chief Minister then, Dr Lim Chong Eu, took on the herculean task of reviving Penang’s economy. Taking the cue from the Robert Nathan report, commissioned by the federal government with World Bank funding, he decided to push Penang into export manufacturing. The Penang Development Corporation was started in 1969 and approximately three years later, the Free Trade Zone (FTZ) in Bayan Lepas was up and running.[3]

He read the times well. This move by the government of the day took advantage of the changing dynamics of global competition between American and Japanese firms. This was growing intense and multinational corporations (MNCs) were looking for cheap production sites for simple assembly jobs.

And Penang welcomed them. Eight key foreign companies, known as the Eight Pioneers, began operations in the FTZ, in effect acting as the strong basis for industrialisation that Penang needed.

National Semiconductor

The first corporation that arrived in 1971 in the FTZ was National Semiconductor. After being acquired by Texas Instruments following a corporate M&A exercise, the corporation is no longer present in Penang.

The rest of the eight arrived a year later in 1972.

Intel

Intel, the world’s largest semiconductor chip manufacturer by revenue, began its operations in Penang in the middle of a paddy field with only 100 employees.[4] Interestingly, its early employees were predominantly women because they performed better on dexterity tasks, such as those done at bonding stations.[5]

Despite a fire in 1975 that destroyed everything except for the cafeteria, the Penang site went on to become Intel Corporation’s largest and most diverse site outside the U.S.. From having been a small memory chip facility plant, it evolved into one of Intel’s largest Assembly Test Manufacturing facilities; its initial investment of USD$320,000 (RM1.6mil in the late ‘70s) has now grown to over USD$5.98bil (RM25bil).[6] As of 2012, it has invested more than RM14bil in Malaysia and employed over 9,000 highly-skilled Malaysians, contributing approximately 0.9% to the Malaysian annual Gross Domestic Product (GDP).[7]

Robert Bosch

Robert Bosch already had a presence in the state as early as 1923. A German auto part producer, Bosch was producing 8mm movie cameras, mechanical flashers and magnetos in the 1970s; radios, amplifiers and loudspeakers from the 1980s onwards; and with the turn of the century, progressed from the production of simple car radios to integrated head units which consist of a complete infotainment system. Currently, it has three manufacturing arms in Penang producing car multimedia systems, power tools and steering systems.

Clarion

Clarion was established on a coconut plantation near the Penang airport. Involved in manufacturing, designing and developing in-vehicle infotainment products, the company chose Penang as a production centre in order to meet increasing global demand for in-car entertainment systems for affordable Japanese cars.

Advanced Micro Devices (AMD)

The Penang site was the first of AMD’s advanced C4 “flip chip” assembly facility outside North America. In 2016, AMD sold a majority of its stakes in its Penang facility to a Chinese company called TongFu Microelectronics, which led to it being renamed TF AMD.

Hewlett-Packard (HP)

Hewlett-Packard had begun its operations producing core memory stacks in a rented bungalow on Macalister Road with only 60 employees, and later moved to the FTZ. It was later acquired by Agilent Technologies and partly sold to Keysight Technologies.

Osram Opto Semiconductors

Founded as Litronix, Osram is one of the world’s most advanced light-emitting diode (LED) chip producers. Its early operations in Penang involved manufacturing 7-segment LED displays, but within a few years, the company expanded into LED-related consumer products such as LED watches, calculators and LED games. Today, the Penang plant produces optoelectronic couplers, displays and intelligent displays as well as custom-designed optoelectronic devices.

Renesas Electronics

Founded as Hitachi, the Japanese company’s Penang site focuses on manufacturing linear and digital integrated circuits, power transistors and transistor diodes.

Fifty Years On

Some 50 years after putting down roots in Penang, most of these Eight Pioneers are still here, albeit that some company names or structures have changed. Over that period, Penang’s manufacturing industries also evolved from being labour-intensive and with low value-added to highly skilled, knowledge-based and high-technology.

The Eight Pioneers of Penang not only assisted in the growth of domestic firms in the form of funds, technology and demand but also helped smoothen the industrialisation process by providing services such as precision tooling, local contract manufacturing as well as assembly and test, consequently reorganising production in the electronics component industry. By the early 1980s, there were 14 MNC semiconductor firms (not including subsidiaries) operating in the country, and Malaysia was recognised as the single largest “third world” site for offshore semiconductor firms.[8]

Local supporting industries also saw a boost in their growth, and some suppliers to the MNCs have now grown into large, listed entities conducting their own research and development and venturing into new markets abroad.[9] Some notable names include Vitrox, Inari Amertron, Pentamaster and Greatech.

The pivotal contributions of the Eight Pioneers to Penang are clearly evident today. From 2014 to 2019, the state’s E&E exports grew at a compounded annual rate (CAGR) of 12% to reach RM210 bil (USD$51 bil).[10] In 2020, the state’s exports surpassed the RM300bil mark to reach a record high of RM310bil, out of which, 82% were contributed by the E&E as well as professional, scientific and controlling instruments (including medical devices) industries.[11]

This is even more impressive when one takes into consideration the major disruptions from the Covid-19 pandemic that same year.

Footnotes:

[1] Cheah, S. (2012). Celebrating 40 years of Penang's industrialisation: Building Penang, leading Malaysia (p. 10). Penang Development Corporation, Penang Institute.

[2] Free port no more - the burden of Penang’s first CM. (2014, August 21). The Edge Markets. https://www.theedgemarkets.com/article/free-port-no-more-burden-penangs-first-cm

[3] Cheah, S. (2012). Celebrating 40 years of Penang's industrialisation: Building Penang, leading Malaysia (p. 10). Penang Development Corporation, Penang Institute.

[4] Intel Marks 40 Years in Malaysia. (2018, October 22). Intel Newsroom. https://newsroom.intel.com/editorials/intel-marks-40-years-in-malaysia/#gs.5pdiul

[5] ibid

[6] Intel’s US$7 bil Penang investment will compel Malaysia’s. (2021, December 31). Digital News Asia. https://www.digitalnewsasia.com/business/intels-us7-bil-penang-investment-will-compel-malaysias-semiconductor-ecosystem-level

[7] Cheah, S. (2012). Celebrating 40 years of Penang’s industrialisation: Building Penang, leading Malaysia (p. 42). Penang Development Corporation, Penang Institute.

[8] Felker, G., Rasiah, R., & K.S., J. (Eds.). (2013). Industrial Technology Development in Malaysia [Abstract]. Routledge Studies in the Growth Economies of Asia, (p. 126-127). Doi:10.4324/9780203023549

[9] SkyeChip. (2021, May 6). The Story of Silicon Valley - SkyeChip. SkyeChip - Accelerating Computing. https://skyechip.com/the-story-of-silicon-valley/

[10] InvestPenang. (n.d.). Penang: The Silicon Valley of the East. https://www.semi.org/en/sea-newsletter-penang-the-silicon-valley-of-the-east

[11] Wen, P. (2021, November 20). Penang Celebrates the 50th Anniversary of its Industrialization Journey in 2022. InvestPenang. https://investpenang.gov.my/penang-celebrates-the-50th-anniversary-of-its-industrialization-journey-in-2022/

Ooi Shinz Jo

has the three S's: being a student, having a sweet tooth, and enjoying the beautiful seashores Penang has to offer.


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