INTRODUCTION

Over the last 40 years, the technology landscape of Penang has been gradually transformed, from a commodity-trading centre into the vibrant high-technology electronics hub we see today. The driver for this transformation has been the government's ability to construct and communicate a compelling business case based on cost as well as the quality of its human resources to attract serious multinational companies in the technology sector to set up manufacturing branch operations in the state. This seed enabled Penang's subsequent transformation into a high technology-based industrial economy.

In the early 1970s, the first electronics component multinationals established operations in Penang. Over the course of the next 20 years, these firms were joined by other component manufacturers as well as consumer and industrial electronics producers, who all sought to capitalize on the state's good infrastructure and relatively well-educated labor. By the end of the 1980s, the state had established a reputation as the “Silicon Island” of the East.

In the 1990s, a large cluster of component producers, particularly in the semi-conductor sector, reached maturity stage with Penang becoming one of the major exporters for the industry. This core of firms was effectively complemented by a large cluster of local suppliers in the automation, contract manufacturing, and piece-part sectors.

Because of the close proximity of the clusters to each other and the possibilities for learning and innovation that this provided, Penang quickly became one of the well-known leaders in the global quality and productivity revolution. The reason for this is somewhere in the mid 1990s, the industrial world became increasingly aware of Japan's manufacturing methods that differentiates that country's products in terms of consistent quality through statistical quality controls and automation.

At that time, Penang's fledgling manufacturing sector took the brave step to embrace these principles and started to make manufacturing-in-Penang as a strategic business advantage for investors.