Evolution of the Electronics and Electrical Industry in Penang Between 1994 and 2013
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Evolution of the electronics and electrical industry in Penang between 1994 and 2013 Upgrading or stagnation? Thesis by Raphaël Rietema & Daan van der Velden Evolution of the electronics and electrical industry in Penang 1994 -2013 Upgrading or stagnation? ___________________________________________________________________________ Utrecht, 10 December 2013 Master thesis by Raphaël Rietema & Daan van der Velden Master of Business Geography Faculty of Geosciences Supervisor: dr. L.M.J. van Grunsven 2 Preface This research is part of the Master Business Geography at the Utrecht University. During the Master course Multinational Corporations, dr. L.M.J. van Grunsven referred with enthusiasm to the opportunity of doing research abroad. And by doing so, he convinced us with his story to apply for doing research in Malaysia. Looking back at this period we definitely have no regrets for doing so. Following in the footsteps of previous students we started motivated by orientating the theme of this research, the electronics and electronica industry in Penang. In collaboration with the Penang Institute, which provided us with office space, support and a small library, we have had the change to collect all relevant data for our research. We have resided for five months in a small village near George Town, Batu Ferringgi, where we constructed large parts of our thesis, while having an amazing view on the sea. The experience of being at the other side of the world in a country with completely different cultures and beautiful nature was unbelievable. During our stay we have also experienced some challenges. It could sometimes be difficult to retrieve information from certain institutions, due to strict regulations. The second big challenge was contacting firms at Penang, because although English is their second language there were a lot of miscommunications. Apart from these difficulties, we have learned much about the electronics and electrical industry, the governmental institutions, the different cultures and the way of living. Finally, we would like to thank a few people for their support during the completion of this master thesis. First of all, we would like to thank our supervisor Leo van Grunsven for giving us the opportunity of doing this research and for his counseling during the complete process by giving us constructive feedback. Second we both like to thank our family and friends for their full support and patience. And last, we would like to express our gratitude to the colleagues of the Penang Institute, and more specific professor Woo Wing Thye and Miss Siou Woon Ong for their warm welcome and supervision throughout the research. Raphael Rietema & Daan van der Velden 3 Contents List of abbreviations ....................................................................................................................... 7 Chapter 1: Introduction ................................................................................................................... 8 1.1 Theme ................................................................................................................................... 8 1.2 Research Aim and Relevance .............................................................................................. 10 1.3 State of the art literature on the E&E in Malaysia ...............................................................11 1.4 Approach ..............................................................................................................................11 1.5 Outline of the thesis .............................................................................................................11 Chapter 2: Theoretical Framework ............................................................................................... 12 2.1 Industry level evolution ...................................................................................................... 12 2.1.1 Branching ..................................................................................................................... 12 2.1.2 Industrial upgrading ..................................................................................................... 13 2.1.3 Factors influencing the branching process ................................................................... 13 2.2 Subsidiary-level evolution .................................................................................................. 14 2.2.1 In situ upgrading .......................................................................................................... 14 2.2.2 Subsidiary’s internal and external embeddedness & locational commitment ............. 16 2.2.3 An MNCs network: the regional production network.................................................. 17 2.2.4 Subsidiary charter development ................................................................................... 18 2.2.5 Regional characteristics ............................................................................................... 18 2.2.6 Characteristics of the E&E industry ............................................................................ 20 2.3 Conceptual framework ........................................................................................................ 21 Chapter 3: Current conditions of the regional characteristics of Penang...................................... 23 3.1 Regional Characteristics ..................................................................................................... 23 3.2 Conclusion .......................................................................................................................... 28 3.3 Hypotheses .......................................................................................................................... 29 Chapter 4: Methodology ............................................................................................................... 31 4.1 Research design .................................................................................................................. 31 4.2 Defining the E&E industry ................................................................................................. 31 4.3 Methods on Industry level .................................................................................................. 33 4.3.1 Population .................................................................................................................... 33 4.3.2 Industrial upgrading and branching ............................................................................. 34 4.3.3 Division of branches .................................................................................................... 34 4.3.4 Data Analysis ............................................................................................................... 34 4.4 Methods on firm level ......................................................................................................... 34 4 4.4.1 Operationalizing concepts ............................................................................................ 35 4.4.2 Survey approach........................................................................................................... 37 4.4.3 Questionnaire ............................................................................................................... 37 4.4.4 Sample.......................................................................................................................... 38 4.4.5 Quality of the sample ................................................................................................... 38 4.4.6 Planning and conducting interviews ............................................................................ 38 4.4.7 Data Analysis ............................................................................................................... 38 4.5 Discussion ........................................................................................................................... 39 Chapter 5: Dynamics in the E&E industry in Penang 1994-2013 ................................................ 40 5.1 Early establishment of the E&E industry in Penang ........................................................... 40 5.2 Recent developments in the E&E industry ......................................................................... 41 5.3 E&E industry dynamics from 1994 onwards ...................................................................... 41 5.4 Dynamics E&E industry between 1994 and 2013 .............................................................. 43 5.4.1 Between 1994 and 1998 ............................................................................................... 43 5.4.2 Between 1999 and 2003 ............................................................................................... 43 5.4.3 Between 2004 and 2008 ............................................................................................... 44 5.4.4 Between 2009 and 2013 ............................................................................................... 44 5.4.5 Dynamics between branches ........................................................................................ 44 5.3 Intra-branch development ................................................................................................... 46 5.3.1 Semiconductors ............................................................................................................ 46 5.3.2 Hard-disk