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Penang to Create Cluster for Photonics Industry

Nineteen companies have formed the Penang Photonics Consortium to speed up the development of the photonics industry within the island state. Consortium chairman Thiam-Seng Tan said the potential for Penang to make the transition -- from a semiconductor and disk drive player, to a major supplier in the highlyspecialized field of optical communications -- is vast.

"The worldwide market for component design and supply in the photonics industry is still wide open and the players are fragmented. We plan to leverage on Penang's reputation for volume manufacturing with our highly trainable workforce, established training centers, pro-business government incentives and supply chain infrastructure already in place," he said.

Penang's 30-year history in component supply has been hit hard by the global technology meltdown, with a number of plant closures, lay-offs, cutbacks and shifts to lower cost-centers in recent years. China, especially, has been singled out for attracting investments away from Southeast Asian countries, which are now forced to regroup and rethink their value-add in the industry. Photonics is seen as the enabling technology to fuel the next industrial wave for the island state.

Tan said the fledgling consortium is already active in organizing trade missions and attending major conferences, such as the recent Optical Fiber Conference (OPC) 2002 in Anaheim, California, to promote the state to major global players.

"We hope to put Penang on the map with our joint efforts. We know that as a closed-business consortium we stand a better chance in pitching our capability and chasing leads jointly. Our main selling point is that we can work together and tap each other's strength according to customer requirements," he said.

Adapting to Survive

Tan is also managing director of start-up Chahaya Optronics Sdn Bhd, an offshoot of major thin-film media supplier Komag Inc. The company exemplifies the shift, coming from a labor-intensive, large corporation in a sunset industry and transforming into a smaller, nimbler, and very high-tech new player in a fast-growth industry.

Chahaya, which means "light" in the Malay language, was founded a year ago and is backed by US$21 million start-up capital from Komag, US venture capital players Summit Partners LP and Storm Ventures Fund II LLC, with smaller stakes from US Venture Partners and Venrock Associates.

Chahaya has established a dual-manufacturing base in Fremont, California and the Bayan Lepas Industrial Zone in Penang, with just over 80 staff and a combined manufacturing space of 3,000 sq m and 1,300 sq m of cleanroom space.

Chahaya hopes to gain a foothold as a contract manufacturer of custom optical interconnects, components and modules for next-generation optical networking equipment.

"We expect bandwidth demand to pick up driven by the switch from the all-electrical to the all-optical networks. Earlier projections suggested that the build-out rate of fiber networks was about one mile per second. That's tremendous opportunity for us," he said.

Tan said besides the consortium's efforts, at least two government-funded research projects in support of the cluster have begun to raise the level of manpower expertise. One was a US$6 million project to develop components for wave division multiplexing (WDM) for fiber-to-the-home involving four universities and a local standards research institute; the other was a US$4.5 million project to develop planar waveguide devices.

Malaysia hopes to produce 10 doctorate holders, 15 master's degree holders and at least 120 graduates annually in photonics-related sciences to meet demand from the industry.

by Julian Matthews,
Kuala Lumpur

(April 2002 Issue, Nikkei Electronics Asia)

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