Penal colonies are for minimum security prisoners
The problem with most fictional penal colonies is that people assume that they are where you send the worst of the worst, but they actually have it backwards. Historically, most penal colonies have been places you send people who've done crimes too small to need to worry much about. Violent offenders, career criminals, political enemies etc. make a lot of sense to execute or keep in high security institutions, but penal colony prisoners were generally people arrested for non-violent, non-seditious crimes like counterfeiting, defaulting on debts, smuggling, tax evasion, working without a license, poaching, vagrancy, etc.
In fact, as the demand for workers in your colonies grows, you will likely outpace your ability to find legitimate criminals; so, you will generally see your government go down one of two unethical rabbit-holes to solve the problem. They will either become very strict about minor legal infractions or they will criminalize some minority group as a matter of policy to try to chain-gang as many prisoners off to the colony as possible; so, as the colony grows, you may see an increasing number of colonists who've literally done nothing wrong being shipped off like slave labor to try to fill demand.
Because they tend to select for people who've committed only minor crimes, penal colonists tend to not need a whole lot of special care to control compared to a normal colonial population. With nowhere for the colonists to go, you really don't need a prison system. They rely on you for survival, and most of them are not blood thirsty enough to fight back over long hours or poor work conditions. So they do their jobs, they live their lives, they raise their families, etc. The fact that there are children born out on theses penal colonies is actually in the interest of your government because the goal is to develop the planet. That takes workers; so, even if children are born here, the living conditions are humane enough that living here is seen less as an active punishment, and more as just a way to find a use for the dregs of society. So if children are born into the system, the government tends to not see this as a moral dilemma... even if it does in practice mean being born into serfdom.
Penal Camps can be an alternate form of execution
A lot of the confusion comes in the from of penal camps, which are distinctly different than penal colonies. Penal colonies are places people live. They spread out building roads, farms, homes, factories... everything you'd find in a normal settlement, but built by the hands of convicts instead of freemen. Penal camps are smaller. They are specific mines or industrial compounds built inside of a typical prison facility complete with guards, jail cells, etc. They are small enough in scope to double as a labor camp.
Penal camps are often places where the work is so hazardous that you use them as a form of death sentence. Examples of this would be the lead mines of Ancient Rome. Romans used a lot of lead for their plumbing, but they did not have the equipment to safely mine it; therefore they would invest heavily in security to guard a lead mine and keep prisoners from escaping, and force them to work where the lead would eventually kill them (6 months to 2 years on average). Because the hazards of lead were too well known for demand to be met with paid labor, the cost of building and maintaining a penal camp off in some remote place was well worth the investment.
This is where Sci-fi often goes wrong is that they try to justify remote penal camps. In the future, there is really no probable hazard where you would have a human do the work instead of a robot. The Romans built Penal Camps because they had no alternative for getting the lead they needed. A future society would find it much cheaper to use machines; therefore there would be no justifying a remote penal camp. Instead, if they make their prisoners do forced labor, it will focus on what is cheap, not what is dangerous; therefore any penal camps they have should be within normal established populations so that their stamped license plates or printed t-shirts or whatever you have them doing does not cost too much to sell because of transport costs.
World Building a Remote Sci-Fi Penal Camp
That said, a sci-fi remote penal camp can be done if you really want to.
To start with, you need a planet with a "Not Rare Over There" Unobtanium. This is important because it justifies bothering with a planet that has an exotic hazard instead of moving to any of the myriad other ones around.
This leads into the second step: This planet needs a hazard on it that affects electronics, but not the the human body. Something like powerful solar flares that periodically EMP the colony could work or maybe some native life form or grey goo that swarms and eats any sort of electronics you try to lower onto the surface. This forces mining of the Unobtanium to be done the old fashioned way with human labor and hand tools.
If you do this, then it suddenly makes sense for a space aged society to run a dangerous iron age style penal camp using convicted murders, rapists, insurrectionists, and targets for genocide, because without modern machines, the act of mining itself again becomes a death sentence.
