OEM Customer - Meaning

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 What is the meaning of the term - OEM customer?

Designing and manufacturing electronics hardware products has evolved into two camps. One camp is the OEM. The other is comprised of contract electronics solutions providers, who often subcontract with each other for the same OEM customer or program. Details below on differences between these firms plus, why it is important you should know, especially if you are looking to reduce or manage your EMS sourcing spend.

OEM – Original equipment manufacturer

The original equipment manufacturer (OEM) is the brand owner, the company whose logo displays on the final product. Think Cisco, Dell, Samsung, Lenovo, LG, Microsoft, Apple …

For example. Apple’s iPhone has the Apple logo clearly visible to users. Apple is the OEM.

Apple designs its products, but Apple outsources the majority of iPhone manufacturing production to contract electronics solutions providers. Both EMS and ODM. Apple does this to leverage cost to scale.

It's cheaper for OEMs to pay another company (solutions provider) to purchase and carry land and factory overhead costs, purchase and deploy expensive production and test equipment, and pay a solutions provider to hire, staff, and train provider employees inside factories external to Apple’s organization, and pay the solutions provider to manage vendors and suppliers in the supply chain, than for Apple to take on all of this responsibility 100% internally. Apple still employs a very large number of employees to manage its outsourcing partners and programs. But, as a result of outsourcing iPhone production, Apple carries little manufacturing infrastructure overhead on its books. For OEM vs ODM, keep reading.

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