Concept: OEMs, CMs, CDMs, EMS, and ODMs
Types of manufacturers and how they interact with each other...
Types of Manufacturers
Fascinating industry jargon, I know.
Here are the different types of manufacturers (especially ones that produce products with electronic components — think computers, fridges, dishwashers, etc.)
Manufacturers and Original Equipment Manufacturers (OEMs)
Original Equipment Manufacturers (OEMs) and end product manufacturers are companies that design, manufacture and assemble final end-products (that are ready to be distributed or sold to end users). These companies are like Apple, and they produce products like the iPhone. Some OEMs make branded parts or subcomponents to distribute and sell to other manufacturers (to use and sell as part of other bigger end-products.) These companies are like Intel, who produces branded microchips, which are meant to be used in another end-product: computers.OEMs typically own a significant portion of the Intellectual Property (IP) attached to their product and brand the product as their own. OEMs don’t usually do everything themselves. They contract out a big chunk of the steps to other third-party manufacturers (contract manufacturers), especially if the process is complicated or costly. There are quite a few options in the ‘contract manufacturing’ space so we’ll cover those next.
Contract Manufacturer (CM)
A contract manufacturer (CM) is hired or contracted by other manufacturers or OEMs to produce a product on their behalf. The responsibilities of a contract manufacturer can vary depending on each case (i.e. whether they have to source the materials/parts themselves, own the IP, are responsible for transporting products etc.)On an OEM basis: By providing detailed instructions and designs for what they want to produce, a manufacturer can get a product produced by a CM on an ‘OEM’ basis. In this case, the CM doesn’t help the manufacturer design things.
Contract Electronics Manufacturer (CEM): a CEM is a CM that works specifically for the electronics industry. They often do not provide support with design and they may or may not own small pieces of the IP for the device. It depends on the specific product.
Contract Design Manufacturer (CDM):
A contract design manufacturer (CDM) can help a manufacturer design and produce the product. The CDM only needs high level designs and instructions — they’ll work with the manufacturer or OEM to fine tune details and produce everything. Depending on negotiations, they often own a big chunk of the IP.Electronics Manufacturing Service (EMS): Essentially a CDM for the electronics industry, which also manages a big chunk of the supply chain and design phase. On top of helping design and manufacture the end product, they also do a number of other things: e.g. decide what parts to use, figure out where to get parts, quality assurance, inventory management etc.
Original Device Manufacturer (ODM): An ODM is similar to an EMS. They’re responsible for big portion of the design stage of a product, but unlike an EMS, they also use their own IP protected parts in the end product. They also negotiate IP agreements with other companies’ whose parts are int he final product. They can also make and sell similar products using the IP under their own or other brands.
Here’s an article that explains the reasoning behind the naming of these various entities. Here’s another.
A summary chart of this complicated terminology:
(Click on the image to zoom in).