The difference between OEM and ODM

Special Report: WebPads (January 2002 issue)

An OEM (Original Equipment Manufacturer) is a company that designs and builds a product based on their own specification, and then sells it to another company for branding and distribution. In the computer business, the term OEM is used mostly as a verb (rather than as a noun or adjective). When one company "OEMs" another company's product, it buys a complete, already designed and manufactured product (the "original equipment") from another company (the OEM). Most of the time the purchaser asks the seller to change only the name and possibly the color of the product, and nothing else. For example, Intermec OEMs the 6651 (convertible) CE Tablet from Sharp; Sharp sells the identical product as the Sharp HC-7000. Only the name and model number are different.

An ODM (Original Design Manufacturer) is a company that designs and builds a product based on another company's specification. For example, a computer company such as HP or Compaq may write a spec on a new notebook that they want to bring to market. They specify all of the external details of the product such as screen size and technology, I/O ports, keyboard pitch and travel, case shape and color, speaker location, etc. They also typically specify some of the major internal details of the product such as the CPU and video controller. But they don't design the schematic, specify the type of switching transistors used in the power supply, or select the backlight inverter frequency. That's the ODM's job. The ODM takes the computer company's specification and designs and builds the notebook. Sometimes the ODM does so based on an existing prototype product that was built to attract business. The result is typically a more cooperative/joint effort than in the OEM situation, where the purchaser has little or no control over any of the product specs. Is the new notebook HP's or Compaq's product, or is really the ODM's product? It's HP's or Compaq's product, because they specified the things that matter to the user, the things that the user touches and interacts with every day, the things that affect the "form, fit and function."

In order to attract customers (marketing and distribution companies), ODM companies typically build prototype products that demonstrate their mastery of a particular technology or product type. These prototypes are often displayed on the ODM's website just as if they were "real" products, ready for sale to a consumer or other individual buyer. For an example, look at the AquaPAD on FIC's website.

It can be difficult to determine if a company is an ODM just by looking at the products on their website. One clue is if there is no "How to Purchase" information on the website. Sometimes the "Contact Us" page will include "OEM/ODM" buried in some text. Sometimes you can read between the lines and understand that the vendor has no marketing or distribution capability. For example, the E-Labs website states that "Overall, the division can be classified as a research and development organization". From this statement it's clear that they're selling their product as an ODM and the product shown on the website is just a prototype.

Based in Silicon Valley, Geoff Walker is a consultant with Walker Mobile. Geoff has worked on the engineering and marketing of pen computers since 1990 at GRiD Systems, Fujitsu Personal Systems (now Fujitsu PC) and Handspring. He can be contacted at

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