Original equipment manufacturer
Original equipment manufacturer (OEM) is a company that makes a part or subsystem that is used in another company's end product. For example, if Acme Manufacturing Co. makes power cords that are used on IBM computers, Acme is the OEM.
However, the term is used in several other ways, which causes ambiguity. It sometimes refers to the maker of a system that includes other companies' subsystems, an end-product producer, an automotive part that is manufactured by the same company that produced the original part used in the automobile's assembly, or a value-added reseller.
When referring to auto parts, OEM refers to parts and manufacturers involved in the final assembly of a vehicle—in contrast to aftermarket parts that can be installed after the car comes out of the factory. For example, if Ford used Autolite spark plugs, Exide batteries, Bosch fuel injectors, and Ford's own engine blocks and heads when building a car, then car restorers and collectors consider all of those brands as OEM brands, in contrast to aftermarket brands (such as Champion plugs, DieHard batteries, Kinsler fuel injectors, and BMP engine blocks and heads). This can mean that Bosch injectors, for example, are considered OEM parts on one car model and aftermarket parts on another model.
Microsoft is a popular example of a company that issues OEM software for their Windows operating systems. OEM product keys are priced lower than their retail counterparts, but use the same software as retail versions of Windows. They are primarily for direct OEM manufacturers and system builders, and as such are typically sold in volume licensing deals to a variety of manufacturers (HP, Dell, Toshiba, etc). Individuals may also purchase them for personal use (to include virtual hardware), or for sale/resale on PCs which they built. Per Microsoft’s EULA regarding OEM, the product key is tied to the PC motherboard which it’s initially installed on, and there is typically no transferring the key between PCs afterward. This is in contrast to retail keys, which may be transferred, provided they are only activated on one PC at a time. A significant hardware change will trigger a reactivation notice, just as with retail. However, a motherboard change for reasons other than a defect will officially cause Windows Activation to consider it a new PC, and will result in permanent deactivation on said PC.
Direct OEMs are officially held liable for things such as installation media, although they are not required to provide it upon sale of a PC hardware, and may indeed exclude it to reduce cost. Instead, manufacturers tend to include a recovery partition on the hard drive for the user to repair or restore their systems to the factory state. System builders further have a different requirement regarding installation media than Direct OEMs. On versions of Windows which require a valid product key for media download from Microsoft (like Windows 7), OEM keys will be rejected, and the party will be given a notice to refer to the manufacturer.
Economies of scale
OEMs rely on their ability to drive down the cost of production through economies of scale. Also, using an OEM allows the purchasing company to obtain needed components or products without owning and operating a factory.
- Original design manufacturer (ODM)
- Electronics manufacturing services (EMS)
- Contract manufacturer
- Open design
- Open hardware
- Private label
- Secondary market
- Value-added reseller
- "Dictionary of IBM & Computing Terminology, page 66" (PDF). About IBM: More than a century of making the world a smarter place. International Business Machines Corp. Retrieved 2014-09-27.
Original equipment manufacturer (OEM) n. A manufacturer of equipment that may be marketed by another manufacturer
- "Build Your Brand on HP: HP OEM Partnership" (PDF). Hewlett-Packard Website. Hewlett-Packard. Retrieved 2014-09-27.
- Ken Olsen: PDP-1 and PDP-8 (page 3), economicadventure.com
- Kidder, Tracy (1997). "Book Excerpt: The Soul of a New Machine". Bloomberg Business Week. Retrieved 2014-09-27.
…hence the rise of companies known as original equipment manufacturers, or OEMs—they'd buy gear from various companies and put it together in packages. (Chapter One, paragraph 17)
- "General Info on Microsoft OEM COA's, CDs, Ect.". Ebay.com. Ebay. Retrieved 9 September 2015.
- "OEM Licensing FAQ-OEM Partner Center". Microsoft.com. Microsoft Corporation. Retrieved 1 October 2015.
- "OEM System Builder Licensing Guide" (PDF). Microsoft.com. Microsoft Corporation. Retrieved 9 September 2015.