In the world of hardware, and almost any product related to electronics, you have surely heard the terms OEM and ODM . Although the former is much more widely used and who else, who less, knows more or less what it is, the term ODM is somewhat more unknown and not many people know the differences . For this reason, in this article we are going to tell you what an ODM is and how it differs from an OEM.
OEM stands for Original Equipment Manufacturer (or manufacturing), and refers to products that are entirely designed by one company but manufactured by a different one. For example, Apple iPhones were invented and designed by Apple, but production was licensed to Foxconn, who are the makers. The same applies to manufacturers of complete equipment, who use components from other manufacturers (such as AMD processor, NVIDIA graphics, Kingston RAM, etc.) and with all this they manufacture their OEM computers.
What is an ODM and how does it work?
ODM are also acronyms, which in this case correspond to Original Design Manufacturer (or manufacturing). This manufacturer is the one who has the original design of a product, and is the one who licenses its manufacture to a third party. With the example above, the ODM is Apple and the ODM is Foxconn.
The clearest example of an ODM we have with ARM , who design the processors but do not manufacture them, but rather license the designs so that other manufacturers are responsible for the manufacture (with the addition that also ARM, as well as most ODM, allows modifications in the design to adapt it to the needs of each of the clients).
We have told you about some very important and well-known cases, but this practice is very, very widespread, and in fact it has to do with rebranding as well. For example, an ODM designs a PC mouse and offers the design to multiple manufacturers; these manufacturers pay for that design and modify it to their liking, but based on it. In this way, they can produce a large volume of products at very low cost, and that is the reason why we can see many products (such as mice, following the example) that are very similar and even use the same configuration software, just with slight changes generally in its aesthetics.
Advantages and disadvantages
The biggest advantage of the MDGs is that they save importers from spending a lot of money on research and development in order to create a product from scratch. Why reinvent the wheel when you can simply improve an existing one, or at least adapt it to your needs? By eliminating or greatly reducing product development costs, importers can focus more on improving production or marketing strategies.
The main disadvantage of this type of manufacturer is that it can be difficult to differentiate your original products from those made by OEMs or even the competition. Although these types of manufacturers require less initial capital, the price competition tends to be more pronounced (see if not how many models of gaming mouse from unknown brands you can find on Amazon, for example), which results in lower profits.
For example, a customer who wants to buy a cheap gaming mouse is more likely to choose it based on price rather than differences in color or design. In other words, this type of manufacturer usually has less notoriety than the OEM, which is the one that actually puts the product on the market.