OEM vs ODM what is best for your brand

ODM Original Design Manufacturer

An ODM is a factory that has white label designs of say a laptop ready to be customized and labeled by a private label: like Dell.

 

ODMs are accessible to any company that can afford its MOQ. They prove to be beneficial to many companies because they can outsource fabrication operations and focus on marketing and sales.

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This is why Original Design Manufacturer is a gigantic business. The global ODM and EMS business is expected to cross $734 billion by 2026.

 

Most well-known brands such as HP, and Sony have a large portion of their products both designed and made by ODM manufacturers in Asia.

 

Another reason to use an Original Design Manufacturing service, is that they offer a way out of local ownership laws prohibition for foreign companies.

 

Such companies can not opt for direct ownership of assets, therefore can not own a factory, luckily an Original Design Manufacturer is all they need to put the organization on the game again.

ODM Biometric access control devices

OEM Original Equipment Manufacturer

OEM means the Brand, say HP or Siemens. It originally stands for Original Equipment Manufacturer, but these days rarely does an electronics company actually does the manufacturing themselves. 

 

The world’s most valuable electronics brand, Apple, has all of its iPhones and iPads manufactured and assembled by OEM companies/factories such as Foxconn and Pegatron. 

 

Confusingly, many people also talk about OEM factories. It’s best to interpret this as, an OEM Factory manufactures according to the design the OEM (the Brand) provides. 

 

EMS Services PCB assembly

 

Here’s a another point of confusion worth clarifying. Are OEMs and EMS the same?

Electronics Manufacturing Services

Many electronics factories in Taiwan and China refer to themselves as OEM factories, meaning they manufacture the design as provided by the OEM client, the brand company or buying firm.

 

Their Western counterparts such as Flex, Jabil, San Mina prefer to call themselves EMS (Electronic Manufacturing Services), of course the more generic term CM (Contract Manufacturer) is also used.

 

ODM , To reduce the production cost, the manufacturing process needs to be simplified as much as possible.

 

Now that you know about the kind of services these companies, provide, let’s discuss what will work for you best.

 

We’ll discuss some points of interests such as intellectual property, brand name, international trade, whether you’ll have direct ownership or not on a specific design, finding a local ODM or going to Asia to find one.

Why work with an ODM or OEM?

The Advantage of Working with an ODM

ODM Benefits - Fast

The main advantage of going the Original Design Manufacturing way is that is the fastest way to get an electronic product to market, with the lowest NRE budget, and at the lowest unit cost. 

 

By outsourcing manufacturing to an ODM company, you don’t have to do any R&D work nor worry about fabrication processes.

 

You’re leaving manufacturing to the experts.

 

Thanks to their expertise, economies of scales, transport links and manufacturing ecosystem where they work; they benefit from low labor inputs, cheaper components and a huge pool of manufacturing experts.

 

All these allows an ODM company to produce goods ready to sell reliably, cheaply and fast.

The Disadvantages of Working with an ODM

When working with ODM products, you can not ask for major redesign changes; this means that if you’re in a very competitive location, you might end up selling a product similar to the one of your competitors.

 

Remember that an ODM company serves different foreign firms at the same time, you won’t be the only business they have.

 

In this article, ODM pitfalls, our CEO lists 7 things you should be aware of before you use the service of an ODM company.

The Advantage of Working with an OEM

OEM manufacturing is a very different service to that of an ODM.

 

The main benefit of this service is that OEM products are all original and you’ll be the sole owner of the IP. The company adjusts its operations to the buyer’s specifications.

 

This will give you a strategic edge over the more generic ODM products out there.

The Disadvantage of Working with an OEM

ODM vs OEM costs

OEM products, because of their originality, require a lot of research and development, plus a lot of testing to produce working prototypes before you can even start considering mass production.

 

This means that you, the company, will have to spend a lot of money on product development before looking for an Original Equipment Manufacturing service.

Where will you find an ODM or OEM?

Taiwan incrementa sus exportaciones de electronicos

Most of the industry is in Chinese territory and Taiwan.

 

You’ll be pleased to know that to get service from one or the other you won’t need to speak Mandarin, at least not for simple ODM production runs.

 

These companies are used to offering their service to a foreign company or local firm looking for mass production to serve the domestic market or go internationally.

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You might wonder what the process to get in touch is, well, we wrote an article that outlines the process of contacting a manufacturing partner.

 

If you’re in need of an OEM or design house, then you’ll need to prepare a BOM, here’s an article that outlines the process of optimizing your BOM components.

I Don’t Want My Brand Company Associated with China.

Taiwan y Malasia son ideales para manufacturar electronicos

In recent years the China-US trade war is forcing companies to shift production to other Asian countries.

 

This, along with social and political points of views, which matter a lot for branding, has made some companies want to find alternatives for their production.

 

Click here to learn where else you can manufacture electronics

CONCLUSION – OUR ADVICE

ODM VS OEM competitors

If you’re not firmly embedded in the Asian electronics supply chain it’s nearly impossible to be cost-competitive.

 

That’s why most all leading tech organizations have decided it’s no longer worth the investment of time and effort to develop and manufacture their products in-house. 

 

While some 70% of all electronics in the world are manufactured in China, 8 out of the world’s top 10 ODM’s are Taiwanese. For some reason, all the big players prefer Taiwanese ODMs as their partner.

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