If you’re looking to manufacture an electronic product in China, you might have come across the terms OEM and ODM.
But what do they mean and how do they differ? And more importantly, which one is the best option for your business?
Table of Contents
WHAT IS AN ODM
An ODM (Original Design Manufacturer) is a factory that has ready-made designs of electronic products, such as laptops, tablets, or smartphones, that can be customized and labeled by a private label, such as Dell or HP.
ODMs are accessible to any company that can afford their minimum order quantity (MOQ). They prove to be beneficial to many companies because they can outsource fabrication operations and focus on marketing and sales.
If you notice a product with a similar design but different branding, it’s (very) probably an ODM model.
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.
Original Design Manufacturers (ODMs) provide a strategic solution for foreign companies restricted by local ownership laws. Without the need to own assets directly (such as a factory), partnering with an ODM can swiftly reposition a company in the competitive market.
Learn more about ODMs in our dedicated article.
WHAT IS AN OEM
OEM stands for Original Equipment Manufacturer, which means the brand, say HP or Siemens. It originally refers to the company that designs and manufactures the product.
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.
Here’s a another point of confusion worth clarifying. Are OEMs and EMS the same?
WHAT ARE EMS
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.
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.
To learn more about EMS, check out our dedicated article.
WHY WORK WITH AN ODM OR OEM?
In a nutshell, both ODM and OEM are viable options for your product. They all include pros and cons which we have summarized below:
| Original Design Manufacturer | |
| Pros | Cons |
| Fast Market Entry. ODM allows for quick market entry with the lowest NRE budget and unit cost. | Lack of Originality and IP Protection.ODM products are generic and may result in IP infringement. |
| Expertise and Efficiency. Outsourcing to ODMs leverages their expertise, economies of scale, and manufacturing ecosystem. | Limited Customization and Control.ODM products cannot be significantly modified, limiting differentiation. |
| Cost-Effective Production:ODMs produce goods reliably, cheaply, and quickly due to low labor costs and a pool of experts. | Potential Pitfalls and Risks:ODM products may have hidden defects, compatibility issues, or outdated technology. |
| Original Equipment Manufacturer | |
| Pros | Cons |
| Originality and IP Ownership.OEM products grant sole IP ownership and a strategic advantage. | High R&D Costs and Time.OEM products require extensive research, development, and prototyping, increasing NRE budget and time to market. |
| Customization.OEM adjusts operations to the buyer’s specifications. | High Unit Costs and MOQ.OEM products are more expensive and require a higher minimum order quantity. |
| Quality and Control.OEM products are manufactured according to the buyer’s design and quality standards. | Dependency and Communication.OEM products rely on the factory’s capabilities and availability, posing challenges in communication and coordination. |
WHERE TO FIND AN ODM OR OEM?
If you’re looking for a factory that can design and manufacture your electronic product, you have two main options: ODM or OEM.
Most of the ODM and OEM industry is based in China and Taiwan, but you don’t need to worry about the language barrier. These factories are experienced in working with foreign clients and can (most of the time) communicate in English.
To learn how to contact and work with an ODM or OEM factory, check out our article on how to find manufacturers in China.
If you need an OEM or design house, you’ll also need to prepare a Bill of Materials (BOM), which is a list of all the components and parts needed for your product.
To learn how to optimize your BOM and reduce costs, read our article on how to create and optimize a bill of materials.
I DON’T WANT MY BRAND COMPANY ASSOCIATED WITH CHINA.
In recent years the China-US trade war is forcing companies to shift production to other Asian countries.
This, along with social and political reasons, which matter a lot for branding, has pushed some companies want to find alternatives for their production.
CONCLUSION: WHAT’S THE BEST PARTNER FOR YOUR ELECTRONIC PRODUCT
To compete in the global electronics market, you need to have a strong presence in Asia. That’s why most of the top tech companies outsource their product design and manufacturing to experts in the region.
With 70% of the Electronics in the world manufactured, China is the world’s largest electronics producer.
On the other hand, Taiwan is the preferred partner for many of the big names. Taiwan has 8 of the top 10 ODMs in the world, offering high-quality, cost-effective, and innovative solutions for electronic products.
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