Understanding the Differences Between OEM, ODM, EMS, and CEM

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In the manufacturing world, electronics manufacturers have grown into specialized niches, allowing customers to choose the perfect fit for their specific needs.  However, when choosing an outsourcing relationship, understand that there are intersections between the terms within the industry, and the different factors are not black and white. The exponential growth of electronic products, their increased and more complicated connectivity, and international demand for products has caused these terms to be used more often in the world of electronic manufacturing. Let’s discover the differences between them:

OEM (Original Equipment Manufacturer)

This term, also called “contract manufacturing” is used to describe a company which designs and produces electronic items based on the buyer’s specifications. The relationship between the companies is that of a manufacturer and buyer, and the buyer turns around and sells the final product, with their company name/logo placed on the product by the OEM (which doesn’t usually design any products for their own sales). This is one reason that companies look overseas for OEM; their name will still be on the product, and they save costs on product development, labor, and other production expenses, and still benefit from the product expertise (and often, a warranty) offered by the OEM.

Example: Microsoft issues OEM software for the Windows operating systems; its product is found in other computers manufactured by companies such as Dell, Acer, and HP.

ODM (Original Design Manufacturer)

ODMs design and manufacturer products which companies are looking for, either to be used in their products or to be sold under their brand name. The ODM is in charge of research and development and has the ability to sell the product on their own, to other buyers or as a “White Label,” a term describing the status of a product which is sold under several names.  Since the ODM already had a proven track record for the component the buyer is looking for, the buyer is not looking for a completely customized product, and they are usually finished products to be used by the buyer, although they will carry the brand name of the buyer. Since the ODM designed the product, it owns the “rights” to it.

Example: Consumer electronics like phone cases and chargers are examples of ODM-created products, which are more common in the food industry (think of the term “generic” and “store brand”).

EMS (Electronic Manufacturing Service)

EMS providers are companies which create an electronic component, from the beginning (design), through manufacturing, testing, and distribution of the final approved product. EMS providers are also responsible for repairing the products they developed for the OEMs the products were created for.

In addition to the manufacturing side of the services they provide, an EMS provider also offers support in the form of shipping management, procurement assistance for obtaining additional components and providing some customer service for the products they created.

Examples: Some of the largest EMS providers are Mitsubishi, Honeywell, LG Electronics, Panasonic, and Hitachi.

CEM (Contract Electronics Manufacturer)

Specializing in electronic components like circuit board assembly and electromechanical assembly, CEM providers design and create electrical parts used by OEMs in more substantial products.  These products are nearly always branded with the buyer’s logo, as they are a small part of the final product. Due to the type and detail of products they create, CEMs are usually highly certified, providing customers with expertise in regulations and industry standards, utilize advanced technologies, and have a detailed and reliable supply management system.  The best CEMs offer service after the sale, exhibiting a commitment to the products they have designed, tested, and sell.

Examples: The focus with Contract Electronics Manufacturing is the production of printed circuit boards (PCB) and cable assemblies.

When You Know, You Can Make Good Choices

When entering the electronics manufacturing industry or reconsidering how to manage your manufacturing needs due to a change in circumstances, understanding the variations in terminology will allow you to make educated choices when choosing a manufacturing partner. With over 30 years of experience, the team at SMC Manufacturing Services can offer you a host of systems integration and electronic manufacturing services, from a variety of engineering and design services to more supportive services like project management and forecasting.