OEM – original equipment manufacturer

Concept illustration showing OEM as part of a supply chain.
OEM – Original Equipment Manufacturer reviewed by Web Webster

OEM (pronounced as separate letters) is short for original equipment manufacturer, which is a somewhat misleading term used to describe a company that has a special relationship with computer and IT producers. OEMs are typically manufacturers who resell another company’s product under their own name and branding.

OEM is Similar to VAR

While an original equipment manufacturer is similar to a value-added reseller (VAR), the term refers specifically to the act of a company branding a product to its own name and offering its own warranty, support and licensing of the product. The term is really a misnomer because OEMs are not the original manufacturers. Instead, they customize the original product.

An Example of Original Equipment Manufacturers

When a computer technology producer manufacturers its product, for example, a computer graphics card, they will usually make two or more versions of the product. One version is distributed by the manufacturer direct to the consumer retail market, using its own branding and offering its own warranty and support.

Other versions of the manufactured product are distributed through the manufacturer’s OEM and authorized reseller distribution channels. Usually these products are the same quality as the retail versions, but warranties may be different, the manual and bundled software may be non-existent, and the cables and connectors required for installation might not be included. In some cases it may be large quantities of the product purchased in bulk by the OEM for mass-production of pre-built systems.

Recommended Reading: Learn more about different OEM Business Models in this Webopedia Quick Reference article.

Vangie Beal
Vangie Beal is a freelance business and technology writer covering Internet technologies and online business since the late '90s.

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