Original Equipment Manufacturer - OEM


DEFINITION of 'Original Equipment Manufacturer - OEM'

1. The original definition: a company whose products are used as components in another company's product. The OEM will generally work closely with the company that sells the finished product (often called a "value-added reseller" or VAR) and customize the designs based on the VAR's needs.

2. The more recent definition: a company that buys a product and incorporates or re-brands it into a new product under its own name.

BREAKING DOWN 'Original Equipment Manufacturer - OEM'

There isn't a typo here; the two definitions do contradict each other. This term has become very confusing since it now can be used in both contexts. OEM sometimes means the company that sells the component to the the VAR, and other times it refers to the VAR who is acquiring a product from an OEM. The reason for this is that "OEM" (the abbreviation) is sometimes used as a verb instead of a noun. For example, a manufacturer might say that it is going to OEM a new product, meaning it is going to produce a new product based on components bought from an OEM.

The term is most often used in the computer industry, where products such as Windows will be referred to as OEM. A company like Dell Computers will incorporate the Windows operating software into its computers and sell the computers to its customers with the Windows product installed.

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  1. What role does the OEM (original equipment manufacturer) play in the finished product?

    Original equipment manufacturers (OEMs) do not typically play much of direct role in determining the finished product. However, ... Read Full Answer >>
  2. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
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    Fiat Chrysler Automobiles, commonly known as FCAU, designs, manufactures and sells passenger automobiles. It is the world's ... Read Full Answer >>
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  5. What other sectors are most highly correlated with the automotive sector?

    The automotive sector is a broad category correlated with a variety of related industries. Auto parts manufacturers and raw ... Read Full Answer >>
  6. What is an Original Equipment Manufacturer (OEM) in the automotive sector?

    OEM stands for Original Equipment Manufacturer. The OEM is the original producer of a vehicle's components, so OEM car parts ... Read Full Answer >>

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