What is ODM?
A product designed by one manufacturer has been chosen to be produced under other companies' brand names, sometimes, this re-branding may introduce some minor changes in the products' design. With such mode, these companies does not need to invest much time in products research and development. The products' originial manufacturers are refered to as ODM manufacturers, such products are ODM products.
What is OEM?
Basically, a brand owner does not manufacture the product by itself. Instead, they take advantage of their key technology to design and develop new products, get control of the sales channels and leave the production task to a contractor that is expert in production end. Later on, they buy all the orders at a low price, re-label their trademark on the products. This kind of cooperation is known as OEM. Those responsible for production is known as OEM manufacturer, their products are known as OEM products.
Main difference between ODM and OEM
The main difference between ODM and OEM lies in that in an OEM mode, the entrusting party put forwards the product design solution, no matter which party will completes the overall design, and the entrusted party shall not provide this design solution to any other third party; while in an ODM mode, the manufacturer will take charge of design and production both, and get the products ready to be ordered by the brand owner. Whether the producer can produce the same product for a third party depends on whether the OEM has bought the design. OEM products are tailor-made for the brand manufacturers, after production, the products can only be used for the brand name, and can not be branded with the producer's own name for sure. And in ODM mode, it depends on whether the brand business has bought the copyright of the product. If not, manufacturers have the right to organize their own production, as long as there is no identifiable corporate design. To put it simply, the core difference between OEM and ODM lies in who has the product's intellectual property rights. If it is the entrusting party that keeps the product's intellectual property rights, that is OEM, that is commonly known as "foundry"; and if it is the producer that has completed the overall design, that is, ODM, commonly known as "re-label."
China 's smart phone & consumer electronics ODM / OEM status quo
China has always been a leading power for smart phone and consumer electronics manufacturing, and is also the manufacturing power for international ODM / OEM, with a large number of high-end talents and sophisticated manufacturing equipments, includings the A ODM / OEM manufacturers like Huaqin, Chino-e, Long Qi, Hui Ye, Wind-mobi, Vanzo, Foxconn, BYD, Chang Cheng Kaifa, Compal, and Pegatron, Inventec, Shanghai Chuangmi and other companies, Apple, Samsung, Xiaomi, Huawei and other international brands of products are manufactured by these ODM / OEM companies, for example, iPhone, iPad are produced by Foxconn OEM.
In China there are many other traditional OEM / ODM manufacturers that are also capable. Because of shrinking domestic mobile phone market, and the Internet brand arising at more competitive prices, these traditional manufacturers are shifting their market to South Africa and Central and South Asia, South America and other developing countries, and even the United Kingdom, the United States, Germany, Spain and other developed countries and regions in Europe and America.
Why ODM / OEM?
Because ODM / OEM manufacturers have a full range of raw material supply chains, large-scale factories and excellent production and technical personnel, ODM / OEM companies can use these ODM / OEM manufacturers production capacity, without the need to worry about the product upstream supply, assembly and logistics. OEM / ODM manufacturers can fulfill the overall design and specifications to produce products tailored to customer requirements.
If a project requires compcustomized equipments, usually a full set of ODM / OEM services is needed, including:
Industrial Design
Structural Design
Hardware Disign
Mould Opening
PCB A Mould
SMT Trial-Produce
Product Trial-Produce
Product Test
Software(SW) Design
Packing Material Design
Sealed Sample
Small Quantity Production
Volume Production
Strengths and weaknesses to choose OEM
OEM is based on your designated product form and specifications to manufacture your product. The manufacturer makes any design, and their responsibility is limited to the manufacturing process. The main advantages are:
1. Your product definition and attached documentations are sufficiently and accurately available to any factory and to produce a qualified product.
2. Your intellectual property will not be limited by the contract, whenver need, you can always change factories for your products.
However, since a complete and accurate documentation are needed to produce the product, you need experienced engineering resources and expertise, which may extend your product development cycle greatly, and more money and talent investment, leaving you the risk of market loss or the cost increase.
The advantages and disadvantages of choosing ODM
1. When working with ODM manufacturers, they will design some or all of the products based on your needs. Working with ODM manufacturers with a lot of experience will have the advantage of saving money and greatly shortening the product development cycle, but there are several drawbacks:
2. Intellectual property ownership is an important consideration, and of course you want to have all the intellectual property of the product, but ODM manufacturers generally do not design your product for free, which means that you need to pay for R & D to buy all the intellectual property of the product.
3. Due to intellectual property rights and contractual restrictions, you may not have the right to terminate the contract and change ODM manufacturers directly until the minimum order quantity or other requirements of the product are reached. In addition, if the product is transferred to a new ODM manufacturer, you may have to start from scratch, resulting in delays in shipping and additional costs.
4. Due to intellectual property and contractual constraints, you may be at a disadvantage and can not get the best price.
5. If the product is of quality or defect, you will not be able to troubleshoot it and propose quality optimization.
Although OEM and ODM have their own advantages and disadvantages, but you should take into account your own business status and features, select the appropriate contract manufacturers, in the principle of fair and mutually beneficial, to maintain good relations of cooperation, in this case, you will be able to produce high quality products to quickly capture the market, OEM / ODM manufacturers can also extend their scale, and achieve mutual development with joint efforts.