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contract manufacturer

An organization that makes products under contract for other companies. It caters to the OEM market. In the computer and electronics fields, thousands of products are manufactured by contract manufacturers. These products are ordered by and branded with the OEM's name, which sells them to its customers.

Contract Manufacturers Can Be Huge
Some of the most popular products in the business are made by contract manufacturers. For example, Microsoft's Xbox game machine is made by Flextronics Corporation (, a huge company with factories around the world and nearly USD $15 billion in sales in 2004. Flextronics also makes cellphones for Ericsson, routers for Cisco and printers for HP. Other major contract manufacturers are Flextronics International (, Sanmina-SCI Corporation ( and Celestica (

An "original design manufacturer" (ODM) is similar to a contract manufacturer, but typically owns the intellectual property (IP) for the product itself, while the regular contract manufacturer uses its customer's designs and IP. Contract manufacturers can make hundreds or even thousands of different products, but ODMs often specialize in only a handful of categories.

Contract manufacturers in the electronics field that not only make products, but offer assistance with the design and supply chain generally prefer to call themselves "electronics manufacturing services" (EMS) or "contract electronics manufacturing services" (CEMS). See OEM.


(Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and resells them. However, the reseller is often the designer of the equipment, which is made to order. Many of the largest PC vendors are OEMs, including HP, Dell and Lenovo. Essentially, any PC company that does not have its own manufacturing facilities is an OEM.

Added Value or None
The OEM often does not add anything to the equipment and merely brands it with its own logo. The OEM's name is either placed on the devices by the contract manufacturer that makes the equipment or by the OEM itself. However, OEMs may indeed add value. For example, a "value added reseller" will purchase a computer, add its own software and/or hardware and sell it as a turnkey system. See VAR and turnkey system.

There are numerous companies that specialize in OEM manufacturing and never sell anything under their own brand (see contract manufacturer). Many companies do both. They manufacture and sell retail, but also have a separate OEM division for goods that are private labeled.

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