Original equipment manufacturer

An original equipment manufacturer, or OEM, manufactures products or components that are purchased by a company and retailed under the purchasing company's brand name. OEM refers to the company that originally manufactured the product.

When referring to automotive parts, OEM designates a replacement part made by the manufacturer of the original part.

Contradictory and confusing definitions
Confusingly, OEM may also refer to a company that purchases a component made by a second company for use in the purchasing company's products. For instance, under this definition, if company 'A Inc' purchases optical drives from company 'B Ltd' that will be used in 'A Inc' computers, then 'company A' is the OEM.

An even more confusing, contradictory definition for OEM is a company that sells the product of the second company under its own brand name.

Companies who follow the above practices are better termed VARs (value-added resellers) or resellers, respectively.

Economy of scale
OEMs rely on their ability to drive down the cost of production through economies of scale. Using an OEM allows the purchasing company to obtain the needed components or products without owning and operating a factory.

Automotive parts
An automobile part may carry the designation OEM if it is made by the same manufacturer and is the original part used when building and selling the product. The term "aftermarket" is often used for non-OEM replacement parts.