Build A Computer Like My Super PC

FAQ: What Is The Definition of OEM?

It's important to have a full understanding of the definition for the term "OEM". Often a computer hardware component is identified as being OEM. OEM stands for Original Equipment Manufacturer. Semiconductor manufacturers have two ways of distributing their products. Retail being the one you're no doubt the most familiar with, and OEM.

If the component is OEM then it means the component is intended to be sold as part of a complete system instead of as an individual component. OEM components provide the manufacturer with the most revenue plus a more secure revenue stream. This is because the OEMs, who are the ones buying the component, must do so under a contract. The contract guarantees that the OEM will make large monthly purchases of the component for a number of months. In return, the the manufacturers provide much better volume pricing to the OEMs.

Since OEMs agree in advance "how many" of a component they will buy and "when" they will buy it, it's often the case that they end up with either too many or too few of a particular component needed in the complete systems they are selling. This difference is handled in the "gray market".

It's become standard practice for the OEM to agree to a contract knowing they will end up with more product than they can use. The extra product is sold at cost to brokers. The brokers in turn sell smaller quantities for a mark-up to resellers at the retail level. The OEM product is typically cheaper and has a shorter warranty, often 30 days, and the warranty is through the reseller, not the manufacturer as is the case with retail products.

The brokers are nameless, faceless folks, at least as far as you and I are concerned. It's possible a broker could pull a fast one on a particular component being sold to the reseller and the reseller would unknowingly pass on the product to you, the customer. But no trustworthy reseller would tolerate this kind of deception since it's the reseller who will have to deal with the returns and angry customers, and it's the reseller whose reputation will suffer. That's why it's important to deal with a reseller that prizes his reputation.

Naturally, as an intelligent consumer, you should be doing the following for any component purchase, OEM or retail:

		Inspecting the product as soon as it arrives to verify that what you received was what you ordered.
		Putting the product into use before the warranty period expires so you can know for certain whether or not it works.

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