contract manufacturer

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 (www.flextronics.com), a huge company with factories around the world and nearly $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 (www.flextronics.com), Sanmina-SCI Corporation (www.sanmina-sci.com) and Celestica (www.celestica.com).

The ODM
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.

EMS and CEMS
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.