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OEM stands for original equipment manufacturer.

Expanded Definition

OEMs make the components that other companies use in their products. To make things confusing, OEM is sometimes used as a verb, in which case a company would OEM a product, i.e., use components manufactured by someone else to build its own product.

The term OEM comes up most often in relation to auto parts and electronics. In both cases subassemblies and manufactured parts are sold to companies who assemble the finished product. But auto parts and computer parts, etc., are also sold through auto supply stores and electronics retailers.

Think for example of tires. Truckloads are shipped to auto assembly plants (just in time, ready to be installed), but some of each size go through different distribution channels to reach a tire store near you. Disk drives, memory chips, keyboards, and monitors have similar distribution channels.

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