An original design manufacturer (ODM) is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale. Such companies allow the brand firm to produce (either as a supplement or solely) without having to engage in the organization or running of a factory. ODMs have grown in size in recent years and many are now sufficient in size to handle production for multiple clients, often providing a large portion of overall production. A primary attribute of this business model is that the ODM owns and/or designs in-house the products that are branded by the buying firm. This is in contrast to a contract manufacturer (CM).
This model is especially used in international trade, where a local ODM is used to produce goods for a foreign company which sees some advantage in the transaction, such as low labor inputs, transport links or proximity to markets. This is also used where local ownership laws possibly prohibit direct ownership of assets by foreigners, allowing a local firm to produce for a brand company for either the domestic market or export.
This type of business is part of "outsourcing". An example is Compal Electronics, which makes notebook computers and monitors, and operates as a mass producer for numerous brand companies, assisted by low labor costs, low-cost transport, and the near commodity nature of the physical inputs (in Compal's case, computer components).
The market research firm iSuppli issued a report in 2006 which demonstrated that 82.6% of PC notebooks' components are made by Taiwanese ODMs.
Intellectual property
ODMs create their own intellectual property and are very proactive in patenting it. Most of their patents are filed in the US, Taiwan and China. Very few are filed in Japan or the EU.
