OEM is probably the most misleading term in the IT Industry. OEM is short for Original Equipment Manufacturer, a term used to describe companies that create original hardware in their workshops or factories and then supply it to a VAR – Value Added Reseller. The VAR takes a lot of such hardware components and then creates a finished product by integrating them together.
An example would be that the company Ralink makes wireless cards for a large number of devices. Ralink is an OEM because it created the WiFi cards by itself. Ralink then sends that piece of hardware to a laptop company like Dell or HP. Now Dell and HP have received these WiFi cards from Ralink similarly they might have gotten some other hardware like processor from Intel and so on. HP and Dell will take all of these hardware, integrate them together and will create a ready to use Laptop form it. Hence adding value to the original hardware in the process. So Hp and Dell are value Added Resellers.
But, this definition doesn’t hold good by modern standards as today a VAR is more commonly known as an OEM. You might have heard today about OEM lock that a smartphone has or an Operating System Given by an OEM. These things are of the modern era when the VAR company has started working so closely with the actual OEM, customizing their hardware so much that people have almost considered these VAR as OEM.
In software world Microsoft also provides OEM Operating System. These Systems are often given to companies like HP and Dell, which are OEMs by the modern standard. They are sold by Microsoft to these OEM at a much lower rate because they purchase in bulk.
Also, these companies make their own drivers from the hardware sources release by the producers. This increases the doubt and has finally led to these companies being called OEMs.
The word OEM has a big difference in it original and interpreted modern meaning. The olden OEM meant the company that produced the hardware. However, in modern times an OEM may be referred to a company that takes hardware from different manufacturers and then assembles them.