An OEM technology partnership is a long-term agreement where one company's technology goes inside another company's product and ships with every unit. That technology can be a physical component, software, firmware, a chip design or an SDK. The original equipment manufacturer (OEM) builds it in and sells the finished product under its own brand. The technology supplier earns repeat orders, license fees or royalties.
Most OEM partnerships in manufacturing work this way. A packaging line, HVAC unit or vision camera is a stack of other companies' drives, sensors, chips and software. Automation leaders such as ABB, Honeywell, Rockwell Automation, Siemens and Yokogawa run formal OEM programs, because a place in an OEM's design can mean years of orders.
This guide covers how OEM partnerships work, the main types, licensing models, benefits, risks, the terms to agree and how to build one. If you're still deciding how your product gets made, start with OEM vs ODM.
What is an OEM technology partnership?
An OEM technology partnership is a commercial and technical relationship in which a supplier lets a product maker build its components, software, firmware, chip design or SDK into the product maker's own offering. The product maker sells the combined product under its brand. The supplier is paid through product sales, license fees or per-unit royalties, and provides training and support.
The OEM is the supplier's customer and its partner at the same time. The OEM's engineers decide what goes into a design, and once something is in a product's bill of materials (BOM), it tends to stay there for every unit built.
Rockwell Automation gives a useful test for who counts as an OEM: a company that earns 51% or more of its revenue from the machines or equipment it sells and services, according to its OEM Partner Program guide.
What gets built in
Almost any technology can be supplied this way. These are the most common types, with examples from published programs.
How OEM partnerships work
Most OEM partnerships follow the same path from first contact to repeat orders:
- Design-in. The supplier's engineers help the OEM select, test and prototype with the technology.
- Commercial agreement. Both sides agree pricing or royalties, volumes, support, branding and how long the deal runs.
- Enablement. The OEM's engineers and sales teams get training, toolkits, SDKs and documentation.
- Production. The OEM builds the technology into every unit and orders or reports on a regular schedule.
- Go-to-market. Both sides promote the finished product, often with co-marketing.
- Review and renewal. Regular business reviews cover volume, quality, roadmap and new projects.
Yokogawa publishes almost the same sequence: consultation, engineering review, product evaluation, commercial agreement, technical onboarding and production support, on its OEM Partner Program page.
Types of OEM partnerships
ABB publishes one of the clearest breakdowns, with six cooperation models listed on its OEM partnerships page:
In plain terms, there are four types:
- Component supply. The supplier sells parts that go into the OEM's product. This is the most common type.
- Licensing. The supplier licenses software, a chip design or a production right, and the OEM embeds or makes it.
- Private label or rebranding. The supplier's technology is sold under the OEM's brand. Schneider Electric describes private-labeled platforms that OEMs can adapt without restarting development, and AVEVA allows rebranding where applicable.
- Co-branding. Both brands appear, such as a "Powered by" mark. Thales, by contrast, sells OEM bundles that must show the Thales brand.
OEM partnerships vs other partnerships
The test is what happens to the supplier's technology: is it built in and sold, or just connected or resold?
Thales draws the same line. Companies that embed and sell Thales products apply as OEM partners, while companies that only integrate with them apply as technology partners, according to its OEM partner page.
Licensing and pricing models
How money changes hands is one of the biggest decisions in an OEM technology partnership.
AVEVA offers volume pricing agreements and the right to resell its products bundled with a partner's equipment, according to its Embedded Solutions page. Autodesk splits its OEM program into Build, a classic OEM contract, and Bundle, where the full product ships with a partner's software or machine, according to its OEM Software Partner Program.
Arm: the royalty model at scale
Customers pay Arm an upfront license fee to develop their own chips, and Arm earns a royalty on each chip shipped, CEO Rene Haas explains in the SoftBank Group Report. In fiscal 2026, Arm reported record revenue of $4.92 billion, with $2.61 billion from royalties and $2.31 billion from licensing, according to its fourth-quarter results.
Microsoft: per-device OEM licensing
Device makers that preinstall Windows IoT Enterprise need an OEM license, which must transfer to the end customer, according to Microsoft Learn. The device maker also supports the complete product, including operating system functions, according to Microsoft's Windows for IoT overview. OEMs sign up through an authorized distributor such as Kontron.
Benefits of OEM partnerships
Supplier programs back this up. Honeywell says its OEM program helps machine builders speed up time to market with engineering toolkits and conversion services, according to its OEM Partner Program page. Siemens describes financial, technical, sales and logistics support on its OEM partnerships page.
Risks of OEM partnerships
- Lock-in. Once technology is designed in, switching means redesign, re-testing and sometimes re-certification.
- Dependence. Shortages, price rises, a discontinued part or an unpatched software flaw can stop production.
- Misaligned goals. The supplier wants more of its content in every product. The OEM wants the best option for each job.
- Channel conflict. A supplier that also sells direct can end up competing with its own OEMs. See our article on channel conflict.
- No exit plan. Deals that don't define how they end are hard to change.
Boston Consulting Group's 2026 research found that high-performing OEM partnerships share five traits: aligned goals, complementary strengths, clear governance, readiness to adapt and well-defined exit paths, according to BCG.
Terms to agree in an OEM agreement
Lifecycle is a good example. Windows 11 IoT Enterprise LTSC has a 10-year lifecycle, according to Arrow's Windows IoT licensing guide.
How to build an OEM technology partnership in 7 steps
These steps are written from the supplier's side, but OEMs can use them to judge whether a supplier is serious.
- Pick the OEMs that fit. Target product makers whose designs already need what you make, in industries you can support.
- Lead with engineering. OEM deals are won in the design phase. Offer samples, prototypes and test support before you talk volume.
- Choose the model. Component supply, license, private label or co-branding, and the pricing model that matches how the product sells.
- Write the terms down. Use the table above as a checklist, including exit terms.
- Enable the OEM's teams. Train engineers, service staff and sales. Give them SDKs, drawings, configurators and one place for documentation. Our partner onboarding guide covers the process.
- Set shared goals and review them. Rockwell's participation agreement asks OEM partners to train key staff and work to agreed annual objectives.
- Go to market together. Co-market the finished product, list the OEM in your partner directory and register joint deals so neither sales team is undercut.
Once you have more than a handful of OEMs, you need a program with tiers, benefits and requirements. Our guide to OEM partners and OEM partner programs covers that.
Example: an OEM technology partnership in practice
This is a fictional example. A maker of industrial vision cameras wants AI defect detection. Instead of building it, it licenses a model from a software vendor, paying a small upfront fee and a royalty per camera. The vendor's engineers help embed the model, and the camera maker rebrands it inside its own app and handles first-line support. The vendor provides the SDK, monthly updates and a 72-hour escalation path. Two years later, cameras with the model make up most sales, and the vendor's royalties grow with every unit.
Managing OEM partnerships at scale
The partnership is often the easy part. Running dozens of them is harder:
- Many people on both sides. Engineering, purchasing, sales, service and marketing all need different information.
- Long sales cycles. Design-in to first order can take a year or more, so deals need protecting.
- Technical content. Drawings, SDKs, firmware, certificates and release notes must reach the right partner and stay current.
- Shared goals and reporting. Objectives, reviews, royalties and co-marketing plans often live in spreadsheets.
These are partner management problems. For more on keeping manufacturing partners engaged, see our manufacturing partner engagement playbook.
Managing OEM technology partnerships with Journeybee
Journeybee is an AI-native partner relationship management (PRM) platform for recruiting, enabling and co-selling with partners. It's headless and customizable, and Journeybee for manufacturing brings OEMs, distributors and integrators into one branded portal connected to your CRM:
- A partner portal for SDKs, drawings and release notes, with access by partner type.
- Partner onboarding and a partner learning management system for technical training and certification.
- Deal registration for long design-in projects.
- CPQ with compatibility rules, so partners quote valid configurations.
- Co-marketing and market development funds for joint campaigns.
- Analytics and integrations to track design wins and pipeline in your CRM.
Plans start at $499 per month with unlimited partners and users, on the pricing page. Book a demo to see it with your OEM program.
Key takeaways
- An OEM technology partnership puts one company's technology inside another's product, sold as one offering.
- Types include component supply, licensing, private label and co-branding.
- Payment models range from component pricing to licenses and royalties. Arm earned $2.61 billion in royalties in fiscal 2026.
- The biggest risks are lock-in, dependence and channel conflict. Agree support, lifecycle and exit terms in writing.
- Win the design phase, then enable, review and go to market together.
