Yaqin Sun, ’20

What is the competitive equilibrium price and service levels between original equipment manufacturers and contract manufacturers?

Original equipment manufacturers (OEM) sought out contract manufacturers (CMs) to outsource manufacturing functions. Nowadays, however, the OEMs are hesitant to partner with the CMs. The major reason is that the CM will aggressively move from upstream to downstream and become the OEM’s competitor by selling a similar but self-branded product to the end customers. Hence, in my research I want to examine this partner-competitor double relationship in a supply chain and the interaction of pricing and service decisions in a competitive setting.

Recently, more CMs, like Foxconn, which used to assemble the accessories for IPhone, started to sell a similar but self-branded product to the end customers. Critiques, like OEMs, view this situation as biting the hand that feeds. OEMs have to find a way to eliminate this threats and maximize the benefits of outsourcing, in order to make itself most competitive in the end market. In my research, I am aiming to find out conditions that can help OEMs be better off in this partner-competitor double relationship setting. Hence I believe OEMs like Apple Inc., will benefit from my research.