| Along with the reform and opening up, the rapid development of China’s OEM industry has been developed rapidly since the beginning of the 80’s, which has a huge impact on our economy and employment. However, since the international environment has been profound changed in recent years, there is economic slowdown or even backward in Europe and the United States, resulting in a significant decline in consumer demand. And the rise of the generation of Southeast Asia to China’s industry has caused tremendous pressure, and the exchange rate of CNY, labor costs, not good for China’s OEM industry. On behalf of the industry of China to small and medium-sized enterprises as the main body, but in recent years, domestic medium and small OEM business closures to China’s OEM enterprises sounded the alarm, transformation and upgrading to face a life and death situation.In this paper, the global value chain theory is used to analyze and study the industry of China. And from the perspective of the smile curve, combined with the theory of small and medium enterprises, the paper focuses on the transformation of China’s OEM small and medium enterprises. Based on the open innovation theory, the open innovation of Chinese OEM enterprises is put forward. In this paper, we put forward the route of the upgrading and transformation of the route, which has changed the traditional way of OEM-OBM, and has been liberated from the simple increasing production efficiency. The article puts forward a number of upgrading and transformation measures and routes, in the case of not increasing the burden of OEM enterprises, product innovation route and enterprise transformation route. Based on product innovation to achieve the perfect transformation, this paper uses YS company to implement open innovation case to prove the open innovation to Chinese OEM enterprise.Finally, I hope this paper can provide a reference for the transformation and upgrading of China’s OEM enterprises, to help the OEM enterprises from labor-intensive enterprises in transition to become a technology development enterprise. Enhance the core competitiveness of China’s small and medium OEM enterprises, achieve sustainable development and enhance the purpose of China’s basic industry. |