Author: Yu Qiao
Source: Business People (ID: biz-leaders)
In October 2021, Liu Zihong retweeted a personal interview with him on Weibo.
The media gave him a list of titles: world-changing scientist, entrepreneur who broke the rules of the industry from zero to one, pioneer who braved the no-man's land of flexible technology. He is a college entrance examination student, a tsinghua high-quality student, a Stanford doctor, and the founder of a leading flexible electronics company.
Judging from the current clues, when this report came out, Liu Zihong, the founder of Royole Technology, was already in trouble.
Some employees broke the news that in September, the company's salary was only 40% of the normal amount, and it did not receive wages in October, the company has not yet issued last year's year-end bonus, and the reimbursement is also in arrears. Liu Zihong reassured employees that he would solve the wage problem in November, but so far it has not been solved.
Because he could not understand the flexible display technology of "foldable and bendable", Xu Xiaoping missed the opportunity to invest in Royole Technology. He claimed to be "like a knife", and the pride of investors was "crushed to pieces", and he could only watch Liu Zihong take 10 rounds of financing and achieve a valuation of nearly 60 billion yuan.
Money comes too quickly and too easily, and Liu Zihong also frequently attended industry summits a few years ago, not losing time to talk about technological foresight and dreams, "What is the original intention of entrepreneurship?" Is it to make a quick buck to start a business, or do you really want to do something? For us, it was a very clear choice. ”
Liu Zihong's long-term doctrine needs to burn money. Investors are willing to pay for his resume.
Liu Zihong has excelled in mathematics, physics and chemistry since his achievements in mathematics, and was admitted to the Department of Electronic Engineering of Tsinghua University as a science champion in Fuzhou City, Jiangxi Province. During college, his "human biosensing chip" was bought by a company for 3 million yuan. After graduation, he went to Stanford University, because his brother said: "If you want to start a business, you can go to Stanford, and if you want to do research, you will go to Cambridge." ”
His idea of making a soft-screen display also sprouted at Stanford. He was helped by nobles. Xi Meixu, Liu Zihong's doctoral supervisor, former senior vice president and chief technology officer of Texas Instruments, used his connections to help his students get a $100,000 research grant, and introduced Liu Zihong to Professor Bao Zhenan, an authoritative figure in flexible electronic technology. In 2009, Liu Zihong became one of the rare graduates in Stanford history who completed his ph.D. in less than three years of enrollment. After working for IBM for three years, Liu Zihong went to the sea and founded Royole Technology.
Liu Zihong boasted that he was "determined to bend the world", claiming that the self-developed non-mainstream technical route can make the flexible screen have the characteristics of low cost and high yield (product qualification rate), so as to break the capital threshold of traditional panel manufacturers.
In the industrial pattern of Samsung, LG, BOE and other panel manufacturers, Royole Technology is really difficult. Flexible screen is divided into fixed curved screen and full flexible screen, the current fixed curved screen has been applied to mobile phones on a large scale. Samsung, LG, BOE, etc. are also on the basis of the original fixed curved screen, the layout of flexible / fully flexible OLED production line, but a production line will cost 30 to 40 billion yuan.
At the end of last year, Royole Technology submitted a prospectus to raise 14.4 billion yuan. Two months later, its prospectus was requested to be withdrawn. In the Caixin report, a professor engaged in display research at a 985 university said bluntly, "If such a company goes public, it will be too damaging to the industry." ”
This is first and foremost a "money-burning" business. Since raising $300 million in May 2020, Royole Technology has not had new money in its account for a year and a half. Liu Zihong joined several executives to pay for the company's emergency. According to the prospectus, Royole's revenue in the first half of 2017-2020 totaled 516 million yuan and a loss of 3.194 billion yuan.
In the eight years since Liu Zihong founded Royole, the outside world has questioned it one after another: burning money and not shipping, yield rate is not open, and is the unique core technology reliable?
The scale of the production line and the yield rate are the keys to the assessment panel manufacturers. In interviews, Liu Zihong always avoided inquiries about yield on the grounds of "trade secrets", or made vague responses such as "reaching a fairly good level in the industry" and "the industry is far ahead".
According to the prospectus, if the actual output (qualified products) is divided by the total output estimate, the yield of Royole flexible screen in 2019 is 36%, and 65% in the first half of 2020, but Royole believes that this calculation method ignores the equipment utilization rate, capacity utilization rate and other factors, and only 2499 yuan is used to change the screen of Royole, and the screen replacement cost of other similar sizes of two competing mobile phones is 599 US dollars and 7080 yuan, respectively, "from the side can prove that Royole technology has a greater advantage in yield."
In contrast, BOE's yield rate can reach 85%.
Royole's products have not entered the procurement list of mainstream mobile phone manufacturers. Its main customers are a group of unknown Shenzhen companies. Unlike panel factories such as BOE, Royole under Liu Zihong not only produces screens, but also manufactures mobile phones, and it has not announced the sales of flexible screen mobile phones.
According to the data, the actual output of the full flexible display in 2019 is 314,000 pieces, and the sales volume is only 52,000 pieces, and the market-oriented sales of the screen produced by Royole are only more than 20,000 pieces. The production capacity of the first phase of the production line can reach 2.8 million pieces.
Royole also did have the problem of idle capacity, with capacity utilization rates of only 15.1%, 31.2% and 5.3% in the first half of 2018, 2019 and 2020, and the inventory value was 165 million yuan, 595 million yuan and 480 million yuan, respectively.
But what is puzzling is that Liu Zihong is still expanding the production line in a big way. Of the 14.4 billion yuan originally planned to raise in the IPO, there were two largest expenses, one was 4.939 billion yuan for upgrading the second-phase production line, hoping that "after increasing investment, production capacity will help more customers to open sales, forming a virtuous circle of 'sales increase - production expansion - price reduction'".
The problem is that the original production capacity has not been fully utilized, and it is not wasteful to expand the production capacity? Another expense was $7.2 billion to supplement working capital. For the flexible screen project of tens of billions of yuan, how long can 7.2 billion yuan burn?
Since 2012, Royole Technology has won more than 10 rounds of financing.
While Liu Zihong's personal reputation is rising, ambition is rolling in with capital. He often said that Royole's technical route can achieve higher yields with less money. Because its self-developed route is based on non-silicon materials, it does not require the use of high temperatures like mainstream materials. If the flexible screen production is compared to building a building, "the temperature drops down one or two hundred degrees, the entire foundation is stable a lot, and the yield rate is naturally improved....... Due to the different processes, Royole also has an advantage in terms of cost. ”
However, this statement has not been recognized in the industry.
In the Caixin report, in the eyes of other industry insiders, Liu Zihong's "unique technical route" is only the first time that he has applied a set of technologies that have existed for many years in the field of flexible screen displays, and has carried out "systematic innovation in flexible integrated circuits", so it is called "the original underlying core technology route".
However, the historical performance of this technology in terms of energy consumption and stability is not good. Today, Liu Zihong still needs to use product and market data to confirm the possibility of "unique technology", at least for now, he has not been able to convince the primary market to continue and adequate blood transfusion, and the company has not formed a benign cycle of "investment - research and development - scale mass production - market sales - capital return".
Recently, a media article suggested to Liu Zihong, "In difficult times, the best choice may not be 'never give up', you may wish to take a step back and invite professional managers and professionals with industrial production experience to help reorganize the business; Liu holds more than 70% of the voting power, and there is no need to worry about outsiders occupying the magpie's nest." ”
But most importantly, Liu Zihong still needs to let the outside world see as soon as possible that the core technology he said is really "core technology". Winter is coming, hungry investors, I am afraid it is difficult to believe in long-term pizza.
*The title image comes from the official website of Royole Technology