Royole "collective holiday" puzzle

Author/Author of "Finance and Economics" Weekly Wu Di

Editor/ Dong Yuqing

After Royole Technology 'owed wages for half a year', the news that all employees were on vacation for three months came out. On April 6, the company debunked rumors that there was no full holiday and many employees were still at work.

Through a former royole employee who recently left royole, the weekly magazine learned that this is not the first time royole has "forced a holiday". Previously, Royole employees were notified by email of the Spring Festival holiday for up to one month, and stipulated that the number of extra days other than statutory holidays would be deducted by annual leave and transfer, and the insufficient part would only be paid to the minimum wage standard in Shenzhen. This time, some employees are on vacation for three months, and they are also verbally notified that the minimum wage will be implemented in the next two months (May and June).

Earlier, in December 2021, some Royole employees broke the news to the media that Royole was in financial difficulties and had suspended the payment of employee salaries on a large scale, and many Royole employees were only partially paid in September, and the salaries in October were fully suspended. Royole promised to pay employees in November, but in the end it did not materialize.

Months of wage arrears, coupled with monthly pay delay email notifications, dampened employee morale. Royole Technology CEO Liu Zihong was even secretly called "Postal General" by employees, and his email content was spread by employee screenshots and widely ridiculed as "email pay".

As a unicorn enterprise in the field of flexible screens, Royole Technology was born with a golden spoon, and once made great progress on the road of financing, and now it has entered the point of not being able to pay employees' wages. In the past two years, successive sprints to the U.S. stock market and A-share failures have exposed the company's problems. The tide of capital receded, and the unobstructed royole was clearly seen.

A Royole supplier source revealed to Caijing Tianxia Weekly that in early 2021, after the last execution, the cooperation between the two sides was terminated.

At the end of February 2022, due to rent arrears, Royole's headquarters building in Nanshan, Shenzhen, was withdrawn from one floor of office space, from the original two floors to one floor. Some employees broke the news on the Internet that Royole also once had a situation of arrears and disconnection.

Royole Building will fall, and Liu Zihong is still hoping to pull financing and find money. The lack of money is not the essence of the Royole problem, but the catalyst for exposing its essential problem.

"Royole constantly claims innovative achievements and large orders of various technologies, but the actual performance is pitiful, and it cannot even withstand the inquiries of relevant departments." An industry insider commented that it turns out that Royole relies on storytelling to circle money is not feasible.

A controversial business

Royole Technology is a controversial technology company.

Royole in the first two years of entrepreneurship, although it is not well known, but due to the uniqueness of technology and the luxurious founding team, it has won the favor of capital. Investor Xu Xiaoping, who once regretted missing Royole's early investment, described the royole founding team as "3 of the world's top scientists and the best talents in China".

Founder Liu Zihong and two Stanford alumni returned to China in 2012 to found Royole Technology, focusing on full-flexible displays and flexible sensors. One of the landing directions of these technologies is the folding screen mobile phone, which was unimaginable at the time.

Flexible screens are considered by the industry to be the third technological revolution in the field of semiconductor displays. The leading companies in this field are all large companies such as Samsung and LG that are well known to everyone.

A startup stepping into a mature and giant track is usually extremely unlikely to succeed, but Royole has its uniqueness. In terms of flexible screen implementation technology, Royole bypassed the LTPS (low-temperature polysilicon process) technology route represented by Samsung, and created its own ultra-low temperature non-silicon process integration technology (ULT-NSSP).

Royole claims that its technology can shorten the process, significantly improve the yield, and significantly reduce the input cost and production cost of the production line.

This was considered at the time to be the first time that a Chinese company had led a foreign traditional display industry giant led by South Korea's Samsung in a major technological breakthrough. Coupled with the wide range of product applications in the flexible electronic technology industry, the industry generally believes that it contains a huge market capacity. As a result, Royole was able to make great strides on the road of financing.

In 2013, IDG invested tens of millions of dollars in Royole. Since 2015, CITIC Capital, Shanghai Pudong Development Bank, China CITIC Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China, China Merchants Bank, and Hong Kong AMTD Group, including Li Ka-shing's Hong Kong AMTD Group, have all entered royole's capital list, and by the time Royole completed the E+ round of financing in August 2018, its valuation had reached US$5 billion.

Royole along the way, the lineup of capital is getting more and more grand. Entrepreneurship is a lifetime, but this law does not seem to exist here in Royole. With the help of the concept of flexible screen with full of scientific and technological sense, it has embarked on an enviable capital route.

Moreover, many institutions have great confidence in Royole. For example, Shenzhen Venture Capital alone has invested billions of yuan in Royole for three consecutive years.

In those years when it was not bad money, Royole also made an extraordinary move in the investment layout. In June 2018, Royole put into operation the world's first fully flexible display production line in Shenzhen, with an investment of up to 11 billion yuan. The flexible screen production base, which covers an area of 100,000 square meters and a construction area of about 400,000 square meters, was put into construction in 2016 and announced mass production in 2018.

According to Liu Zihong,Royole only took two years from 0 to 1. For the flexible display industry, which is quite technically difficult, Royole Technology has truly realized a large investment and a "great leap forward".

After mass production in 2018, Royole entered the stage of "from N to N+", which is what we usually call the product landing stage. This also means that Royole needs to move from a precarious start-up company to a mature and reliable large company. Relying on capital transfusion alone is not a good enterprise, and Royole also needs to learn self-hematopoiesis.

At its peak, Royole had a team of about 2,000 people, mainly technical personnel, and had 4 R&D bases around the world, which has shown a hint of the style of a big factory.

However, in contrast to high financing, high valuation and high growth, many people in the outside world evaluate Royole as "selling concept", calling it PPT Company. The reason is that mobile phones are the most important landing scenes for flexible screens, but not many mobile phone manufacturers are willing to cooperate with Royole to purchase Royole screens. As of 2021, only one mobile phone company in ZTE has reached a strategic cooperation with Royole.

Royole imagined a large number of multi-scene landings, but did not arrive as scheduled, which eventually led to its fall into the whirlpool of controversy. The display industry is a long cycle, high risk, slow return, and the domestic long-term catch-up state of the industry, Royole in the publicity of the high profile has become a double-edged sword.

A veteran of the mobile phone industry once told the "Finance World" weekly that the low yield of royole screens is the most fatal problem. "Technology is not an advantage," the person said, "energy production is." ”

In October 2018, Royole took the lead in releasing the world's first folding screen mobile phone before Samsung and Huawei, but royole's folding screen mobile phone sales were dismal, and many people did not even know that there was such a brand of mobile phones.

Due to customer and production capacity limitations, royole technology's sales scale has been very small. From 2020 to 2021, Royole has successively tried unsuccessfully to impact U.S. stocks and listings on the Science and Technology Innovation Board. Among them, its financial situation and operating income have been questioned a lot.

Compared with the proposed fundraising amount of 14.4 billion yuan, Royole's revenue and profit are dismal. The corporate prospectus also shows that Royole has many practical problems such as "continuous loss", "lack of hematopoietic ability" and "mediotic product sales".

According to the prospectus, in 2017, 2018 and 2019, Royole's revenue was 64.7267 million yuan, 109 million yuan and 227 million yuan, respectively, with a compound revenue growth rate of 87.3%. However, at the same time, the loss continued to expand, and the net profit during the three-year period was -359 million yuan, -802 million yuan and -1.073 billion yuan, respectively. During the same period, cash flow from operating activities was -358 million yuan, -611 million yuan and -810 million yuan, respectively.

In order to raise funds, Royole Technology will have the only land use right mortgage, subsidiary Royole display equity pledge, part of the equipment mortgage and part of the patent pledge for the bank to apply for loans, these pledged assets are important production and operation assets of Royole Technology.

"With so little revenue, can I file an IPO?" A person in the semiconductor field once complained to the "Finance world" weekly, "For this sales growth rate, I lost so much money." ”

Enter an irreparable situation

For Royole, the original route is a huge challenge, and there is no experience to learn from. Liu Zihong also described the process as "digging a hole in the ground with a flashlight." But putting aside the difference in technical routes, in fact, as a layman and head mobile phone manufacturer, Royole's ability to grasp the consumer electronics market is also far from the same.

In terms of customer accumulation, because unlike well-known manufacturers such as Samsung and BOE, which have accumulated B-end resources over the years, Royole's road to livelihood is more difficult, and it has to produce and sell mobile phones at the same time as producing and selling screens. The latter is undoubtedly a lot of "pits" for Royole, which has never had experience in mobile phone production and marketing.

In the B-end business, according to Liu Zihong's disclosure, Royole currently has more than 500 enterprise-level customers around the world, including mobile smart terminals, intelligent transportation, sports fashion, advertising media, smart home, education and office and other fields. But he himself admits that at this stage, it is more about building an ecological and education market with partners.

As the first company to launch a folding screen mobile phone, Royole's folding mobile phone product sales are pitiful, and they are far behind Samsung and Huawei.

At present, Royole's products in the Tmall flagship store, the high sales volume is still a smart handwriting book. The folding screen mobile phone that best reflects and represents its core competitiveness has not sold well in the store. From the perspective of the market, folding screen mobile phones still have fatal shortcomings such as screen fragility and obvious creases, and are still stuck in the gimmick stage.

The lack of hematopoietic ability is also a problem that Royole has been facing.

Liu Zihong once said that a forest can be seen behind the flexible display, but now the market is only opening a window. For Royole, the time left for its self-help is running out, and this window is about to be closed.

"Royole is one of the representative companies that like to build factories and buy equipment," a technology industry analyst explained to Caijing Weekly, "I am referring to negative cases." Entrepreneurs must remember that money can only be spent on the cutting edge. ”

What he means is that the difficulty of trying to create a new industrial chain is not within the scope of the startup's ability. And Royole just did something beyond the scope of his ability, and problems followed, making it step by step to a situation where it was difficult to reverse the fate and save the situation.

Royole employees are "fleeing" in large numbers. According to media reports, the size of Royole's personnel has been rapidly reduced from 1800 people to about 700 people. The above-mentioned departing employees are also one of those who have recently fled Royole. The other party told the "Finance world" weekly that the employees who are still sticking to it are either helpless or have the illusion of being able to get additional compensation.

Royole has promised several times that it will give different degrees of cash compensation on the basis of the deferred salary. But at present, it has not really been implemented.

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