Rou Yu in the cracks: It is not easy to save yourself, he has not saved anyone

Writing/Roasting

Edit/Tiannan

In the past ten years, Royole, which once had unlimited scenery, has entered the darkest moment: years of losses, financing difficulties, wage arrears, unsuccessful IPO... All of this is like a domino effect, making Royole Technology, which originally lacked "hematopoietic" ability, crumbling.

Fangmai, who has worked around Royole founder Liu Zihong for many years, is not surprising.

"At the beginning, most people were moved by Liu Zihong's story and followed him, and I was the same, only to find out after coming that the story was a story after all, watching the company from more than 1800 people to more than 700 people now." Fang Mai told the "Financial Story Club" without sighing.

In Fang Mai's eyes, "Liu Zihong is an extremely confident and even a little narcissistic person, he thinks that what he does is correct, and in private, he recognizes himself as a shoulder to shoulder with entrepreneurs such as Ren Zhengfei." But in fact, he is a very good scientist, but he is an entrepreneur who has not yet touched the door. ”

Recently, Liu Shuwei, director and researcher of the China Enterprise Research Center of the Central University of Finance and Economics, spoke out on his personal WeChat public account for Royole, the company that is an independent director, and the market was in an uproar.

On Weibo, many accounts "shouted from the platform" for Royole for the action, which attracted the ridicule of some netizens, "Royole has money to buy water troops, no money to pay wages."

Why is there a voice for Royole at this time? Fang Mai speculated, "Maybe some investors can't bear to see the company lose all their money, and pin their hopes on shouting loudly, hoping to cause the government to intervene?"

Why did Royole fall into the capital chain dilemma? The consensus is that the company's technical research and development results cannot find the application scenarios of the transformation landing, the lack of customers is not good at finding customers, and so on.

Should we save Royole, respect the will of the market, or wait for the government to take over?

Liu Zihong AB: A scientist who is good at storytelling and an entrepreneur who has not yet passed the test

At the beginning of its business, royole's fame was closely related to Liu Zihong's ability to tell stories.

In the long-winded media reports, Liu Zihong's story was widely circulated. As an employee of Liu Zihong's side, Fang Mai felt that he could recite it, "His story uses the same version, both internally and externally, many times. ”

Liu Zihong, a "scholar bully", was born into a civilian family, but his study and entrepreneurship have been repeatedly favored by fate.

"Of course, he rarely mentioned his origins, and every time the story began with the entrance to Tsinghua," Fang Mai remembered.

As a high-level returnee talent, Liu Zihong received a lot of respect from relevant departments at the beginning of his return to China.

At that time, Royole with its unique flexible screen research and development technology route (ultra-low temperature non-silicon process integration technology) in the industry quickly became popular, the media praised him. He was once named one of the "Top Ten Innovators of the Year" by Forbes, on a par with Tesla CEO Musk.

Investor Xu Xiaoping also made no secret of his appreciation for it. Because of missing Royole, Xu Xiaoping claimed that he was full of remorse, "Since I made an investment, a real missed project" and "Every time I see their good news, my heart is like a knife." The pride of being an angel investor was crushed to pieces. ”

Liu Zihong firmly believes that flexible electronic technology can be everywhere, so that all objects can become information carriers and human-computer interaction platforms, and realize the future application scenarios of "surface is screen, screen is media".

With a bright resume and the aura of scientists starting a business, it is naturally sought after by capital.

Since its establishment in 2012, Royole has gone through 13 rounds of financing in more than 9 years, with investors including IDG, CITIC Capital, Shenzhen Venture Capital, Songhe Capital, Cornerstone Capital and other more than 40 institutions, with a pre-IPO valuation of up to US$6 billion.

However, the story can attract investors, but it may not win the market.

Reviewing Liu Zihong's personal history, "not bad money" is the key word. Money comes too early, too much, too easily, and it is easy to affect the entrepreneur's judgment of the capital market.

On the other hand, this also makes Liu Zihong more dismissive of making "fast money".

Now Royole is in a dilemma due to lack of money, which may be related to Liu Zihong's lack of desire and reverence for money.

"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 called himself.

To be sure, there is nothing wrong with abandoning short-term interests and focusing on long-term value, provided that investors can continuously transfuse blood, especially in the capital-intensive track of flexible panels, entrepreneurs must measure whether investors are willing to accompany them for a long time.

For a long time, Royole's funds were abundant. Because the imagination space of the flexible screen drives investors to continue to be optimistic about this track and are willing to bet.

However, just as the coin has two sides, self-developed technology has made Royole once unlimited, but it is not "mainstream" technical route, and the low yield rate also makes it difficult to mass-produce on a large scale, let alone win mainstream customers.

Liu Zihong has claimed on many occasions that Royole adopts the relatively unpopular IGZO technology route, focusing on ULT-NSSP (ultra-low temperature non-silicon process integration) technology, rather than LTPS (low temperature polysilicon) used by domestic and foreign manufacturers such as Samsung and BOE.

In Liu Zihong's preaching, this set of plans can achieve higher yields with lower investment. However, industry experts say that the cost of the IGZO solution will indeed be lower, but the energy consumption is high, the stability is poor, and it drags down the yield.

From the yield point of view, Royole's yield rate in 2019 is only 36%, which will increase to 65% in 2020, while BOE's yield in 2020 will be 85%, which makes it difficult for Royole to squeeze into the procurement list of first-line mobile phone manufacturers. At present, its customers are mainly China Mobile, China Telecom, Louis Vuitton, Luzhou Laojiao, Gree Electric Appliances, etc., none of which are mainstream mobile phone manufacturers.

Breaking new ground also means that everything needs to start from scratch, and burning money is the first step. The flat panel display industry is already in the field of heavy investment, and there is a significant scale effect.

According to official information, Royole's sixth-generation flexible AMOLED production line costs 11 billion yuan and the annual production capacity is expected to reach more than 50 million pieces. Tens of billions of investment seems to be a lot of money, but compared with the investment of other panel manufacturers in the full flexible production line, the investment scale of this volume is obviously small.

By analogy, BOE spent 46.5 billion yuan to build a 6G flexible OLED production line in 2017; Vinoxon, a screen supplier of Xiaomi and Huawei, also invested more than 40 billion yuan in the flexible panel production line; and TCL Huaxing t4 production line planned to invest 35 billion yuan.

In addition, in the way of landing, Royole is also "obstinate, leaving no back road".

At present, the flexible screen is divided into a fixed curved screen and a fully flexible screen that can be freely folded. Fixed curved screen production once formed, has now been applied to the large-scale rigid mobile phone, full flexible screen can withstand hundreds of thousands of times of repeated folding, but the technical difficulty is higher than the fixed curved screen.

Nowadays, Samsung, LG, BOE and other panel suppliers have laid out fully flexible OLED production lines on the basis of the original fixed curved screen.

But Royole is "All in" full of flexible screens - so lonely, the winner wins, the loser is in great trouble.

Not only that, Liu Zihong has been engaged in technical research for a long time, lacks production line management experience, and the senior management team is the same, shorter than the supply chain, resulting in Royole's long-term failure to get out of the quagmire of idle production capacity.

As early as June 2018, Royole has put into production the first six-generation full-flexible display production line. However, in 2018, 2019 and the first half of 2020, due to sluggish sales and increased inventory, Royole's capacity utilization rate was only 15.1%, 31.2% and 5.3%.

Although it is more common for the manufacturing industry to pre-emptively lay out redundant capacity, such a high idle rate is obviously unreasonable - the bleeding does not return, and it will inevitably lead to the rupture of the capital chain.

Royole team also has a short board is weaker than sales, buried in the screen, do not look at the market.

At present, Royole's business is divided into two parts, B-end and C-end, selling flexible screen solutions and flexible screen mobile phones respectively.

At the B-end, Royole has cooperated with Airbus, LVMH, Luzhou Laojiao, etc., and signed a number of memorandums of understanding and other agreements, which are said to be used in the aircraft cabin, luxury handbags and even wine bottles.

Although the partners also praised Liu Zihong. For example, "It is not a simple Chinese feeling, but a world feeling." Wu Yue, president of LVMH Group Greater China, believes that Liu Zihong is not starting a business for money.

But the cooperation agreement and friendship touting did not bring more orders to Royole. Royole's revenue is mainly supported by some unknown Shenzhen companies, while companies such as Airbus have contributed very little orders.

On the C side, Royole released the world's first folding screen mobile phone in October 2018, but due to factors such as quality, channels, and price, sales were not ideal.

If your own sales are not effective, the reasonable choice is to cooperate with the mobile phone manufacturers and persuade the latter to choose their own products. But unfortunately, Royole failed to do this, and Liu Zihong had an unshirkable responsibility.

Three months after Royole released the folding screen mobile phone, Royole vice president Fan Junchao sent a long article in the circle of friends to rebuke Lin Bin, president of Xiaomi, accusing Xiaomi of lying and having problems with values, and public opinion was in an uproar.

Liu Zihong did not try to calm the situation, but instead shouted, "No one offends me, I do not offend, and if a person offends me, he will be punished from afar." This remark also blocked the possibility of royole and Xiaomi cooperation.

Up to now, the domestic head mobile phone manufacturer Huami OV has issued folding screen mobile phones, but none of them have adopted Royole's solution.

It is lamentable that even if the company is in trouble now, Liu Zihong still prefers to bend. He said in the circle of friends that "don't expect to send charcoal in the snow" and said that he would never give up.

"Liu Zihong does not have such a good popularity in the industry, and it is impossible to put down his body and take the initiative to seek external support." Fang Mai guessed.

Although the backbone is important, it is inevitable that there is a little less flexion and extension that entrepreneurs must have, as well as the compromises and concessions made to achieve the goal.

Flip or roll over, save yourself or save him?

IPO folded, and now it is deeply in the capital winter, but Liu Zihong, who advocates the "Forrest Gump spirit", may continue to confirm the possibility of "unique technology" to capital.

In fact, capital is more of the icing on the cake, rarely sending charcoal in the snow, leaving Royole and Liu Zihong with few opportunities for self-help.

Optimistically, the flexible screen is still in the ascending stage of the track, and the Royole plate is small, the burden is not heavy, and there may be some possibilities for turning over.

From a global perspective, according to CINNO Research, the demand for flexible screens in the market is still increasing. By 2024, the global demand for flexible OLED for folding smartphones will reach 38 million pieces, with a compound annual growth rate of about 141%.

Honor CEO Zhao Ming also drew a "big pie", believing that ordinary mobile phones and folding screen mobile phones will become the mainstream of smart phones, predicting that the folding screen mobile phone market can grow 10 times in 2022.

Judging from public information and media reports, royole mass-produced products and applications are rarely seen, and it is inevitable that the outside world will question its products and production capacity.

"In the past few years, when speaking to the outside world, Liu Zihong avoided questions about yield on the grounds of trade secrets", only vague replies, such as "reached a fairly good level in the industry", "the industry is far ahead", etc., "Specific data has not been released until recently", Fang Mai revealed.

Yield and production line size are the two key indicators for evaluating the level of manufacturing.

The so-called yield rate is the product qualification rate, which is directly related to the cost and feasibility of mass production. According to the prospectus data, between 2018 and 2019, Royole's annual design production capacity was only tens of thousands, and the existing production capacity was completely unsaturated, and it was difficult to call it a large-scale "mass production".

In the case of high inventory backlog at the sales end, Liu Zihong insisted on going his own way and still expanded the production line in a big way.

According to its prospectus, of the 14.4 billion yuan raised by the company's IPO plan, 4.939 billion yuan will be used to upgrade the second-phase production line, hoping that "after increasing investment, production capacity will help more customers to open sales and form a virtuous circle of 'sales increase - production expansion - price reduction'".

But the mature players who are the first on this track may not leave a gap for Royole.

Taking BOE as an example, its 2021 financial report shows that BOE invested 12.436 billion yuan in research and development throughout the year. According to Chen Yanshun, chairman of BOE, the shipment target of BOE flexible OLED screens in 2022 is more than 100 million pieces, basically achieving full production, and the shipment volume in 2021 is 60 million pieces.

But even so, the current BOE flexible screen production line is still in a state of loss.

Compared with BOE, the gap between Royole and BOE is still quite large.

In addition, mobile phone screens belong to industrial standards, Royole as a start-up company, even if it can achieve large-scale mass production, its product quality stability may not be better than the giant.

Therefore, if Royole wants to continue to obtain the blood transfusion of the capital market, the story to be told should not be the old-fashioned innovative technology, but the mass production ability and market recognition, which is the only way for it to regain its capital confidence.

At the most dangerous moment, Liu Zihong's best choice may not be a "never give up" statement, may wish to take a decisive step back, invite professional managers, help reorganize the business; and Liu Zihong holds more than 70% of the voting power, and there is no need to worry about outsiders occupying the magpie's nest.

Retreating behind the scenes, focusing on research and development, while stabilizing the military's heart and rallying the team, may be more suitable for Liu Zihong's role.

As for whether the government should lend a helping hand and endorse Royole Financing, the industry has different views.

Liu Shuwei gave two rescue plans, the first is that companies related to flexible technology have become strategic investors in Royole Technology, and second, the government has come forward to help Royole Technology solve the shortage of funds and help Royole introduce strategic investors.

However, for Liu Shuwei's proposal, there is a lot of controversy in the industry.

Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University International United Business School, believes that "now the market is not optimistic about Royole, in the final analysis, it is the risk judgment made independently by market players, can the government solve all problems?" Further, the government's endorsement creates moral hazard, and who bears the risk of regurgitation of government credit once the problem is not resolved? ”

At the same time, Pan and Lin pointed out, "We have moved from a planned economy to a market economy, from regulation to competition, which is itself to improve efficiency." When the government can't distinguish between bad money and good money, let the market competition distinguish. Whether the technology is good or not, the yield rate is not high, and it does not meet the market demand, it should be tested in a fair and orderly market competition, rather than judged by the government. ”

Self-help or his rescue, no matter what kind of choice, tests Liu Zihong's business wisdom and mindset pattern, and what can save Rouyu is not an "innovation story" that cannot be landed for a long time.

As for FangMai, who has been owed wages for several months, he has not had much expectation, "Find the right opportunity, I will leave, and now I just haven't left."

(The interviewee Fang Mai in the article is a pseudonym)