Hold on to that lifeline.
Text: "Chinese Entrepreneur" reporter Tao Tao
Editor|Li Wei
Header image source: Visual China
At the end of 2023, the warm Shenzhen experienced a cold wave, with the temperature plummeting from 30°C to 5°C.
Located in the display base of Royole Technology in Longgang District, Shenzhen, the chill is even more real - Royole Technology, a once-popular unicorn company, has once again fallen into a storm of unpaid wages.
"From the late stages of pregnancy to the end of lactation, I didn't get a single salary, and I didn't even get paid by the government's maternity allowance company. Cong Yue said to "Chinese Entrepreneur". At the beginning of this year, she returned to Royole after maternity leave, "breastfeeding while working, and doing a lot of work", but she never received a salary.
Hou Lei, a staff member of a Royole supplier, told China Entrepreneur: "Royole owes tens of millions of yuan in debt to our company, but the amount of debt is larger than ours, there are banks, and Baoye Group, which is engaged in infrastructure. ”
Zeng Zhenglong, a veteran employee who has worked in Royole for several years, has not received his salary for a year, and Royole currently owes him more than 100,000 yuan in salary. Many Royole employees, including him, rent houses in Shenzhen, and some have car loans. On December 25, more than 100 Royole employees, including Zeng Zhenglong, pulled banners in front of the company and went on strike to demand wages.
Zeng Zhenglong said: "It's almost the Chinese New Year, and our appeal is to get our salary before the Spring Festival. ”
Royole employees went on strike to demand wages. Source: Interviewee
According to public information, Royole Technology, a fully flexible screen manufacturer, is a pioneer in the global flexible technology industry, which has developed ultra-low temperature non-silicon process integration technology, and used related technologies to develop flexible screen mobile phones and other products. On October 31, 2018, Royole released the world's first foldable mobile phone, FlexPai, ahead of Huawei, Xiaomi and other major mobile phone manufacturers.
Founded in 2012, Royole has received 13 rounds of financing in the nine years to 2021, including Shenzhen Venture Capital, IDG Capital, and Songhe Capital, with a maximum valuation of more than 50 billion yuan. However, after two failed sprint IPOs, at the end of 2021, Royole was revealed to be in deep financial difficulties, and this problem has not been effectively solved.
Tianyancha shows that Shenzhen Royole Technology Co., Ltd. has been a dishonest company publicized by the Supreme People's Court, and has been listed by the court as a restricted high-consumption enterprise, and has submitted as many as 46 applications for related companies restricting its high-consumption. Up to now, Shenzhen Royole Technology Co., Ltd. has 18 pieces of information on the person subject to execution, with a total amount of more than 2.9 billion yuan.
Royole has entered a debt-ridden winter of life and death, but Liu Zihong, the founder and CEO of Royole Technology, and all parties are still actively saving Royole. A person close to Liu Zihong told China Entrepreneur that Royole has a lot of things to do, but they can't be made public, and Shenzhen is also helping to coordinate it.
"Royole still has more than 3,000 patented technologies, it is a pity not to save it; second, Shenzhen's previous support for Royole technology is very large, if you don't save it, the sunk cost will be very high. Hou Lei revealed.
In the first half of this year, Royole employees found that Liu Zihong was often busy meeting bigwigs from all walks of life in the office. "It should be an investor, and at that time I still heard the rumors, and a salary may be paid at the end of June. An employee revealed to China Entrepreneur.
However, Royole Technology's ambition is not at the right time, as well as Liu Zihong's stubbornness in his personality, so that Royole and opportunities have passed by repeatedly. From a timing point of view, Royole was also a little bit unlucky.
In the past 5 years, the scale of the flexible screen market has grown rapidly, and in 2019, the global sales of flexible organic screens reached 14.5 billion US dollars, and it is expected that by 2025, the global sales of flexible organic screens will double to nearly 30 billion US dollars. "If Royole can hold on a little longer, the mobile phone flexible screen market will continue to expand, and Royole will be able to get a piece of the cake no matter what. Cong Yue sighed.
Source: Visual China
Under the current circumstances, even if it tries to turn the tide, it is difficult for Royole to regain its glory.
Long wait
"The majority of Royole's 2.9 billion foreign debts are from banks, followed by Baoye Group, which is engaged in infrastructure construction, with an estimated amount of hundreds of millions of yuan. There is a law in the state that for the company that builds the factory to encounter debts, it does not need any legal formalities, and it has the priority to enforce the factory funds by default. Hou Lei told "Chinese Entrepreneur".
However, for Hou Lei's company, it is relatively late to file a lawsuit, and it will be more difficult to recover the debt, and the amount of debt is a drop in the bucket compared to banks and infrastructure companies.
"In the early days, before Royole encountered a debt crisis, it gave us a normal performance contract. Since the termination of the listing and the problems in the capital chain, Royole has not paid us for the contract. Hou Lei sighed, "The current situation of our company is like waiting for a prisoner." ”
For Royole's internal employees, the haze that hangs over the company will cause a tornado on individuals.
This year's unpaid salary turmoil has been the second impact on Royole's old employees. As early as the end of 2021 to April 2022, Royole owed employees half a year's salary due to cash flow difficulties, and it was not paid until early May 2022. "At that time, all the employees' salaries were made up, and the month's salaries were also issued, and everyone thought that the company had ushered in the dawn. Cong Yue sighed.
Recently. At the end of 2022, Royole's salary payment began to be discounted again.
According to Zeng Zhenglong, at present, the company has a total of 200~300 employees, and a total of more than 41 million yuan is owed to employees. ”
"Royole's maternity allowance was originally to return to the unit to apply for and approve after taking maternity leave, and after the company received the government subsidy, it would be issued at the next salary payment. Cong Yue said, but because Royole has stopped paying her salary for a whole year, the maternity allowance applied for during this period has not been issued.
This year, Cong Yue's family bought a house, but it was not delivered, and she felt more and more psychological pressure on her back every month of mortgage and rent, and she felt that the psychological pressure was getting bigger and bigger: "I can't let my family bear it, and the salary will not be paid before the Spring Festival, and I will go to find a job after the holiday, otherwise the loss will be greater." ”
According to Cong Yue, this year, the company laid off a group of colleagues, and she thought she had escaped because of breastfeeding: "The compensation clause signed between the laid-off colleagues and the company is N, not N+1, but now they haven't gotten a penny." ”
Zeng Zhenglong, who rented a house in Shenzhen and had not made any income for a whole year, what he longed for most was to get the belated salary before the Spring Festival and go home for the New Year.
Power Grind Crazy
Looking back at the past three years, the demarcation line of the crisis that Royole has encountered today is that the listing has run aground and lost its "ammunition".
At the end of 2020 and the beginning of 2021, Royole Technology planned to go to the United States and A-share listing. In the prospectus, Royole Technology mentioned that from 2017 to the first half of 2020, Royole Technology achieved revenue of 64.7267 million yuan, 109 million yuan, 226 million yuan and 116 million yuan respectively, with a revenue of more than 500 million yuan in three years, but a cumulative loss of 3.2 billion yuan. At that time, Royole's cash flow situation was not optimistic. The net outflow of the company's operating cash flow reached 358 million yuan, 612 million yuan, 811 million yuan and 386 million yuan respectively within the above time line, and the liquidity pressure continued to increase.
Continued losses and negative cash flow have directly led to Royole's high debt. Royole has been trying to save itself, and multiple forces have also intervened.
According to Hou Lei, Zhao Hong, the former vice president of Lenovo Group, who was appointed in 2021, was appointed as the COO of Royole, and got a large order contract of 600 million yuan in the second half of the year.
On November 10, 2021, Royole announced the contract. According to the agreement, Royole will provide customers with flexible OLED display modules independently developed and produced, which will be shipped one after another in 2022 and all orders will be delivered within two years. Later, however, the delivery of the order appeared to be stranded.
Liu Zihong. Source: China Attempt Library
Hou Lei also told China Entrepreneur that until the end of 2022, Liu Zihong had always enjoyed high voting rights on Royole's board of directors, with different rights with the same shares as other shareholders. That sparked disagreements with potential investors, who backed down a year ago in an effort to attract capital injections. ”
Zeng Zhenglong recalled that in the past year of salary arrears, every two or three months, the company would come with some good news, such as the company's progress in financing, but in the end there was no news.
In the first half of 2023, Cong Yue heard that Liu Zihong was communicating closely with industry bigwigs, and at the end of June, the company's financing was expected to land, and a salary would be paid soon. But then the financing did not materialize.
In April 2022, Liu Shuwei, a researcher at the China Enterprise Research Center of the Central University of Finance and Economics and an independent director of Royole Technology, also widely called for multiple parties to save the fate of Royole, believing that "the three founders of Royole Technology all have high-end educational backgrounds, and they master the world's leading flexible technology, but they lack experience in how to develop the market and ensure the company's sustainable operation, which is a common problem for most high-tech enterprises."
Shenzhen is also saving Royole Technology. Hou Lei learned that in August 2023, Shenzhen set up a special team for Royole Technology, hoping that Royole could introduce state-owned assets and revitalize enterprises. However, there has been no follow-up so far.
Hou Lei analyzed that Shenzhen will choose to save Royole Technology, mainly because of many considerations: "The government has a lot of support and investment in the early stage, and the sunk cost is relatively high, hoping to save local enterprises; Royole has its own technical route and holds so many patents, which is worth saving; Royole has also brought some scale effects to local enterprise clusters, and for the remote Longgang District of Shenzhen, the entry of Royole Technology Display Base has brought a positive effect to the investment attraction of the park." ”
hanging in the balance
Although many forces have been trying to save Royole, it has been short of money and has repeatedly missed development opportunities.
"Royole is stuck in the capital quagmire, probably because Liu Bo (Liu Zihong) understands technology more than business. Cong Yue analyzed.
Royole explained in its prospectus at the end of 2020 that the company's cumulative loss of 3.2 billion yuan lies in the fact that the product "has a small sales scale and requires a lot of investment in research and development".
According to the prospectus, in terms of research and development alone, Royole Technology's expenses from 2017 to the first half of 2020 were 160 million yuan, 488 million yuan, 586 million yuan and 583 million yuan respectively, and the R&D expense rate was as high as 247.87%, 447.88%, 258.25% and 502.01% respectively. The proportion of R&D investment in 3 years to revenue is as high as 308.17%.
In terms of specific sales volume, in 2019, Royole Technology sold 52,747 all-flexible displays, and 22,136 in the first half of 2020. BOE, which has the largest market share in China, has sold 17 million pieces in 2019 and more than 80 million pieces in 2022.
The large order of 600 million yuan in 2021 is a typical case. Hou Lei told "Chinese Entrepreneur": "It is said that the other party gave an advance payment in that contract, but Liu Zihong did not use it to put into production, but used it to repay debts, the funds could not be rolled in time, and the connections were also injured, Zhao Hong stayed for a few months and left, which is a pity." ”
"I think there is also a problem with Royole's market positioning. If, like BOE, it only acts as a supplier or outsources hardware, Royole should be able to get rid of a lot of baggage. The quality of Royole's hardware often doesn't keep up with the software. Cong Yue said.
And many people feel that Liu Zihong's personality is also to blame for not being able to get out of the quagmire.
From the top student of the local college entrance examination to the Xi experience of Tsinghua undergraduate and Stanford master's and doctoral students, coupled with innovation awards, in the eyes of Royole employees and suppliers close to Liu Zihong, he has a kind of arrogant temperament, and he will not easily compromise on many things.
From the end of 2020 to the beginning of 2021, Royole Technology withdrew its application for listing in the United States, switched to A-shares, and later withdrew its A-share application, which is one of the strong evidence. "At the beginning, it was mainly because Liu Zihong felt that the valuation given to Royole by the brokerage was not enough, so he did not plan to go public. In Hou Lei's view, the stock market situation at that time was much better than now, in fact, it is still very likely to live well.
Hou Lei also revealed that among the founders and partners of Royole who had gone all the way with Liu Zihong, Fan Junchao had left Royole to start a business on his own, and the contradictions between several others with Liu Zihong had become public.
"Liu Zihong will never hit the south wall and never look back. Hou Lei mentioned that perhaps it was precisely because he was forced into a desperate situation that at the end of last year, in order to succeed in the next round of financing negotiations, Liu Zihong finally made concessions in the company's decision-making power. This may well be Royole's last chance.
Cong Yue, Hou Lei, and Zeng Zhenglong are pseudonyms in the article