Recently, the application for bankruptcy review filed against Shenzhen Royole Technology Co., Ltd. and its subsidiaries, Shenzhen Royole Electronics Technology Co., Ltd. and Shenzhen Royole Display Technology Co., Ltd., has attracted widespread attention from the outside world.

In response to this, Royole Technology issued a statement today through its official WeChat public account, stating: "The company has never voluntarily applied for bankruptcy, nor has it entered into bankruptcy proceedings; the enterprise is still in operation at present."

Royole stated, "The company has never voluntarily applied for bankruptcy, nor has it entered into bankruptcy proceedings; the enterprise is still in operation at present."

Regarding the source of the bankruptcy rumors, Royole explained, "The recent rumors originated from an individual who recently left the company, who filed for bankruptcy review under the guise of an option settlement dispute. The company has always placed great importance on safeguarding the legal rights and interests of its employees. The company will actively and prudently handle the relevant matters in accordance with objective facts and in compliance with laws and regulations."

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In fact, this is not the first time Royole has been caught up in a whirlwind of public opinion.

01

Valuation of $6 billion, Royole's moment in the spotlightAfter graduating, Dr. Liu Zihong, the founder of Royole Corporation, joined IBM and became a consultant-level engineer and research scientist at the company's Global Research Center, working on the research of electronic flexible screens. With an impressive resume and the prestige of a renowned university, Liu Zihong, after more than three years of work, chose to start his own business.

In 2012, Liu Zihong, along with two alumni from Tsinghua University and Stanford University, Yu Xiaojun and Wei Peng, officially established Royole Corporation in Shenzhen and Silicon Valley simultaneously with the help of angel investor Yang Xiangyang. Due to its high starting point and international perspective, Royole quickly gained the favor of a number of capital investors. In just two years, Royole released the world's thinnest full-color AMOLED flexible display with a thickness of only 0.01 millimeters and a curling radius as small as 1 millimeter, as thin as a cicada's wings.

The success of the "Cicada Wing Screen" propelled Royole's valuation to rise, and Royole began to attract the competition of various capital investors. From 2017 to 2019, within just three years, Royole Corporation received seven rounds of financing, with companies such as IDG, Shenzhen Capital Group, and Songhe Capital participating in the investment. As of May 2020, Royole had completed a total of nine rounds of equity financing totaling 6.197 billion yuan.

In 2020, Royole Corporation made it to the Hurun Global Unicorn List and topped the "2020 China Science and Technology Innovation Enterprise Top 100 List" published by "Chinese Entrepreneurs." That year, Royole Corporation's valuation reached 6 billion US dollars; with the support of capital and the increasing speed of its own spending, Royole Corporation initiated a listing.

02

Deeply involved in the whirlpool of rumors of losses, unpaid wages, failed IPO, borrowing, and bankruptcy

At the beginning of 2020, Royole began to attempt a listing in the United States but later voluntarily canceled the plan. On December 31, 2020, just over a month after submitting the application for listing on the STAR Market, Royole Corporation voluntarily withdrew its application documents. A series of issues such as technology, production capacity, yield rate, and business model began to emerge, and Royole's competitiveness in the industry raised widespread doubts.

The prospectus shows that from 2017 to 2019 and the first half of 2020, Royole Corporation's operating income was 64.73 million yuan, 110 million yuan, 230 million yuan, and 120 million yuan, respectively; the net profit was -360 million yuan, -800 million yuan, -1.07 billion yuan, and -960 million yuan. Royole Corporation, which has been losing money for years, does not have the ability to "generate blood" itself, and the company's cumulative loss from 2017 to the first half of 2020 exceeded 3 billion yuan. Since then, Royole Corporation has been surrounded by negative news such as "unpaid wages" and "bankruptcy review."

Faced with huge losses, Royole Corporation explained that the product is still in the market expansion stage, with a small sales scale and a large amount of capital needed for research and development. However, since its establishment, Royole's screens have not appeared in any mainstream mobile phone manufacturer's products. At the same time, due to the persistent difficulty of Royole's products in breaking into the market and the increasing investment, investors began to lose confidence in Royole, and it became more and more difficult for Royole to raise money in the capital market. Public information shows that after obtaining the last F round of financing in May 2020, Royole has not announced any new financing news.During the Qingming Festival in 2021, Royole Technology directly granted its employees a three-month vacation. Various departments verbally communicated that "after the Qingming Festival, all employees will be on vacation for three months. The salary for April should be paid in full, while May and June will be settled according to the minimum wage standard. Social security for these two months will also be adjusted to the lowest base." Due to Royole Technology's long-term arrears in employee salaries or underpayment without taking the initiative to lay off staff, the incident continued to ferment, made headlines, and attracted industry-wide discussion and attention.

In 2022, as a once leading enterprise in flexible screen technology, Royole Technology's situation began to deteriorate rapidly, from planning to go public to falling into arrears of wages, all within less than a year.

On March 29, 2023, an employee of Royole Technology claimed that since September 2022, he had received five wage arrears emails within six months, all with roughly the same content: "The company's financing is progressing, funds will be in place soon, and wages will be paid immediately." According to his calculation, Royole Technology owes him nearly 100,000 yuan in wages. The employee also stated that the number of Royole Technology employees has dropped from 1,800 to 700. Additionally, some vice presidents and senior executives have also been affected by wage arrears. For management positions below the vice president level, the salaries owed in March of that year were paid in May, 50% of the July wages were received in September; the August wages were paid normally in September, and only 40% of the September wages were received in October. Since then, the payment of salaries has become increasingly chaotic.

Furthermore, information from Tianyancha also shows that Royole Technology has added two new equity freezing notices, with a total freezing amount of 3.116 billion yuan, from June 19, 2023, to June 18, 2026. The executing court is the Longgang District People's Court of Shenzhen, and the executed party is Shenzhen Royole Technology Co., Ltd. Reporters have combed through the information and found that Royole Technology has been the executed party five times within a month, and several subsidiaries have also been forcibly executed. In addition to forced execution, Royole Technology and its founder, Liu Zihong, have also been restricted from high consumption, becoming "deadbeats."

In February 2023, Tianyancha information showed that because Royole Technology failed to fulfill the payment obligations determined by the effective legal documents, it was listed as a dishonest executed person by the Shenzhen Intermediate People's Court and restricted from high consumption for the company and its legal representative and CEO, Liu Zihong. According to public information, Liu Zihong has been issued a consumption restriction order six times.

At the end of 2023, at the Shenzhen Longgang Royole Technology display base, a group of employees demanding their wages gathered, holding banners and shouting slogans, demanding that the company immediately pay the arrears. These employees stated that since November 2022, the company has not paid wages for a year. This once popular unicorn enterprise has once again been pushed to the forefront of public attention.

Although Royole Technology claims to still be in operation, its business activities have essentially ceased, and its consumer-facing business has also come to a standstill. Now, only a few employees remain in the company's factory area, with a small number of staff staying on to maintain equipment and other basic needs.

From being a star enterprise to potentially facing bankruptcy, Royole Technology's financial crisis has not yet passed.

03

The debate over flexible OLED screen technology routesIn fact, companies betting on flexible screens are not limited to Royole, but Royole has been unable to turn a profit, and some believe this is related to the choice of technology path. It is understood that flexible OLED (FOLED) displays are made by using OLED technology to create display devices on flexible plastic or metal films, with a basic structure of "flexible substrate/ITO anode/organic functional layer/metal cathode," and the light-emitting mechanism is similar to that of OLEDs on ordinary glass substrates.

The flexible OLED technology can be traced back to as early as 1990, when Heeger and others used the solution spin-coating method to form a conductive film of polyaniline (PANI) on the flexible transparent substrate material polyethylene terephthalate, using it as the transparent electrode of the device to prepare a light-emitting device.

Then, by 2008, there were flexible OLED displays on exhibit, such as the FOLED screens developed by the University of Electronic Science and Technology in China.

Royole's main focus is on flexible full-screen displays and flexible sensors. Unlike the mainstream LTPS technology route of Samsung, BOE, and others, Royole has independently developed the ULT-NSSP technology, claiming that this technology can greatly shorten the process, significantly improve yield rates, and enhance display effects.

What is LTPS (traditional low-temperature polycrystalline silicon)?

Low-temperature polycrystalline silicon (Low-Temperature Poly-silicon; abbreviated as LTPS) is a manufacturing process for the new generation of thin-film transistor liquid crystal displays (TFT-LCD). The biggest difference from traditional amorphous silicon displays is that LTPS has a faster response speed and offers advantages such as high brightness, high resolution, and low power consumption.

TFT-LCD liquid crystal panels are divided into two technologies: polycrystalline silicon and amorphous silicon. Currently, the mainstream TFT-LCD liquid crystal panels are primarily based on amorphous silicon (a-Si), with more mature related technologies. LTPS technology is the polycrystalline silicon film technology applied in flat panel display manufacturing.

During the encapsulation process of LTPS, excimer lasers are used as a heat source. The laser light, after passing through a projection system, produces a laser beam with uniform energy distribution, which is projected onto the glass substrate with an amorphous silicon structure. When the amorphous silicon structure glass substrate absorbs the energy of the excimer laser, it transforms into a polycrystalline silicon structure. The entire treatment process is completed below 600°C, making it applicable to general glass substrates.LTPS, with a transistor carrier mobility rate more than a hundred times higher than amorphous silicon technology, enables displays to have high brightness and high resolution characteristics, presenting superior picture quality. When used in laptops, LTPS panels consume less power, saving a significant amount of electricity.

In the field of flexible displays, the LTPS technology route has been extended from traditional LCD panels to OLED panels, with a long history and a relatively mature state. However, it also has certain shortcomings. For instance, while the low-temperature process environment is conducive to higher yields when manufacturing rigid OLED panels, the "low-temperature" environment can still affect the flexible materials in the production of fully flexible OLED panels, thereby impacting the yield rate.

What is LT-NSSP (Ultra-Low Temperature Non-Silicon Process Integration Technology)?

According to reports from Royole Technology and related media, traditional silicon-based materials limit the LTPS process, which cannot do without complex processes such as high-temperature dehydrogenation, ion implantation, and laser crystallization. Royole's ULT-NSSP route, which uses a new non-silicon-based material, not only improves many traditional setups but also eliminates these complex processes. It also reduces the number of exposure and development steps, resulting in a noticeably thinner and lighter fully flexible screen produced by the ULT-NSSP technology compared to LTPS technology. Since it uses non-silicon-based materials, the production temperature for Royole's ULT-NSSP technology only needs to be between 150℃ and 250℃, reducing material loss and significantly increasing the yield rate.

Liu Zihong emphasized, "ULT-NSSP is a completely new technological direction, with significant differences from the material system, process system, to circuit design, compared to low-temperature polycrystalline silicon technology. According to currently available data, the screen replacement prices for most brands range from 4,000 to 6,000 yuan; while the screen replacement price for Royole FlexPai is only 2499 yuan, achieving the lowest in the industry. ULT-NSSP greatly reduces the cost of fully flexible screens, promoting their large-scale commercial use."

It is understood that the main domestic supplier of AMOLED flexible screens used in folding screens is BOE Technology Group. BOE's flexible AMOLED shipments ranked second globally in 2019, and with a market share of 86.7%, it leads domestically. Its products are currently used in domestic major clients' Mate X series folding phones, Motorola Razr folding phones, etc.

Royole's products have not yet appeared in the market. Some analysts believe that the large number of manufacturers choosing LTPS technology has led to rapid iteration of related product patent technologies, and the yield rate and production capacity ramp-up are also fast. While Royole's technology has taken a unique path, it has also gradually lagged behind mainstream manufacturers in terms of products, yield rates, and technology.

04

Reasons for Royole Technology's DilemmaIn the field of flexible screens, Royole Technology can be said to have started early but arrived late to the party. It is widely believed that the main reasons are as follows:

Firstly, there are issues with yield and production capacity. Some analysts have pointed out that the technology of fully flexible screens is too complex, leading to a low yield rate for Royole. In 2019, this figure was only 36%. This fatal flaw is also the key reason why Royole cannot secure more orders. In 2022, Royole Technology claimed that the yield rate of its fully flexible screen wafer production line reached 81.6%, but in the eyes of industry insiders, the yield rate is acceptable, moderately above average, but still not high within the industry.

Secondly, there are financial issues. Since its establishment, Royole Technology, despite having a high starting point, has already encountered financial problems. Especially before initiating the listing process, Royole's financial situation had already shown signs of trouble, leading to the shelving of its plan to go public in the United States and the decision to raise 14.4 billion yuan on China's STAR Market. This indicates that Royole Technology is facing significant debt pressure. Moreover, Royole Technology has attempted to go public twice in the past two years, but both attempts were unsuccessful. These series of attempts not only failed to bring capital injection to the company but may have also exacerbated the company's financial predicament.

Lastly, there is the issue of market positioning errors. Royole Technology has been criticized for its mistakes in market positioning, not focusing on becoming a screen supply chain but instead choosing to enter the C-end product market. On one hand, this has dispersed the company's R&D efforts and funds, and on the other hand, it has affected shipments to downstream B-end customers. This strategic choice may have led the company to struggle to achieve expected returns in fierce market competition, thereby affecting its financial performance.

"Royole's technological approach indeed has its value, but in terms of the flexible screen industry, it requires cooperation between upstream and downstream to form an ecosystem in order to achieve a virtuous cycle of business models and technology. BOE and Samsung's technological paths have also undergone 20 years of development, investing hundreds of billions of yuan, to achieve today's results," said Lin Mu, but the boss (Liu Zihong) might be unwilling to cooperate with the industry chain and just wants to make it happen on his own. "This goal is indeed grand, but whether it can be successful in the end can only be left to fate."