How much water is there in the US$3 billion valuation? Will Royole’s bubble burst?

There are not many well-known unicorns in the manufacturing industry. One of them is CATL, which has already reported a listing with a valuation of 130 billion yuan, and the other is Royole, which is valued at 3 billion US dollars.

Unlike CATL, which has sales of over 10 billion yuan and profits of over 1 billion yuan, Royole seems to have no sales.

In the popular version, the story of Royole usually starts like this:

Liu Zihong, a PhD student at Stanford who was researching flexible screens, joined IBM after graduation. He started preparing to start a business in flexible screens at the end of 2011. After experiencing various negative reviews, he finally received investment from well-known capital and settled in Shenzhen in 2012. Since then, the valuation has continued to rise, the reputation has continued to grow, and various honors have been won, making it one of the most well-known companies in the industry.

An excellent project always has to have impressive setbacks to highlight the excellence of the project. Liu Zihong, who has been a top student since childhood, naturally had smooth sailing in his studies. The only thing he can talk about is the setbacks he encountered during financing.

As a result, the story of "how Mr. Xu Xiaoping of Zhen Fund missed out on Royole and how he regretted it" has been constantly forwarded and narrated, and has become a strong testimony to Royole's excellence.

In recent years, the most news about Royole, apart from Xu Xiaoping of Zhen Fund, is that Royole has developed a new product and obtained a certain amount of financing. Apart from that, there is no exciting progress in business. It seems that Royole exists to lead academic innovation rather than commercial success. And what we hear most in news reports is what Royole has developed, rather than what kind of performance Royole has achieved.

Royole's products have extended from the earliest flexible display screens to flexible sensors and VR products Royole Moon.

Flexible displays and flexible sensors are important components of flexible terminal products. However, there are currently no mature flexible terminal products that can be mass-produced in the world, so naturally the revenue from this business is equivalent to nothing.

VR products were very popular in 2015, which is why Royole entered the VR market. However, the true nature of the VR market has been proven in the past two years.

As a manufacturing unicorn valued at US$3 billion, Royole's business revenue is really a bit low.

The first project that Royole wanted to work on was flexible screens.

At that time, Royole's idea was to find a panel factory that could provide technical solutions, with Royole providing the solutions and the panel factory doing the OEM work. However, it eventually discovered that this approach was not feasible.

In order to control the production of flexible screens, Royole decided to set up its own panel production line.

According to public information, in July 2015, Royole built the first ultra-thin flexible display module and flexible touch product mass production line in Longgang, Shenzhen, with the A production line designed to produce 1 million pieces per month. Perhaps thinking that this was far from enough, at the end of 2015, Royole announced that it would invest in the construction of the world's first 6th-generation large-scale fully flexible display mass production line, with an investment of over 10 billion yuan and a designed production capacity of about 50 million pieces per year.

It has to be said that Royole has fallen into a huge pit.

Panel investment has always started at the tens of billions level, which is a capital-intensive and technology-intensive industry. According to Royole's 50 million pieces/year volume, let's see how much investment is needed:

BOE, Shenzhen Tianma, Guoxian, Truly, CSOT, and Hehui have all deployed flexible OLED screens. As the leader of the domestic display panel industry, BOE's investment in a 6th generation flexible AMOLED production line with a designed capacity of 48,000 pieces per month has reached 46.5 billion yuan.

Royole claims to have invested 10 billion yuan in its panel production line. Is the money enough?

In September 2017, Royole announced the news of its D round of financing. Royole held a signing ceremony for bank-enterprise cooperation with five banks including Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, China CITIC Bank, and Ping An Bank. Together with part of the previous D round of equity financing, Royole Technology's D round of financing totaled US$800 million.

In the D round of financing, Royole Technology raised approximately US$240 million in equity financing, with participants including WARMSUN Holding Group, Hanfor Capital, Pudong Development Bank, China Overseas Shengrong, and Tanshi Capital; and approximately US$560 million in debt financing, with participants including China CITIC Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China, Ping An Bank, etc.

The company raised $560 million in debt financing, all from banks. Can Royole pay it back?

Perhaps the serious expressions of the bank representatives at the press conference explained something.

In January 2017, Royole's annual meeting made headlines again. Not only did it give out Royole-X, Royole Moon and other awards, but it also awarded outstanding employees with multiple Audi and Mercedes-Benz cars and nearly one million in cash.

As a company with almost no income, it lavishly gave out various big prizes and cash at the annual meeting. I wonder if this kind of generosity is more luxurious than that of Ningde New Energy, which earns more than one billion yuan a year.

Over the past five years, Royole has always focused on its ability to make flexible screens with a thickness of 0.01mm, the thinnest in the world. Liu Zihong even used the example of "buildings on tofu" to demonstrate the difficulty of mass-producing the thinnest flexible screens.

However, everything has to be done first and then done well. If we don’t even know what the form of flexible terminal products is, what’s the point of making them the thinnest?

In other words, if we require a building to cooperate with tofu and build a building on tofu, wouldn't it be difficult for the building?

The manufacturing industry has its own development logic and industrial laws, and no industrial company can escape these laws. Constantly making up stories to obtain funds may work in the Internet industry, but it is definitely not possible in the manufacturing industry.

Giving out large bonuses when the company has almost no revenue doesn't seem like the responsible behavior of a company. There's nothing wrong with investing in real estate, but this inefficient way of spending money is undoubtedly a waste, especially when major profitable panel manufacturers have already invested in flexible panel production.

It is better to settle down and do some business that can generate scale income. At least, you should be able to support yourself.

Starting a business is not easy. I wish Royole good luck.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.