Internet & Tech

Bend, but don’t break

Screenmaker Royole is struggling for survival


Royole makes bendable displays

Royole loved its time in the limelight in 2018 when it announced the launch of its production line for the mass manufacture of fully flexible screens, backed by its own intellectual property. Such was its determination to defend its pioneering position that it rubbished the claims of rival manufacturer Xiaomi the following year when the latter launched a foldable format of its own.

“Companies like this fly high in China as long as they sell the right concepts, but they would not be respected and recognised internationally because all they know is copying without being innovative, and worse still, making false claims”, a boss from Royole admonished at the time (see WiC440).

Those halcyon days of four years ago have long passed, however, with reports in the Chinese media that Royole is close to perishing from a catastrophic cash crunch that has left its employees unpaid and its production lines mothballed for months. In the latest news on the crisis, most of the remaining employees were said to have been sidelined with three months of mandatory leave.

Royole was heavily backed between 2017 to 2019 by investors including Citic Capital and Shenzhen Capital Group on the basis of its bendable screen technology, which was expected to catch on with millions of smartphone users.

But high prices for the first generation of phones and concerns about their reliability led to disappointing sales. Royole also ran into criticism that it had rushed out its prototype model, the FlexPai, so that it could be the first to market.

The 10 year-old firm then pulled back from plans to go public in the US and shelved preparations for another listing on Shanghai’s STAR Market last year after regulators raised concerns about breaches of listing rules (because of the way that some of its investors intended to stay on as controlling shareholders post-IPO). A company that had accumulated more than Rmb3 billion ($453.8 million) in losses over the previous three years was probably not that alluring for some potential investors as well.

Since then Royole has tried to broaden its reach into applications with other partners. There was an announcement of a partnership with Airbus to install displays in planes, for instance, as well as talk of working with Louis Vuitton to put flexible screens on the handbags of the future.

Back in the market of smartphones, bendable formats from suppliers like Samsung and BOE Technology have been getting more traction with the smartphone majors. Vivo, Xiaomi, Huawei and Oppo have all released foldable phones and global shipments could hit 15.7 million units this year, according to CINNO Research.

Royole’s flexible screens, which have been developed from a proprietary non-silicon-based process, haven’t been adopted in the same volumes. Partners have been put off by a ‘closed loop’ culture in which the company guards the secrets of its foldable format closely and insists on controlling the manufacturing process. Production capacity also trails its rivals, putting it at a further disadvantage in winning contracts with larger customers, its critics add.

All of this leaves Royale in serious trouble ¬ nowhere to be seen in the smartphone sector even as sales of foldable phones finally start to grow and likewise short of the capital it needs to deliver on contracts in other sectors. “Royole’s screens haven’t featured in any mainstream mobile phone manufacturers’ products, and its own brand is hard to find in public channels. Its technical ingenuity, mass production capabilities and customer acquisition skills are being questioned by the outside world,” National Business Daily lamented this month.

In the meantime the company is hunting for investors willing to fund another effort to introduce its bendable screens in new areas. But a failure to convince its initial backers to put in more cash must be a red flag for newcomers, so perhaps the best hope for survival is to bring in new funding from its home city, with claiming that the Shenzhen municipal government has been considering a round of rescue funding.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.