Having launched the world’s first folding screen smartphone, the Chinese tech unicorn struggled to ‘call for help’

In April 2022, Liu Shuwei, one of the leaders of this tech unicorn, had to “call for a rescue operation” on social media. “I ask the government to actively help Royole solve the problem of capital shortage and attract strategic investors.”

Having launched the world's first folding screen smartphone, the Chinese tech unicorn struggled to 'call for help' - Photo 1.

Founded in 2010 in Shenzhen, Royole has joined the list of promising unicorns of the Chinese tech sector. Royole’s problems were no secret.

The company halted pay for a few executives last year, and even recently encouraged employees to take three months of unpaid leave. Within two years, Royole had cut nearly a quarter of its staff, down to just 700 people.

Difficult road to issue shares

CEO Bill Liu, an electrical engineer who graduated from Tsinghua University and Stanford, founded Royole in 2012. Upholding its mission as an innovative company, Royole quickly attracted the attention of many investors. private. Even a fund backed by the Shenzhen city government poured money into the company.

With abundant financial resources, Royole spent 6-7 billion yuan ($883 million – $1.03 billion) to build a panel factory, which went into operation in 2018. At that time, the development plan was The company’s foldable phone development is getting a lot of attention. Massive shipments began to ship the following year, surpassing Samsung Electronics, the smartphone giant and the display industry.

According to research firm Itjuzi, Royole was valued at $6 billion in May 2020, putting the company on the list of tech unicorns. At the time, the company was as famous as drone maker DJI, another $22 billion Shenzhen-based unicorn.

However, Royole’s equity story quickly took a dark turn. By the end of 2020, the STAR technology exchange in Shanghai received an application for an initial public offering (IPO) of this unicorn. The company sought to raise more than 14.4 billion yuan, but withdrew its application in February 2021.

It’s not clear what’s behind the decision to withdraw the application, but analysts say the company has been in a hurry to diversify its business portfolio while smartphone sales are still volatile.

Market share is suffocated by the big guys

According to analytics firm iResearch, the number of foldable phones in China is forecast to reach 13.8 million units by 2025, 12 times the number in 2020. But another data company, iiMedia Research, shows 75% of customers prefer Huawei Technologies folding phones and only 2% choose Royole products.

The panel market has also proven to be very competitive. Leading Chinese panel manufacturers such as BOE Technology Group and China Star Optoelectronics Technology have developed their own folding screens. Both of these giants are shaking hands with other device giants, including Huawei, so the space for startups to jump in is very narrow.

Instead, Royole turned to investment allocations with Louis Vuitton and Airbus.

Royole “has gone too far in expanding its business but hasn’t grown fast enough to cover the costs,” said a representative of a Shenzhen-based trading company.

With revenue affected, the company reported a net loss of more than 1 billion yuan in 2019. Meanwhile, the loss figure for the first half of 2020 was 960 million yuan and operating revenue was only about 110 million yuan.

Royole isn’t the only business struggling to expand market share. Last year, more than 80 other companies also canceled their plans to list on the STAR exchange, double that of 2020.

This number has increased in part because the Securities and Exchange Commission of China has tightened regulations with IPOs in recent years to protect investors.

Last month, XAG, an agricultural drone maker, also withdrew its plan to list on the STAR exchange. The company struggles to expand its customer base as DJI dominates the global market. IPO filings show that XAG had a net loss of 85 million yuan in the first half of 2021.

Speech recognition startups Unisound and Hesai Technology, which develop sensors for autonomous vehicles, both canceled their IPOs in 2021 and opted to raise additional capital from existing investors.

According to Nikkei Asia

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