Jan 06, 2021 08:27 PM

Minuscule Demand Isn’t Stopping Money-Losing Flexible-Screen Firm From Eyeing Shanghai IPO

A foldable mobile phone featuring Royole’s flexible-screen technology sits on display at an industry conference on Nov. 8 in Guangzhou, South China’s Guangdong province.
A foldable mobile phone featuring Royole’s flexible-screen technology sits on display at an industry conference on Nov. 8 in Guangzhou, South China’s Guangdong province.

Flexible-display maker Royole Corp. has dreams almost as big as its astronomical financial losses, which are revealed for the first time in an IPO prospectus the company has filed to the Shanghai Stock Exchange.

Royole wants to raise 14.4 billion yuan ($2.2 billion) in the listing, half of which it said would be spent on replenishing its capital supplies. The other half will be spent on research and factory upgrades, the firm said.

Based on its plan to issue 480 million shares, the company would be valued at 57.8 billion yuan — about 40% higher than its valuation after a $300 million financing round it completed in May.

The firm’s IPO application, filed on New Year’s Eve, was formally acknowledged by the China Securities Regulatory Commission on Sunday. Royole plans to list on the Shanghai’s Nasdaq-like STAR Market.

The controversial panel-maker does two main things: make flexible smartphone screens and burn cash. In the first half of 2020, Royole lost 960 million yuan on revenue of just 120 million. Analysts do not expect its fortunes to turn around any time soon.

Royole’s largest shareholder and actual controller is currently co-founder Liu Zihong, who owns about 40% of the company. The next-biggest shareholders are Citic Capital, individual investor Wei Peng, and Shenzhen Venture Capital, which hold 6.05%, 4.97% and 4.64% respectively.

The share issuance will dilute Liu’s stake in the company to about 29%, but not his control over it — the chairman and CEO will retain almost 62% of the firm’s voting rights.

Soft screens a hard sell

Royole, established in 2012 launched its third-generation panel in March, but as with previous versions the industry’s response to its intriguing technology has been tepid.

The firm debuted its first smartphone prototype, called the FlexPai, in 2018. The handset later drew criticism, with many consumers reviewing the panels as more fragile than advertised. Critics accused Royole of rushing the product’s launch just so it could be the first to put a foldable phone on the market. It priced the phone at a hefty 8,999 yuan.

Despite this, Royole’s consumer business is actually the firm’s primary source of revenue, making up about 78% in the first six months of last year. That was up from just 18% in 2017.

High price tags, bulkiness, shorter battery life and a lack of supporting apps have long dogged foldable and flexible smartphone technology.

That’s reflected in Royole’s mounting losses over recent years, the prospectus shows. Royole lost 800 million yuan in 2018, 1.07 billion yuan in 2019 and a whopping 960 million yuan in the first six months of last year alone. Its revenue was 109 million yuan, 230 million yuan and 120 million yuan for those periods.

Analysts are skeptical of the company’s ability to turn a profit with its proprietary technology amid fierce competition. Supplies of the flexible organic light-emitting diode panels that the company produces exceeded market demand by 35% in 2019, according to a report issued by consultancy Sigmaintell that year.

The company has maintained that it continues to lose money because the market for its technology has not yet taken off, and it has poured cash into research and development.

It will be betting on investors buying into the idea that foldable and flexible device screens are the future — and that major smartphone brands such as Xiaomi and Oppo will actually purchase them.

Royole has other ideas too. A representative of the firm previously outlined to Caixin its plans to integrate its technology into conferences, aviation, sports events and other fields. One idea included embedding screens on the clothing of football referees.

The company said previously it had capacity to make 50 million screens a year, even though sources told Caixin that Royole only made 2.8 million in 2019.

The market for smartphone screens isn’t anywhere close to being large enough to justify even that level of output. Less than 1 million foldable smartphones were shipped last year worldwide, according to Sun Yanbiao, head of the N1mobile Research Institute. Sun pointed out that last year Huawei Technologies Co. Ltd. only shipped 100,000 units of its flagship foldable smartphone, the Mate X.

Anniek Bao contributed reporting.

Contact reporter Flynn Murphy ( and editor Joshua Dummer (

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