The performance of 14-nm SMIC chips has reached the level of industrial production.

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China’s largest chip maker SMIC posted record profits in 2022 despite lingering US sanctions, but warned of a tougher year ahead amid a slowdown in the semiconductor industry.

SMIC said on Thursday that it expects revenue of $7.2 billion in 2022, up 34% from the same period last year, and a gross margin of a record 38%. This is the second year the company’s sales have grown by more than 30%.

However, SMIC said first-quarter revenue is forecast to fall 10-12% compared to the December quarter.

“Looking forward to 2023, the industry cycle is still at its lowest point in the first half of the year, and the impact of external uncertainties is still challenging,” the company said in a statement.

SMIC is one of China’s most important chip companies. It is the country’s largest foundry, which is a company that manufactures microcircuits designed by other firms. It competes with companies like Taiwan’s TSMC and South Korea’s Samsung, but SMIC technology is several generations behind.

In 2020, the company was placed on a US trade blacklist called the Entity List, cutting off SMIC from key foreign technologies that would allow it to produce more advanced chips.

Demand for some chips that go into consumer products has fallen, such as memory, which has hit SMIC hard, as well as big firms like Samsung.

SMIC is actively investing in capacity expansion in China. The company said its capital spending in 2023 will remain roughly the same as the $6.35 billion it spent in 2022.

SMIC said mass production at one of its plants, known as SMIC Jingcheng, would be delayed for one to two quarters due to “bottleneck equipment delays.”

The company did not mention whether the recent broad US export controls, which are aimed at denying China the ability to source or manufacture key chips and components, were responsible for the hardware delays.

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