On Thursday, Chinese chip foundry Semiconductor Manufacturing International Corp (SMIC) warned of a weak 2023 despite record-high sales last year, as slowing demand for electronics placed pressure on its business.

Backed by funding from Beijing, SMIC is China’s best hope for becoming a global leader in chip manufacturing that can rival Taiwan Semiconductor Manufacturing Corporation (TSMC), the industry’s largest foundry.

SMIC has seen sales surge over the past two years, as global demand for low-end chips rocketed in the wake of the COVID-19 pandemic and a global chip shortage.

On Thursday, it said total revenue for 2022 reached $7.23 billion, up 33.6% from 2021. That was below an average estimate of $7.35 billion, according to a survey of analysts on Refinitiv, and on the low side the company’s late November forecast of “around $7.3 billion.”

The company’s growth may be peaking, however, with demand for consumer electronics waning as the pandemic subsided.

In its financial filing, SMIC said it expects revenue for 2023 to “decline by low-teens percentage year-over-year,” which would mark a break from continual growth.

Net income last year hit $1.82 billion, a 6% year-on-year increase, while sales in the final quarter of 2022 hit $1.62 billion, about 2% year-on-year and marginally below analyst expectations. Gross profit over the same period fell slightly, hitting $518.7 million down from $552.8 million the year prior.

The company remains generations behind rivals in leading-edge technology and has been in Washington’s crosshairs in recent years amid an ongoing spat with Beijing over chip technology.

“In 2022, the market demand for smartphones, computers, and home appliances turned from strong to weak, and customers’ willingness to place orders was significantly weakened,” said SMIC co-CEO Zhao Haijun on an earnings call.

In early October, the US department of commerce released a sweeping set of export controls aimed at containing advancement among China’s chip manufacturers.

The restrictions are further set to hamper SMIC’s ambitions for making advanced chips, experts say.

Nonetheless, it is rapidly expanding capacity across China, announcing plans to build four new chip manufacturing plants since 2020.

On its earnings call, co-CEO Zhao Haijun said that by the end of 2022, its newest fab in Shenzhen had entered production, another fab entered “pilot production,” and two others remained under construction.

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