(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. is bracing for weaker-than-expected sales by reducing spending, deepening concerns the technology industry’s slump is yet to bottom.

Most Read from Bloomberg

The chip giant signaled this quarter could mark its first revenue drop in four years. But executives forecast slight growth for the full year on an expected recovery in demand for server chips.

The company is betting on its technology and scale advantages to weather the worst of the slowdown. The US has tightened China chip trade controls, while rising interest rates, soaring inflation and concerns of a potential global recession have caused consumers to curb spending on smartphones and computers.

“Demand is softer than we thought three months ago,” Chief Executive Officer C.C. Wei said on a conference call. TSMC and its customers will be “more prudent” about their expectations for demand and supply over the coming months, he said.

The world’s biggest contract manufacturer of chips, which is the exclusive supplier of Apple Inc.’s Silicon chips for iPhones and Macs, may also have been affected by problems at the US tech giant’s assembly operations in China. Apple was forced to trim output estimates after Covid-related chaos at a plant in Zhengzhou exposed vulnerabilities in the company’s supply chain.

What Bloomberg Intelligence Says

Overseas capacity expansion will be front and center for now, especially in the US and Japan, as TSMC pushes to meet customers’ diversification requests and rises to the challenge of growing competition from Samsung and Intel. Rapidly rising depreciation and operation costs, coupled with increasing uncertainty for smartphone demand recovery, are capping its gross margin.