(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. surged as much as 4.6% Friday after investors bet the world’s most valuable chipmaker would be among the first to emerge from an industry downturn in 2023.

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TSMC executives addressed concerns about a prolonged chip crisis at its earnings announcement a day earlier, forecasting a small annual revenue growth and the beginnings of a recovery in the latter half of the year. Markets had been bracing for a far weaker outlook.

TSMC, the exclusive supplier of Apple Inc.’s Silicon chips for iPhones and Macs, has the technology and scale to weather a slowdown better than most of its peers. Executives reiterated the company’s plans to ramp up next-generation 2-nanometer chips to meet demand for more powerful and energy-efficient silicon. The company began bulk production of advanced 3nm chips last month.

What Bloomberg Intelligence Says

TSMC will be the first of the world’s top-five chip foundries to resume sales growth, probably in late 2023, while the semiconductor manufacturing industry will be dominated by smartphone and PC chip demand weakness through the year. Steady migration to next-generation process nodes, such as N3 in 2023, N2 in 2025, new specialty manufacturing capacity and 3D-packaging technology, ensure the company’s long-term domination of the contract-chipmaking market, and could help its long-term gross margin stay in the 53-60% range, far above peers.

- Charles Shum, BI analyst

TSMC’s contract chipmaking clients are slashing spending as recession fears prompt consumers to curb spending. At the same time, tightening US-China trade controls and rising interest rates and inflation also complicate the outlook.