(Bloomberg) -- Tokyo Electron Ltd. raised its profit outlook for the year after global chipmakers continued to spend on new equipment in the face of rising economic uncertainty.

The Tokyo-based supplier to Taiwan Semiconductor Manufacturing Co. and Intel Corp. lifted its forecast for the year to March above expectations to ¥580 billion ($4.4 billion). Companies kept spending after reviewing investment plans, Tokyo Electron executives said during earnings calls Thursday.

The Japanese maker of equipment used to coat, etch and test silicon to form semiconductors now sees a recovery starting in the second half of 2023 and continued growth from 2024 onward, thanks in part to government subsidies for chip-related investments around the world, according to Hiroshi Kawamoto, Tokyo Electron’s general manager of finance. 

The company, which competes against Applied Materials Inc., had slashed its profit outlook by more than a quarter in November in the wake of US sanctions on advanced chip-related exports. Lifting operating profit outlook by 6% “hardly provides any evidence for a recovery or resilience,” said Amir Anvarzadeh, strategist at Asymmetric Advisors. 

Tokyo Electron climbed more than 5% Friday morning, its best intraday performance in almost three months.

The company has been closely watched for its reaction to the recent news that Japan and the Netherlands have agreed to join the US in imposing strict export restrictions on advanced semiconductor technology and products to China. Tokyo Electron is one of a handful of indispensable suppliers to the chipmaking industry, providing machinery to fabricate the latest generation of chips.

Washington has stepped up its campaign to curb China’s access to technology that may improve its economic influence, issuing in October sweeping restrictions on US-connected exports or staff heading to the Asian nation. To make those sanctions work, the Biden administration has sought and secured the collaboration of international partners.

Tokyo Electron, which also announced a 3-for-1 stock split, said operating profit fell 26% to ¥114.8 billion for the December quarter, above average analyst estimates of ¥102 billion. There was a dip in the December quarter, as US chip gear makers were unable to ship to Chinese customers, hindering production, but the feared cratering in demand did not materialize, Kawamoto said.

“We see strong demand from many different customers, including logic foundry clients outside China,” he said.

The company has no plans to shrink operations in China, which it sees as a large future market for automotive power chips, according to Kawamoto. “China will remain an important market for Tokyo Electron,” he said. “We deal in more than just cutting-edge equipment.”

Tokyo Electron and fellow Japanese semiconductor industry players Renesas Electronics Corp., Nikon Corp. and Sumco Corp. each have a significant proportion of their sales going directly to China, with even more of their business dependent on the market via sales by their customers. All four reported earnings on Thursday.

Read more: Renesas Plans $380 Million Buyback as Profit Beats Estimates

Silicon wafer maker Sumco said demand from automotive and industrial-use customers remains strong, but the weak smartphone market is likely to yield lower wafer orders in 2023 before recovering in 2024. The ongoing inventory adjustments that hit the memory-chipmaking industry hard in recent months are likely to continue for the time being, CEO Mayuki Hashimoto said.

Dutch equipment maker ASML Holding NV said at the end of January that the sanctions won’t have a material impact on its 2023 earnings, despite China perennially being one of the biggest importers of chips and chip technology.

Two Japanese chip suppliers that reported their December-quarter results earlier, Advantest Corp. and Screen Holdings Co., gave solid numbers that were in line with market expectations. Yokohama-based Lasertec Corp. saw its shares drop after trimming its order outlook, though it too signaled a recovery ahead, saying “demand for advanced equipment is not waning” and that orders postponed should come back in or beyond the next fiscal year.

--With assistance from Vlad Savov and Ville Heiskanen.

(Updates with share reaction in fifth paragraph)

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