which backup is best when setting up a new iPhone

Time Machine is not an option for backing up an iPhone or setting up an iPhone.

You can use any of the following: Quick Start, an iCloud Backup or a backup to a computer. All of them work well but I recently used the Quick Start option to setup 2 new phones and was impressed with how well it worked.

See: Transfer data from your previous iOS or iPadOS device to your new iPhone or iPad - Apple Support

Forgot to say, I always have automatic iCloud Backup turned on and haven't backed up an iPhone to a computer for several years. The Quick Start method doesn't require a backup (but having one is always a good idea).