Google TPU 26 years 4 million units? Analyst: Taiwan Semiconductor's production capacity cannot keep up, with the earliest volume release in early 27 years

Google's ambitious expansion plan for its self-developed AI chip TPU is facing a real bottleneck in advanced packaging capacity.

Despite high expectations from the market for Google's TPU, with rumors suggesting it could reach an astonishing production of 4 million units by 2026, the latest supply chain analysis indicates that this goal may be difficult to achieve in the short term.

Reports from multiple institutions show that TSMC's CoWoS advanced packaging capacity, which is a key bottleneck, is not expected to meet Google's enormous demand until early 2027, meaning that the true large-scale rollout of TPU may be delayed.

The latest developments come from intensive tracking by investment banks. Morgan Stanley released a report on December 1, significantly raising its long-term production forecast for Google's TPU, predicting it will reach 5 million units by 2027, and estimating that every 500,000 units sold could bring Google an additional $13 billion in revenue. This forecast has sparked market imagination about Google launching a direct sales business for AI chips, making the TPU supply chain a focal point.

However, a report from Fubon Research published by Jefferies provides a more sober perspective on the supply chain. Analysts pointed out that despite rumors that Meta is in talks with Google to start purchasing TPU from 2026, they believe that TSMC's CoWoS capacity may not support the market speculation of producing 4 million TPUs in 2026. The alleviation of the bottleneck may have to wait until TSMC's expansion plans are implemented in 2027.

This time lag highlights the core contradiction in the AI hardware race: the game between rapidly expanding demand and limited advanced manufacturing capacity. For investors, this means that when assessing the growth curve of Google's TPU, they must temporarily shift their focus from the vast market potential to a precise judgment of TSMC's capacity release pace.

Capacity Bottleneck: The 4 Million Target for 2026 May Be Difficult to Achieve

According to supply chain checks by Fubon Research analysts Sheman Shang and Vincent Cho, the optimistic expectation of achieving a production of 4 million TPUs in 2026 faces practical challenges. Based on TSMC's CoWoS model, they estimate that the total production of TPUs in 2026 will be between 3.1 million and 3.2 million units.

The report explains the reasons for the capacity constraints in detail:

• Existing Capacity at Full Load: TSMC's current AP8 plant is operating at full capacity.

• New Capacity Allocation: The new AP7 plant's first phase capacity is primarily reserved for Apple's processors.

• Expansion Timeline: The second phase of the AP7 plant will not be ready until the end of 2026, making it unable to support large-scale production for the entire year of 2026.

The report also clarifies that while TSMC plans to outsource some mid-to-low-end CoWoS products to ASE, this outsourcing is limited to CPUs and network chips, and all AI accelerators (such as TPUs) will still be advanced packaged by TSMC's own fabs. Therefore, in the short term, TPU production will be strictly limited by TSMC's internal CoWoS capacity

Positive Outlook: TSMC Accelerates Capacity Expansion, Expected to Ramp Up in 2027

Despite capacity bottlenecks in 2026, supply chain signals indicate that TSMC is actively preparing for strong demand in 2027 and beyond. The latest survey from Fubon Research shows that TSMC is becoming "more aggressive" in accelerating its CoWoS capacity expansion.

According to its latest forecast, TSMC's internal CoWoS capacity will:

• Reach 120,000 wafers per month by the end of 2026 (mainly for production in the first quarter of 2027), up from the previous forecast of 110,000 wafers.

• Further increase to 140,000 wafers per month by the end of 2027, up from the previous forecast of 130,000 wafers.

Analysts believe that TSMC's conservative approach means that once it begins to actively expand production, it will be a positive indicator for the outlook in 2027. With the release of capacity in 2027, TSMC will be able to provide more support to its major partners in Google TPU, Broadcom, and MediaTek.

Based on this, Fubon Research predicts that by 2027, the total output of TPU is expected to double to 5 to 6 million units.

Trillion-Dollar Potential: TPU Exports May Become Google's New "Cash Cow"

The long-term expansion of capacity paves the way for a transformation in Google's TPU business model. Morgan Stanley's Asian semiconductor analyst Charlie Chan pointed out in his report that the uncertainty in the TPU supply chain is dissipating, and future output is expected to experience "explosive growth."

The firm predicts that Google TPU's output will reach 5 million and 7 million units in 2027 and 2028, respectively, with a combined output of 12 million units over the two years, far exceeding the total of 7.9 million units over the past four years. Such a massive scale is interpreted as an "early signal" that Google is preparing to sell TPU as an independent product directly to third parties.

The financial impact of this strategic shift is significant. Morgan Stanley estimates that for every 500,000 TPUs sold to external markets, Google could potentially add about $13 billion in revenue and $0.40 in earnings per share (EPS) in 2027. If this strategy is implemented, Google will shift from being a "consumer" of AI chips to a hardware "vendor," directly challenging the existing market landscape.

The strong growth trend of TPU is expected to significantly benefit the upstream supply chain in Taiwan