Google TPU 4 million units in 2026? Analyst: TSMC’s production capacity can’t keep up, volume production at the earliest in early 2027.

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

Although the market has high expectations for Google TPU, with reports suggesting its output could reach an astonishing 4 million units by 2026, the latest supply chain analysis points out that this goal may be difficult to achieve in the short term.

Reports from multiple organizations show that TSMC’s advanced CoWoS packaging capacity, which is a key bottleneck, is expected to meet Google’s huge demand only by early 2027, meaning that true large-scale production of TPU may be delayed.

The latest developments come from intensive tracking by investment banks. Morgan Stanley released a report on December 1st, raising Google TPU’s long-term output forecast significantly, predicting it will reach 5 million units by 2027. The bank estimates that for every 500,000 TPUs sold externally, Google could gain an additional $13 billion in revenue. This prediction has sparked market imaginations about Google starting direct sales of AI chips and put the TPU supply chain in the spotlight.

However, a report by Fubon Research published via Jefferies offers a more sober supply chain perspective. Analysts pointed out that although there are rumors that Meta is negotiating with Google to purchase TPUs starting in 2026, they believe that TSMC’s CoWoS capacity may be unable to support the rumored market goal of producing 4 million TPUs in 2026. The bottleneck may only be eased after TSMC’s expansion plan takes effect in 2027.

This timing gap highlights a core contradiction in the AI hardware race: a contest between surging demand and limited cutting-edge manufacturing capacity. For investors, this means that when evaluating Google TPU’s growth curve, attention must temporarily shift from long-term market potential to accurately judging the pace of TSMC’s production capacity release.

Capacity Bottleneck: 4-Million Target in 2026 May Be Difficult to Achieve

According to supply chain checks by Fubon Research analysts Sheman Shang and Vincent Cho, the optimistic expectation of producing 4 million TPUs in 2026 faces real challenges. Based on TSMC’s CoWoS model calculations, they project total TPU output in 2026 will be between 3.1 and 3.2 million units.

The report explains the reasons for limited capacity in detail:

Full Capacity: TSMC’s current AP8 facility is operating at full load.New Capacity Allocation: The newly built AP7 facility’s Phase 1 capacity is mainly reserved for Apple’s processors.Expansion Timeline: Phase 2 capacity at AP7 will only be ready by the end of 2026 and cannot support large-scale production for the full year.

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

Improved Outlook: TSMC Accelerates Expansion, Scale-Up Expected in 2027

Despite the bottleneck in 2026, supply chain signals indicate that TSMC is actively preparing for stronger demand in 2027 and beyond. Fubon Research’s latest survey shows TSMC is becoming “more aggressive” and accelerating its CoWoS capacity expansion.

Based on its latest forecasts, TSMC’s internal CoWoS capacity will:

Reach 120,000 wafers per month by the end of 2026 (mainly for Q1 2027 production), up from the previous forecast of 110,000.Further increase to 140,000 wafers per month by the end of 2027, up from the earlier estimate of 130,000.

Analysts believe TSMC’s conservative operating style means that as soon as expansion accelerates, it marks a positive indicator for the 2027 outlook. As capacity comes on line in 2027, TSMC will be able to provide more support for Google TPU's key partners Broadcom and MediaTek.

Based on this, Fubon Research forecasts that total TPU output could double to between 5 million and 6 million units in 2027.

Trillion-Dollar Potential: TPU Sales May Become Google’s New “Money Printer”

Long-term capacity expansion paves the way for a shift in Google TPU’s business model. Morgan Stanley’s Asia semiconductor analyst Charlie Chan points out in his report that supply chain uncertainty for TPUs is fading, with future output set for “explosive growth.”

The firm projects Google TPU production in 2027 and 2028 will reach 5 million and 7 million units respectively, with the two-year combined output (12 million units) far exceeding the total output of the previous four years (7.9 million units). This massive scale is interpreted as an “early signal” that Google is preparing to sell TPUs as standalone products directly to third parties.

The financial impact of this strategic shift is tremendous. Morgan Stanley calculates that for every 500,000 TPUs sold externally, Google could increase its 2027 revenue by approximately $13 billion and boost EPS by $0.40. If this strategy is realized, Google would transition from being a “consumer” of AI chips to a hardware “vendor,” directly challenging the current market landscape.

The robust growth trend for TPUs is expected to significantly benefit Taiwan’s upstream supply chain.

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