This issue can occur when the VSPHERE_CONTROL_PLANE_NUM_CPUS parameter is set to "1" in the .tkg/config.yaml file or as an environment variable. The minimum number of CPUs for a Kubernetes node in TKG 1.2.1 is 2. You may also see similar behavior for the VSPHERE_WORKER_NUM_CPUS parameter is set to "1".
Set the VSPHERE_CONTROL_PLANE_NUM_CPUS and/or VSPHERE_WORKER_NUM_CPUS parameters to "2" or higher. You can also unset thes values and the Kubernetes nodes will be sized according to the Instance Type selected during installation.