Material Icons Extended going to be sucks for file size.

Yes, it is not recommended to be used directly without also using proguard / R8 - there are simply too many icons. We are exploring tooling opportunities to expose the icons in this library without needing to add the whole dependency.

Could Android Studio able to generate it?

The generated icons are tied to the vector APIs used underneath, so we would still want to generate the icons and ship the artifact that matches the vector library, but studio could potentially just use this generated icons directly and add it to your project