Fabs need a lot of water, like a swimming pool. Once you fill it up, then you need comparatively less to stay operational.
Intel has invested in both recycling water as well as partnering with organizations on water conservation and ecology projects.
Arizona does draw water from the Colorado River, but among the four states, Arizona is at the bottom of the water rights. We get what is left over after Colorado, California, and Utah get their legal share.
The biggest user of water here in Arizona are the commercial farmers. (The Hopi people practice dryland agriculture and so don’t irrigate at all; most everyone else irrigates using inefficient and destructive land management practices). Aquifers here have been draining, and it has been a big issue. Farmers are already getting restricted on water use this year (despite an unusually wet monsoon season), and water restrictions has not hit residential users yet. It is on the radar for policymakers though.
Both TSMC and Intel are attracted to Arizona because it is seismically stable. They each had to invest an enormous amount in the more seismically active Taiwan and California, and it gets more sensitive the smaller the chips get.
If we want to conserve more water, the most effective way is to change commercial farming practices. Fabs have already invested a lot to reducing ongoing water use.
For an example of what I mean by better land management practices in regards to water: https://youtu.be/-8nqnOcoLqE