You are right that fabs require a much higher grade of water but the overall quantity is much less. Yet with farmers suffering the worst effect of the drought it is very difficult for TSMC to expand production without looking like the bad guy who profit at other people's expense. Notwithstanding the fact that the actual amount of water they use is not significant.

NYT has a pretty good piece of reporting about the situation:

https://www.google.com/amp/s/www.nytimes.com/2021/04/08/tech...