I'm from Arizona and have thus wondered this and researched the perceived water dilemma myself. Fabs do need a considerable injection of water to start, but their systems are so advanced and their logistics so efficient that they end up reusing so much of it over time. Couple this with the fact that Arizona also has a great infrastructure already in place for water reuse and conservation. When Arizona had only 700,000 people in the 1950s, they used more water than they do now for 7,100,000 people. And it's still in the top 3 fastest growing states in the US (both by new relative to existing population, but also by total incoming population volume). Models also indicate that the once-in-a-century drought is coming to an end in the next few years, with huge rainfall amounts the last two years in the state.

There was a great ArsTechnica article and subsequent comment section where many of the water questions are addressed: https://arstechnica.com/gadgets/2021/06/why-do-chip-makers-k...