GoKawiilArizona, an epicenter for the bipartisan push to revive American chip manufacturing, is about to lose more than a quarter of the water it typically pulls each year from the Colorado River.
The 1,400-mile waterway is a crucial lifeline for the region and other western states. A recent federal decision on how to manage its dwindling flow hits Arizona, and its already drought-prone desert communities, particularly hard. The river provides more than a third of the Grand Canyon State’s water. Arizona has been a manufacturing hub since the start of the semiconductor industry, and now it’s where TSMC and Intel are expanding massive factories to make advanced chips for AI — a water-intensive effort.
City planners and industry leaders have already taken precautions to conserve water and find alternative sources. It’s a resource that is likely to become more expensive for manufacturers and residents alike as they learn to rely less on the Colorado River. That’s already raising tensions over who shoulders the costs for new infrastructure needed to adapt, as well as what constitutes a good use of water. The challenges that come with managing a limited water supply are only going to grow as AI demands a larger share.
TSMC and Intel are expanding massive factories to make advanced chips for AI — a water intensive effort
“Our economy is changing, and that’s really painful,” says Kathryn Sorensen, research director at the Kyl Center for Water Policy at Arizona State University. “When there’s a water scarcity issue you have to start looking at what the uses of that water are that bring the most value to the community.”
Agriculture has been a major part of Arizona’s economy since it became a state, and still gobbles up more than 70 percent of the state’s water. Industrial uses, including the chip manufacturing that’s had a foothold in the state since the 1940s, account for just 6 percent.
While the amount of water that semiconductor factories, or fabs, use is still quite small compared to agriculture, the chip industry is growing fast. Fabs use “ultra-pure” water to clean surfaces and etch sensitive chips. It takes more municipal water to create a smaller amount of ultra-pure water through deionization and reverse osmosis. A typical facility might use 10 million gallons of ultra-pure water a day, which could require up to 16 million gallons of municipal water.
New chip factories are sprouting up in Arizona’s desert with the help of federal funding. President Joe Biden signed the CHIPS and Science Act into law in 2022, setting aside $52.7 billion to expand domestic chip manufacturing. Armed with a $7.86 billion grant from the government, Intel is planning to spend $32 billion on two new factories and an expansion of an existing facility in Arizona. In 2025, the company’s facilities in Chandler, Arizona withdrew more than 2.7 billion gallons of freshwater, according to its latest corporate responsibility report.
TSMC, the world’s largest chipmaker, received up to $6.6 billion in CHIPS Act funding and decided to build at least six new semiconductor fabs in Phoenix. TSMC’s first fab in Arizona uses roughly 4.75 million gallons of water a day, the company told The Verge last year. It’s approximately equivalent to the water usage of more than 14,000 homes a day, or 2 percent of Phoenix’s housing. That amount grows with each new fab the company builds, and with the more advanced manufacturing processes TSMC is developing. The company recycles 65 percent of the water it uses in Arizona, TSMC says, a figure that’s supposed to grow to at least 90 percent when it finishes building a water reclamation plant.
“There’s not enough water for everything we want to do with it.”
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