CHIPS for America Guide March 27, 2023

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Notice of Funding Opportunity –

Commercial Fabrication Facilities 

Guiding Principles for Full Application 

Financial Model

Table of Contents

1. Overview .............................................................................................................2

2. Model Structure...................................................................................................2

3. Granularity ..........................................................................................................4

4. Metrics ................................................................................................................9

5. Scenario Analysis...............................................................................................10

6. Conclusion .........................................................................................................11
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1. Overview

This document is intended to provide guidance on creating dynamic and integrated project-level 

financial statements and scenario analyses as required in the CHIPS Notice of Funding Opportunity 

(NOFO) section IV.I.7. This document is divided into the following sections: Overview, Model 

Structure, Granularity, Metrics, and Scenario Analysis.

As described in the NOFO, the project-level financial statements should include detailed cash flow, 

income and balance sheet statements for each facility, through the end of the facility’s useful life.

These financial statements should be delivered in an Excel spreadsheet and contain dynamic 

formulas that can be traced (i.e., not hard-coded). They should be linked to each other within the 

model and update automatically as variable inputs are adjusted. Scenario analysis should also be 

embedded in the linked model.

The financial statements will be a critical part of the CHIPS program evaluation and will be used to 

assess project viability, financial structure, economic returns, and risks, as well as to evaluate and 

size the amount, type, and terms of potential CHIPS awards.

To the extent management models align with the guidelines for Financial Statements in the NOFO, we 

would encourage applicants to submit those models. 

Disclaimer: While this document is intended to provide guidance on financial model construction, 

Applicants are not bound to follow the specific suggestions outlined below. Projects will vary 

considerably in nature and scope. 

2. Model Structure

Financial models submitted in the applications may have a wide range of designs depending on 

unique project-specific information and company profiles. In all cases, the model worksheets should 

be fully dynamic and linked through formulas and calculations, rather than hardcoded values, to

allow traceability across the various inputs, processing, and output spreadsheets. This section 

illustrates the building blocks of a representative financial model.

The following figure illustrates the typical components of a financial model.
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Figure 1: Example Model Structure

Inputs and assumptions

The figure above illustrates a model structure with a separate worksheet laying out in detail all core 

inputs and assumptions used to drive the forecasted income, balance sheet, and cash flow 

statements. For example, within income assumptions, the project revenue could be driven by 

assumptions around capacity, utilization rates, assumed yield, and price for each production 

segment, as well as customer, end market, or wafer type. For cash flows, financing assumptions 

would include inputs around amount and terms of sponsor equity, non-CHIPS debt, CHIPS debt, third 

party equity, state and local government incentives, investment tax credit, and CHIPS incentive. 

Financial Outputs

The applicant should clearly present the outputs summarizing the key financial statements for the 

project including cash flow statements, income statements, and balance sheets. These outputs 

should each be in their own worksheet and should be a direct byproduct of the inputs provided in 

the assumptions tab and any processing or computations of those inputs shown in a separate tab or 

otherwise via transparent formulas. Forecasts should be quarterly through the first year of cash flow 

breakeven and annually thereafter through the end of the facility’s useful life1

.

Metric Outputs

The applicant should highlight the key financial, performance, and risk metrics associated with the 

project. Metrics could be organized as a table of clear numerical outputs alongside visuals (e.g., a 

1 ”Useful life” is an estimate of the number of years a facility will remain operational and cost-effectively generating 

revenue. In the NOFO, the CPO estimates that to be at least 20 years. Any assumptions made around useful life should be 

explained in the accompanying narrative.
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chart showing gross margin over facility useful life or debt service coverage ratio over time) to 

provide an effective summary of the projected returns and key takeaways. Examples of key metrics 

are included in Section 4.

Scenario analysis

The model should be structured to allow alternative inputs to override and replace the baseline 

inputs and assumptions to illustrate the effects of different scenarios. These analyses should be fully 

integrated within the dynamic financial model to demonstrate the impact of each scenario across 

the full set of outputs (financial statements, risk and return metrics, etc.).

3. Granularity

Detailed financial inputs are critical for a comprehensive review of the project’s financial strength. 

Inputs should include granular line-item assumptions for underlying components of both the income

statement and cash flow statement, and explicit details on how drivers vary over the useful life of 

the project. Submissions that lack sufficient granularity may require requests for additional 

information, which could cause delays in the review process. 

We have outlined key principles around the granularity of inputs and assumptions that applicants 

can use as guidance as they construct their models. The purpose of input granularity is to drive 

illustrative, transparent, and functional outputs that can be easily reviewed and sensitized.

Table 1: Guiding Principles for Granularity

Principle Description

Consistency Assumptions should generally have a consistent level of detail across the model. 

This level should be informed by the size and complexity of the project as well as 

the level of detail the applicant uses to evaluate its business. 

Reasonableness Assumptions should be sensible and derived from reputable data sources. Any 

proprietary research, analysis, benchmarks or expert opinions used to inform 

underlying assumptions should be documented in the accompanying narrative.

Functionality Assumptions should be broken down into a comprehensive set of underlying 

drivers. For each line item in the outputs, there should be traceability to all 

underlying components, such that they can be validated and sensitized.

The remainder of this section includes examples of potential financial inputs to illustrate how the 

principles described above can be applied.

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Revenue assumptions example: The following example demonstrates the desired granularity for 

revenue inputs and assumptions for an illustrative semiconductor wafer manufacturing project as 

well as how the inputs translate into outputs in the income statement. In this example, the facility

produces 5nm, 7nm, and 9nm wafers.

2 The examples provided are for illustrative purposes only and should not be considered as professional tax or accounting 

advice. The contents may not be comprehensive, and the tax and accounting treatment of specific transactions or 

situations may vary depending on various factors. It is the responsibility of the applicants to ensure that the tax and 

accounting treatment of any transaction or situation is correct and compliant with the applicable laws and regulations. 

Applicants are advised to seek professional tax and accounting advice before making any decisions based on the 

information provided in this paper.
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In the below figure the key revenue source, wafers, has been broken out into its underlying 

components. Given the facility is producing multiple types of wafers, the assumptions have been 

broken out accordingly (e.g., separate capacity, price, utilization, and yield assumptions based on 

wafer type).

Figure 2: Assumptions Revenue Example

When translating the assumptions into outputs on the income statement, this example model 

maintains a consistent segmentation. Individual production segments (5nm, 7nm, 9nm) used to 

calculate the project revenue are broken out under the operating income section of the income 

statement. The segmentation used by the applicant should be based on what they believe are the 

key assumption differentiators but could include segmentation by product, production line, end 

market, and/or customer.

Figure 3: Income Statement Revenue Example

Operating costs assumptions example: The following example demonstrates the expected 

granularity for direct labor and corporate overhead operating cost inputs and assumptions for an 

illustrative semiconductor wafer manufacturing project, as well as how the inputs translate into 

outputs in the income statement.
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This example shows direct labor costs being estimated by multiplying the expected “Full-Time 

Equivalents” (FTEs) required to operate the facility over time by the salary and benefits expectations 

of each employee type (e.g., operator, production supervisor, production manager, general 

manager, engineer, and technicians). Input assumptions drive the number of employees and wages 

varying over time based on expected trends and facility production volume.

Figure 4: Assumptions Direct Labor Example

The below example shows a potential corporate SG&A allocation approach at the project level. This 

potential corporate SG&A application is intended to demonstrate the expected level of granularity. 

This does not include direct SG&A which should also be granular and included. The allocation 

approach used, if any, should be consistent with the allocation methodology used for other 

corporate projects or subsidiaries with support provided in the accompanying narrative. In this 

example, allocated SG&A expenses are allocated based on an FTE allocation factor.
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Figure 5: Assumptions Corporate Allocations Example

When translating the above assumptions into outputs on the income statement, the figure below 

maintains a consistent segmentation with the underlying inputs and assumptions. All direct 

materials, labor, and production costs should be appropriately segmented to facilitate the 

calculations of gross margins and other key income-related metrics. Further, other operating costs 

below gross margin (e.g., SG&A and R&D costs) should be broken down by key categories; including 

direct costs vs corporate allocations.
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Figure 6: Income Statement Operating Costs Example
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4. Metrics

As required in the NOFO, Applicants should capture key outputs in the form of internal rate of return 

(IRR), financial performance metrics, and risk and debt service metrics. We have outlined some 

guiding principles around metrics in the table below:

Table 2: Guiding Principles for Metrics

Principle Description

Relevance Metrics should reflect Applicant’s view of the most appropriate measures of 

performance and risk based upon the project type and underlying business. Any 

decisions around inclusion/exclusion of specific metrics should be clearly explained 

in the corresponding narrative submitted in the application

Comprehensive Applicants should include all metrics needed to assess project risks and 

performance

Standardized Metrics should be consistent with industry standards and best practices, and should 

include commonly used indicators of risk, return, and performance measurement 

along with any requirements stated in the NOFO

Some key metrics for consideration (a subset of those mentioned in the NOFO) are outlined in the 

table below. IRR metrics should be clearly highlighted in the financial model and the accompanying 

narrative should provide a justification for why the projected IRR in the cash flow model is 

appropriate for a project of this type, scale, and risk profile. Similarly, if the applicant focuses on 

other specific return or performance metrics, the accompanying narrative should highlight those 

metrics, the applicant’s view of their usefulness, and why the calculated values for those metrics are 

appropriate for the project based on market or other benchmarks.

Table 3: Example Key Metrics for Consideration

Type Metric Description

Internal Rate of 

Return (IRR) Metrics

Unlevered IRR Also known as the “Project IRR”, unlevered IRR reflects the 

discount rate that makes the net present value of a project’s 

unlevered free cash flows equal to zero. Unlevered free cash 

flows assume no debt financing

Levered IRR Also known as the “Equity IRR”, levered IRR reflects the 

discount rate that makes the net present value of a project’s 

levered free cash flows equal to zero. Levered free cash 

flows include impacts from the project’s / company’s 

financing structure 

Financial 

Performance Metrics

Payback Period The amount of time required for cash inflows generated by 

a project to offset its initial cash outflow

Return on Equity 

(ROE)

Measures financial performance calculated by dividing net 

income by equity and provides a gauge of a corporation’s 

profitability and how efficiently it generates those profits

Risk and Debt 

Service Metrics

Debt / Equity Ratio Shows the proportion of debt to equity and helps measure 

debt capacity and evaluate financial leverage. It is calculated 

by dividing total debt by total equity
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Debt Service 

Coverage Ratio

(DSCR)

Measures the project’s ability to produce enough earnings 

to cover its debt. DSCR is calculated by dividing the project’s 

net operating income by its total debt service which includes 

interest and any required principal repayments

5. Scenario Analysis

Scenario analysis involves stressing model parameters under a range of scenarios or assumptions.

Scenario analyses for the financial model should flow through the end-to-end model to demonstrate 

the impact on the output financials (income statement, cash flow, balance sheet) as well as the risk, 

performance, and return metrics.

We have outlined some guiding principles around scenario design in the table below.

Table 4: Guiding Principles for Scenario Design

Principle Description

Appropriateness Scenarios used in the analysis should reflect historical events or hypothetical 

situations to test how a project would perform under a range of possible outcomes 

with varying degrees of likeliness of occurring. 

Variety The Applicant should define and test a diverse range of scenarios and magnitudes to 

comprehensively assess key project risks and upsides. These scenarios should cover 

themes such as:

- Idiosyncratic scenarios: scenarios based on direct project or company 

impacts (e.g., project construction delays).

- Market scenarios: scenarios based on market or industry-wide impacts 

(e.g., reduction in leading edge wafer demand)

- Combined scenarios: scenarios assuming combinations of project specific 

and market impacts

Impact Scenarios that are highest impact on the forecast should be prioritized over those 

that are less impactful. The goal is to understand what the most material risks to the 

project are and how they impact the risk and return distributions (as well as project 

viability)

Directionality Scenario analysis should show how the project performs under a variety of positive 

and negative scenarios to show the upside and downside ranges that may occur

Timing While scenarios that alter early cashflows often have the highest impact on project 

return and profitability, scenarios should also assess impacts across the useful life of 

the facility to understand the stress at other points that may cause the project to

become at risk (e.g., impact of reduced production in periods with the lowest 

coverage ratios)

In the accompanying narrative, the applicant should clearly describe and provide the rational for the 

scenarios selected (including underlying parameters altered and magnitude of changes and why the 

specific parameters and ranges were selected).

The following table provides examples of revenue assumptions that may be altered in scenario 

analyses.
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Table 5: Example revenue assumptions and scenarios

Assumption Example scenario

Wafer starting price Increased competition during project construction leads to a global 

oversupply relative to demand, leading to a lower wafer price by the 

time the project starts operating

Wafer price changes over time Technology has increased adoption in downstream products, leading 

to increased demand for output and stable prices during first few 

years of project operation

Capacity utilization rates Higher downtime is required to repair and maintain equipment, 

leading to reduced operating time and therefore utilization

Wafer yields Operational challenges with project lead to lower quality outputs and 

result in lower yields

6. Conclusion

This document is intended to provide guidance on the construction of the financial model that is

required in the CHIPS NOFO as part of the full application. Applicants should use this document in 

conjunction with the NOFO. If Applicants have questions about this guidance, please consult the 

NOFO, other postings on the CHIPS website (including FAQs and Fact Sheets), or contact the CHIPS 

Program Office at apply@chips.gov.