(Reuters) - Semiconductor maker SkyWater Technology said on Monday it will receive up to $170 million from the U.S. Department of Defense to make chips that can work in outer space, and create smaller, faster ones with new materials.

The Bloomington, Minnesota-based company was spun off from Cypress Semiconductor Corp CY.O in 2017 to a group of U.S.-based investors. That year, SkyWater became part of a Defense Department program to ensure U.S. military access to the domestic chip supply chain.

SkyWater executives said the Defense Department investment will allow it to develop a new chip making process. To support the new process, SkyWater will pay to add about 60,000 square feet of production space for both defense and commercial customers and add 30-50 mostly high-end engineers to its staff of 500.

The $80 million first phase of the project will help SkyWater make chips that work when exposed to high levels of radiation in spacecraft and medical devices. The U.S. military also uses such chips to ensure electronics will remain functional in a nuclear conflict.

SkyWater said the funds also will enable it to use copper instead of aluminum to connect circuits on its chips, a change that eventually would lead to smaller chips than even its current 90-nanometer manufacturing technology allows.

Smaller, faster chips will help SkyWater become more competitive in commercial markets such as battery monitoring systems and wireless chargers for consumer gadgets, SkyWater President Thomas Sonderman said in an interview.

“The goal of the government really is to stand up capabilities that can be used commercially,” Sonderman said. “They want to have commercially viable entities that ultimately can provide the technologies they use for their applications.”

(This story has been refiled to correct paragraph 3 to show SkyWater will pay for expansion of facilities and headcount)