(Reuters) -U.S. quantum computing startup PsiQuantum said on Tuesday it has started the construction of a facility at Chicago's Illinois Quantum and Microelectronics Park (IQMP), as it capitalizes on a fresh $1 billion funding round.

The site, located at a former U.S. Steel South Works site, will serve as IQMP's anchor tenant and launch with the development of its largest intermediate-scale quantum test system.

The system will be evaluated by the Defense Advanced Research Projects Agency under the Quantum Benchmarking Initiative, a sign that government agencies will be closely watching the progress.

PsiQuantum is betting on a photonic approach, using semiconductor manufacturing processes and conventional telecom fiber, a route that offers solutions to some of the technical bottlenecks hindering rivals, the company said.

"Today, we break ground on a landmark project that will establish Illinois as the nation's leading hub for quantum innovation while attracting billions in economic investment and creating thousands of jobs," said Illinois Governor JB Pritzker.

The Silicon Valley-based company said the new facility, if successful, will house the country's first million-qubit, fault-tolerant quantum computer.

PsiQuantum earlier this month disclosed a Blue Owl Capital-backed Series E funding, which was one of the largest U.S. investments in quantum technology.

The latest funding will also support development at a partner site in Australia and further work on its quantum photonic chips, the company said.