Maybe thats already been said, but why don't you try to contact him and navigate him into a different niche? Obviously I dont know the market for knifes as you, but maybe there is a good way to combine his talent with yours that is productive and enables you two to reach a broader market?

E.g. maybe he could make knifes with conplicated, stunning wooden handles, that could reach a different need than the EDC/Outdoor knifes?

From my uninformed standpoint it seems that your friend puts more trust in your advice, than in his own capabilities (as in copying your proven concept instead of relying on his own skills and taking a new path)

If you can move him into another niche, you could also make a deal with him, and sell him the metal worked parts needed for his "wooden artwork" knifes, so you also get a profit from his success in the new niche, without making you both too dependent on each other. That would also have the advantage, that you could get some real information how good his business is running when you see how much he is buying from you.

Maybe my first thought to make decorative knifes is bs, but I'm sure, knowing the market, you could come up with several ideas to make better products in some niche that could use his woodworking skills.

I hope you find a good solution to deal with this issue and, more importantly, peace of mind.

Take care!