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Theater knives are knives that were made "in theater", which for WW2 would be the European Theater or the Pacific Theater. During WW2 there was a shortage of fighting knives. To fill the shortage Navy ships, Army Rear Areas, had their machine shops turning out knives, using primarily scrap material. Broken plane props, scrap aircraft aluminum, plexiglass from aircraft canopies, smelted brass casing, black and red micarta from scraped electrical junction boxes, repurposed MK1, MK2, Shark, etc blades, repurposed bayonets and swords (friend and foe), hunting knives, saw blades, files into blades... the list goes on.
Many knives were also made/customized by REMFS in the rear, who would trade them to GI's coming back from the front for a trophy, say maybe a custom knife for a Japanese flag.
There were also many crafted by POW's who welcomed the work during their captivity.
It is a fascinating field to collect.