Every manufacturer dreams of finding a process that leads to a better product, at a fraction of the price. Deputy Business Editor Dan Jenkins reports on a company that has achieved it.

ALCHEMISTS in the Middle Ages searched for a way to turn base metals into gold. Durham Scientific Crystals has gone one better. Its crystals are worth ten times their weight in gold, and the company can create them at a fraction of the cost their competitors can.

Dr Arnab Basu, managing director, said: "It is a breakthrough technology for the defence, medical imaging and space industries.

"We can produce a larger and more high-quality product than anyone else in the world - and it can be done in a cost-effective manner."

The company, on the Net Park development near Sedgefield, County Durham, produces cadmium telluride single crystal wafers, which are used as semi-conductors in a range of applications, including x-ray machines and military guidance systems.

It is a high-value product, with an average 20sq cm crystal costing £2,000. The laboratory has the capacity to produce 7,000sq cm a year.

"It is an alchemist's dream material," said Dr Basu.

After two years in development, the company is finally taking its product to market and expects to generate its first revenue within weeks and aims to be trading profitably by 2008.

DSC is in talks with the likes of defence company BAE Systems, the European Space Agency and Dutch electronics group Philips.

It is also poised to sign a venture capital funding deal in the coming weeks.

DSC was formed in April 2003, with £200,000, principally from founder Professor Max Robinson, and funding group Business Angel.

It evolved from world-beating technology developed during 30 years of research by physicists at Durham University.

Traditionally, crystals for this sector are grown from liquids, which are heated and cooled.

During the 1990s, scientists at Durham developed and patented a process where crystals were grown from vapour, at a fifth of the cost.

Not only is manufacturing cheaper and more efficient, the end product is much more reliable.

"We knew it had commercial potential because we were approached by a Swedish company for crystals while we were still based at the university," said Dr Basu.

"As they say, there might be a gap in the market, but is there a market in the gap?

"It has taken us a while to figure out our market, because it is quite complicated and there are a lot of competing products."

The global market is estimated to be worth about $80m a year, but this is expected to quadruple in the next three years.

"There is a huge, addressable market where this technology can be used," said Dr Basu.

"Growth has been restricted in certain sectors, because it is not available at the right quality and price.

"We can come in and make it available for a lot of those applications."

Areas that the company will be targeting include airport baggage screening equipment.

Liquid-grown crystals in the screening equipment process images slower than the wafers made by DSC.

"Heathrow alone handles 60 million items of baggage a year," said Dr Basu

"In that kind of environment, an extra second, or half-a-second, per image is a long time."

The digital imaging potential is already being explored in the US to detect cancer and Alzheimer's disease at an early stage.

Rival products in the radiation detection sector also require cooling systems, making them bulky and more expensive.

Another application for DSC could be hand-held detectors that can locate so-called dirty bombs - conventional explosives wrapped in radioactive material. The US is already considering equipping its emergency services with a pocket-sized device.

"It can detect various radiations and point out what exactly they are," said Dr Basu.

"Most people are unaware, but ceramic tiles give out radiation, so a fireman or policeman needs to be able to distinguish between ceramic tiles and a real threat."

In the long-term, Dr Basu hopes the company will move up the manufacturing chain to producing those types of value-added products.

"We have expertise in imaging systems, and the addressable market there runs into the billions," he said.

"We have a fairly short-term, fast-growth strategy. But to reach that, the business plan must be based on the material first."

The company has a team of five, including three Durham academics. The two full-time employees are Dr Basu, who lives in Durham, and technical director, Dr Ben Cantwell, 27, from Washington, Wearside.

Theirs was the first business to move into Net Park at the start of this year.

"There were three people here and we were two of them," said Dr Cantwell. "It is a great place, but at times we felt like guinea pigs."

The company shares Net Park's vision of creating a vibrant group of technology companies, on a similar model to Cambridge University.

"They call it the Cambridge phenomenon," said Dr Basu. "They now have a critical mass of companies down there.

"It provides a nice safety net, because if a project fails, they can fall back on something else.

"That gives them a sense of security, which we in the North-East do not have yet. But if Net Park comes on as expected, hopefully, that will happen here.

"There is a concerted effort from the likes of One NorthEast and other agencies and it is essential to have a place with vision like this. This is a home-grown technology and we want to stay in the North-East."

But he said the region still had a way to go.

"We were talking to some French journalists recently and they asked us if Durham was a suburb of Cambridge.

"The perception of County Durham is a real barrier. People still think about it in terms of mines and heavy industry, rather than what is happening now.

"The region's five universities are doing good things. But the whole concept of research is converting money into knowledge.

"You need the other half of the cycle to convert that knowledge into money."

To this end, DSC won a £63,000 research grant last year from the Department of Trade and Industry (DTI), administered by One NorthEast.

And while the company is happy with the support it has received from the region, Dr Basu feels further development is being restricted by a lack of Government funding.

"Our main competitor in the States has received around $100m of public support over the last ten years.

"Our product is strategically important, but has a very high development costs. Every research run costs thousands of pounds.

"We are very grateful for the grant and support from various other agencies, we need substantial Government funding, not only for the company, but for the research groups working in this field."