That is simply an unfounded theory.
Ok, lets put that into practice then:
Volks - have upgrade - viable mid and late game, fall off because of intended design of transitioning into being supported by obers.
Grens - have upgrade - viable mid and late game.
Rifles - have upgrade - viable mid and late game.
Tommies - have upgrade - viable mid and late game.
PFs - have upgrade - viable mid and late game.
Fucking osttruppen - were not viable - got upgrade - became viable late game.
Conscripts - had no upgrade, were not viable, got upgrade, became viable.
Penals - have no upgrade, are not viable late and mid game.
There, the theory is based on hard fact that supports it with undeniable proof.
Also, reminder: we're talking about firepower in squad vs squad combat, before you try to play vehicle card, which only makes it much worse for penals.
Vet 3 Penal will beat vet 3 LMG grenadiers in cover to fights at many ranges and Vet 5 Vg both of which have weapon upgrades.
They will.
So will rifles.
Rifles still have upgrades, access to strong light tank, access to strong med tank, ability to upgrade to AT and have AT snare too and are not broken in any way.
There is no real relevance between having a weapon upgrade or not.
We've just established that there is, you can't stick your head deep in your ass and pretend you don't see it.
Performance is related to stats and weapons available to squad regardless of how one come to have these weapons available to them.(concentrate DPS over spread DPS)
As evidenced by conscripts over the years, no amount of veterancy buffing or adjusting replaces actual upgrade and until upgrade is added, unit will never be viable late game onless one of the two are true:
Veterancy is batshit insane high and obviously out of the line.
Base stats are batshit insane high and obviously out of the line for the cost.
Neither of which is true for penals.