Check the mod priority guide:
https://docs.google.com/spreadsheets/d/1ty239kyJbBs1sLhTo1JvSWuN0mIJsK1nwVdI6OLLtXo/view?rm=minimalM38 is a real cutie. If that was the only factor in upgrading, I’d say “yes, go and upgrade!”, but it’s not. M38 is the second 2 star stun SMG to get a MOD, the first being Type 64. While she doubles down on the stun grenade, M38 instead tries to branch off for more offensive utility… though this still falls just as flat.
Her Skill 2,
Scarlet Flame Pursuit, is quite literally just an incendiary grenade. Except on a longer ICD and with REALLY bad modifiers. The initial impact of M38 MOD’s incendiary grenade deals 2.8x damage, which is downright pathetic. To put this into more perspective, MP40 is a 2 star with an incendiary grenade and her direct impact deals 5.5x damage. M38’s DoT is also 0.6x, as opposed to the typical 1x that other incendiary users have.
M38’s advantage over these is the radius of her incendiary is 2.5 units, as opposed to the 1.5 units of other incendiary users. This means that M38 can theoretically stack up to the others when there’s a lot of enemies present and she can hit enemies that the other incendiary users cannot. But this is a very specific scenario and even though her damage can add up, it’s more likely that she’s going to fail to kill her enemies. M38 is safe to ignore for practically everyone.
While this new Set Smoke Grenade has some additional effects, such as a 30% Vulnerability, this just doesn't amount to much due to the very low uptime and the fact that you're using M38. If you want a Smoke Grenade with a massive Vulnerability debuff, use MP41. Also note that a large amount of newer enemies are completely immune to stuns, making half her kit pretty useless (outside of already being so spread out that the stun wouldn't be useful either way).
M38 throws each of her three Grenade types one after the other, meaning the additional ones are slightly delayed compared to regular Smoke/Molotov timings, though not massively so.
All in all, M38 is just not very good, even with a Set.